Articles – Page 22

Tides To Turn For Shorten On Debt, Boats And Tax

Bill Shorten is romping ahead in the polls right now, but being in opposition is a long-term goal and the tables will turn on three big policy areas before the next election, writes Chris Berg.

Bill Shorten has one of the worst jobs in Australian politics – first opposition leader after a loss of government.

Just ask Brendan Nelson, Kim Beazley, Andrew Peacock, and Billy Snedden.

Yet, thanks to the Government’s disastrously bad selling of the budget, Shorten has an impressively winning poll position. If the election were held tomorrow, Labor would romp it back in.

Unfortunately for Shorten there are no federal elections scheduled for tomorrow.

Opposition is a long-term game – almost certain to be longer term for Shorten than most, as Labor’s new party rules make it virtually impossible to spill him before the next election.

In the Sydney Morning Herald on Sunday Mark Latham claimed the “right-wing hunting pack” is targeting Shorten because he is too successful. (This is the sort of canny judgment that made Latham such a success himself.)

But polls go up, polls go down. If we look out two years from now to the next election, Labor’s political profile is very different. Where Shorten looks strong now, he is vulnerable in 2016. Where he looks vulnerable, he is actually quite strong.

Let’s take the big issues of last year’s election: debt, boats, and the carbon tax.

The debt is Shorten’s biggest weakness.

This seems paradoxical, perhaps, because the Coalition’s budget – that is, its solution to the debt problem – is deeply unpopular. According to an Essential Poll earlier this month, just 23 per cent of voters think that Labor should support university deregulation. Just 27 per cent think Labor should support the pension changes. Just 32 per cent think Labor should back the Medicare co-payment.

These are gimmes for Shorten. Yet opposing the specific proposals will do little to rebuild Labor’s economic reputation.

Wayne Swan destroyed Labor’s standing on the economy when he was unable to wrestle the budget back into the black. Year after year Swan claimed that the budget was returning to surplus. Year after year we got deficits.

It’s easy to free ride on public dissatisfaction with government policy. Voters might be hostile to the Coalition’s individual budget measures but voters are not stupid. Shorten has to suggest – perhaps just hint, allude, imply, give us a knowing wink – that there could be a better way to fix the deficit.

That’s the difference between being a time-serving opposition leader and a viable potential prime minister.

If Shorten is strangely weak on the budget, he is strangely strong on boats.

Labor has careened from one side to another on the asylum seeker issue. Last week a few in caucus tried to engineer a shift back to the left again. Quite apart from the morality and practicality of the policy, Labor looks hopelessly divided and confused.

But will it in two years?

Right now, Labor will be secretly crossing its thumbs that the boats have, in fact, stopped, and stay stopped. It is in Labor’s interest to get boats off the front page; to remove asylum seekers from the centre of Australian politics. A weakness isn’t a weakness if nobody is talking about it.

For Labor, the carbon tax is neither vulnerability nor strength.

This is strange, perhaps, because the carbon tax has been one of the defining policies of the last decade. Elections have been won and lost on it. Prime ministers and opposition leaders have fallen at its altar.

Yet much of the heat dissipated from the carbon tax debate after it was introduced. Kevin Rudd smothered what remained when he announced he would transition from the tax to an emissions scheme. This is a rare example of trying to confuse voters as a deliberate political strategy. (I outlined the farcical nature of this announcement on The Drum when it was made last July.)

Climate activists have tried to respark climate change as a political issue – every once in a while the Climate Institute puts out a poll to try to get momentum going again, as they did yesterday – but realistically the issue is on hiatus. All sides have dug in. It isn’t a positive. It isn’t a negative. It just is.

It is often said that the Coalition didn’t win the 2013 election, Labor lost it.

In other words, it was the Rudd and Gillard government’s faults that were highest on the minds of voters as they faced the September ballot, rather than Tony Abbott’s virtues.

This is true as far as it goes, but those faults were made powerful because of the Coalition’s dogged prosecution of them.

Abbott made the carbon tax into a political liability. It wasn’t before. Same with the boats. And Abbott and his predecessor Malcolm Turnbull made Labor wear its deficit spending.

By contrast, Shorten is just along for the ride. He’s been gifted the budget backlash. He’ll likely be spared the need to take a stand on asylum seekers. And he’s been excused from boldness on the carbon tax debate.

Shorten might be polling well now, but if he wants to be competitive in 2016 he’ll have to be more proactive than that.

Entrepreneurs Should Not Get Government Support

The 2014 Federal Budget cuts back family payments, places tough new rules around welfare for young people, taxes doctor visits to fund medical research, and reindexes the pension.

But it’s not all bad news!

If you own a business that’s more than three years old, has good turnover, and operates in any one of 14 favoured sectors, you’ll be eligible for $20,000 of taxpayers’ money to hire management consultants.

Better, you could receive a $50,000 grant to employ a researcher for a few months.

Or, the jackpot: if you own a company that’s about to launch a new product or service, you might get $250,000 of matched government funding to help.

The base immorality of corporate welfare is never clearer than in times of austerity.

These obscenities are part of what’s called the Entrepreneurs’ Infrastructure Programme. The program was announced in the May budget, but it’s only now the subject of a public discussion process. (An incredibly short discussion process. The program starts on July 1.)

The program partly rationalises and partly replaces a bunch of other grants and subsidies from the previous government.

It’s worth $484.2 million over five years – the better part of half a billion dollars. This is huge. The change in Work for the Dole payments will only save $1.2 billion over four years, and that will affect many more people.

The entrepreneurs program is funded from a larger cut of industry programs, so the government can say it is reducing expenses somewhat.

But it is still incredible that even in a horror budget the federal government plans to give money away to successful companies.

After all, we’re not talking about bailing out firms in trouble here. We’re talking about handouts to firms the government believes have “growth potential”. Of course, the real winners will be the management consultants paid to pore over business plans on the taxpayer penny.

The Australian government is awash with small grants, minor programs, petty subsidies. State governments are too. Yet these sorts of policies are rarely discussed, let alone justified.

The Australian government has always been in the business of giving privileges to private firms.

The great tariff barriers of the 20th century acted as an indirect transfer of wealth from consumers to manufacturing interests. By preventing cheaper goods from entering the country, consumers were forced to spend more in order to protect certain politically connected industries. Think the car industry.

Tariffs were not presented to the electorate as a gift to private enterprise. The justifications were more complex – Australia needed temporary barriers to build industries until they were adult enough to compete globally, or that the government knew which industries were “industries of the future” and needed a little kick along.

In retrospect these claims were absurd. The “infant industry” argument never went away, even after decades of tariff protection. Somehow our industries were always young.

And with 20-20 hindsight those “industries of the future” just look like wrong turns. Again, think the car industry.

But for all the intellectual debate, the practical, real-world effect of protectionism was to subsidise private companies; a privilege those companies lobbied hard to defend.

The Whitlam government took the first axe to the Australian tariff. Much of the growth in living standards over the last few decades is thanks to tariff liberalisation.

So what’s going on with the Entrepreneurs’ Infrastructure Programme?

It’s tempting to see programs like this as the last gasp of corporate welfare – simply the trinkets that remain after three decades of liberalisation, waiting to be swept up.

But such programs really demonstrate that the political dynamic that supported protectionism is still with us. Rent-seekers and their political supporters have just gotten smarter.

Instead of the implicit taxation of the tariff, governments just hand firms money directly. The grants are given fashionable titles. Labor had a “Green Car Innovation Fund” and “Innovation Precincts”. The Coalition talks about entrepreneurship.

This is a bit strange. Every minute entrepreneurs spend filling out a grant applications is a minute stolen from doing what makes entrepreneurism so valuable: developing new products, finding new markets, and adding value to the economy.

One of the successes of the economics profession has been to persuade politicians that entrepreneurs are important. Entrepreneurs take risks, and those risks are tested in the marketplace. That’s great. But politicians took that lesson to mean they should give money to entrepreneurs. Never say politics doesn’t have a sense of irony.

To the individual taxpayer, the Entrepreneurs’ program will cost a fraction of a cent a year. Who could be bothered complaining about a few cents of tax? To the recipients, though, these subsidies are huge. Politicians will like the subsidies, too. What better publicity than being photographed with innovative entrepreneurs – to have job creators thank politicians for their support in front of TV cameras?

Tony Abbott is fond of an Abraham Lincoln quote: “Government should do for people what they can’t do for themselves and no more.”

How on earth does taxpayer-funded management consultants for private businesses fit that criteria?

True Economic Liberty Means More Open Borders

There are two versions of David Brat, the upstart who defeated House Majority Leader Eric Cantor in the Virginia Republican primary last week.

The first is a professor of economics at Randolph-Macon College in Virginia – a principled libertarian, dedicated to the cause of economic freedom.

Brat describes himself “a free-market guy”, who believes the economy has been badly distorted by regulation. He runs something called the BB&T Program on Capitalism, Markets and Morality. He’s passionately opposed to the mass surveillance program exposed by Edward Snowden. His academic research focuses on the intersection between Christian theology and the market economy.

That’s the first version of Brat.

The second version is different – an anti-immigration warrior for the conservative right. He ran hard against Cantor on the latter’s support for amnesty for the children of illegal migrants.

In this campaign, Brat argued immigration “lowers wages, adds to unemployment, and the taxpayer pays the tab for any benefits to folks coming in.” (Just as the asylum seeker debate is in Australia, the question of amnesty for illegals is a proxy for the broader question about how open the United States should be to migration.)

For these sentiments he received endorsements from conservative firebrands like Ann Coulter – Brat was a candidate “true patriots should support with everything they have” – and Laura Ingraham.

It’s not easy to bridge the divide between the two Brats. There’s nothing “libertarian” or “free market” about an immigration crackdown. Quite the opposite.

The great free market victories over the last few decades have meant goods and capital can move around the world freely. This has raised living standards for everyone, rich and poor.

The last remaining barrier to economic liberty is the free movement of people.

It’s as much a barrier of political philosophy as it is a barrier of legislation. As Brat demonstrates, even some of the most hardcore free market advocates have a blind spot when it comes to immigration.

Yet what could be more respectful of the tenets of individual liberty than allowing individuals and families to travel across national borders to make a better life for themselves?

And what could be more inconsistent than claiming to believe in the morality of liberty but then placing the strictest of possible limits on that liberty?

On The Drum in 2011 I argued that to prevent migration is to prevent the most powerful way to lift people out of poverty. Migration is a big deal economically too. Opening the world’s borders could double the size of the world’s economy, according to one famous estimate.

Yet one of the doyens of free market thought, the Nobel-winning economist James Buchanan, said the hardest essay he ever had to write was on whether governments could justifiably restrict immigration.

There are two objections to larger scale immigration that you commonly hear from the intellectual right. Neither are strong.

The first is that increased immigration is incompatible with the welfare state. In this view, allowing large scale migration is great in theory, but we have generous welfare programs. There’s a risk some immigrants might migrate with the goal of hopping on social security. This argument was made by no less an authority than Milton Friedman.

But it’s almost comically easy to resolve the apparent incompatibility: cordon off welfare programs to new migrants for a certain amount of time. In fact, that’s exactly what we do in Australia (with the exception of refugees, who constitute a small fraction of the total migration intake).

The second objection is migrants may not assimilate to the national culture. This is not helped by the fact that many of the loudest pro-immigration voices are on the left and espouse a woolly sort of multicultural utopianism. But the point of a liberal framework of laws is that people of different values, preferences and beliefs can go about their business while everybody’s rights are equally protected.

And let’s not overestimate the cultural consensus among those born in the developed world. In Australia the Lowy Institute poll has been recording remarkably low support for basic things like democracy for many years.

Yet somehow the Commonwealth endures. As it would with a larger – even vastly larger – immigration intake.

(If your concern is that immigrants might vote for illiberal policies – that is, undermine the liberal legal framework – note that immigration and citizenship are different things.)

Let’s be clear – Brat is more philosophically coherent than 99 per cent of the politicians out there. Any defeat of an established Washington politician is a win. In response to Brat’s attack on immigration, Cantor surged hard to the right on amnesty. Self-interest beats principle.

And even taking Brat’s views on amnesty into account, American politics will be better off with him in Congress rather than a beltway native like Cantor.

Brat ought to be praised for his scholarship on the connection between morality and free markets.

But it’s also time for politicians who proclaim the virtues of liberty to discover its connection with the free movement of people.

Coalition In Murky Waters In Hunt For Online Pirates

One of the quickest ways for a company to cut costs is outsourcing. Even better when you can have the Government do your outsourcing for you.

This is the basic political logic behind the upcoming crackdown on online copyright infringement.

For the last year George Brandis has been hinting at a legislative crackdown on copyright infringement. It wasn’t quite an election promise in 2013, but it was definitely on the cards.

Now nine months into Government the Coalition is reportedly on the brink of announcing its approach. (Momentum for the policy was temporarily slowed by the unfortunate political storm around the budget – it was due to go to cabinet in early May.)

Here’s what we know. There are two proposals being considered, “graduated response” and a website blocking scheme.

In a graduated response scheme – sometimes called “three strikes” – internet service providers are required to penalise their users for pirating material on a scale of increasing severity.

Graduated response has been introduced in a number of countries around the world, including France, New Zealand, the United Kingdom, and South Korea.

Typically the scheme works like this.

Copyright owners notify an ISP that they believe a user has pirated copyright material. The infringing user is initially issued with warning notices by their ISP.

If those warning notices are ignored and the user continues to infringe, more serious consequences follow.

The final punishment is the disconnection of internet service altogether.

Why disconnection? Simply because disconnection is the most severe penalty ISPs can mete out. Their only “coercive” power over their customers is to stop doing business with them.

Under Australian law downloading copyrighted material is not illegal – it is not a crime, in any formal sense. (There are some copyright offenses which are criminal: things like importing, selling, or exhibited pirated material. Basically copyright infringement on a commercial scale. But simply downloading a movie for personal use is not.)

Rather, piracy is a civil matter. Enforcing copyright requires a copyright holder to sue the pirate themselves. But litigation is complicated and expensive. Determining exactly who has pirated a particular film or music track is not easy. Lawyers are pricey.

Litigation has an even bigger cost – to reputation.

American copyright holders did themselves enormous reputational harm earlier this century when they tried to sue the piracy problem into submission.

There were some appalling cases. Take the legal action against this single mother in Minnesota, who was threatened in 2004 with a $540,000 lawsuit after her daughter downloaded some music – a damages bill orders of magnitude larger than her $21,000 annual salary.

Stories like these didn’t just make the industry look greedy – it made them look cruel and vindictive.

Outsourcing the problem to ISPs with a graduated response scheme avoids the costly and controversial need to sue otherwise law abiding citizens.

Better to have the ISPs look like they’re the cruel and vindictive ones.

So unsurprisingly, as Nicolas Suzor and Brian Fitzgerald pointed out in an important 2011 paper, graduated response is counter to basic principles of the rule of law.

Disconnecting someone from the internet is a big deal. It’s easy to forget how integrated internet access is to the modern world. There is hardly a public or private service that does not rely on digital interaction with customers.

Graduated response schemes impose such a punishment on internet users without also granting them the legal protections they would receive if they were taken to court.

For instance, graduated response schemes offer little in the way of due process. Copyright infringement is not always clearly proven. The schemes place the burden of proof on the accused, rather than the accuser. Graduated response can easily become draconian.

And for what? There is no reliable evidence to suggest that graduated response schemes reduce copyright infringement, as one detailed study published in the Columbia Journal of Law and the Arts found this year.

The second proposal the Abbott Government is considering to tackle piracy is certain to be even less effective: requiring ISPs to block websites that facilitate the downloading of pirated material. Websites like the Pirate Bay host torrent files through which people share content.

Never mind that some of that content is “legitimate”. The last decade has conclusively demonstrated that when one avenue for piracy is closed off, another quickly appears. Exhibit A: Napster.

But more importantly, any such policy would come head to head with the Government’s professed support of freedom of speech.

In 2010 Malcolm Turnbull claimed that the previous Labor government’s internet filter was “dead, buried and cremated, and if it shows any signs of revival it will then be exorcised”.

But a policy that blocks torrent websites will be, in a very real way, the internet filter by other means.

A crackdown on copyright infringement was not one of the Coalition’s 2013 election promises. Defending free speech was.

If the copyright lobby convinces the Government to take responsibility for protecting its business model, that promise will be completely broken.

Expelling MP Geoff Shaw Should Not Be The Only Way Out For The Napthine Government

Resolving the Geoff Shaw crisis ought to be relatively simple. Ought to be, if a) the previous Labor government hadn’t fundamentally broken the flexibility of the Westminster system, and b) Daniel Andrews wasn’t trying to score disgracefully undemocratic political points by seeking to expel a fellow member of parliament.

Last time someone was expelled from Victoria’s Legislative Assembly was in 1901 and he had insulted the king. Shaw’s offence is even less serious than that.

Denis Napthine struggles to control the lower house. Now that Geoff Shaw has “gone rogue”, the Coalition’s previously razor-thin parliamentary majority is an unworkable one. Some days the government loses control of proceedings. This is not sustainable.

But nor is it particularly unusual. Sometimes governments lose control of the lower house. It happens.

Under a bog-standard Westminster system, Napthine would be able to call an election to resolve the problem once and for all. (Last week the Premier said he would have liked to go to an election six to 12 months ago. It might have been a tough election for the Coalition. But better than this damaging farce.)

Alternatively, the Governor of Victoria Alex Chernov could require that the Premier demonstrate he has control of the lower house. If Napthine was unable to do so, Chernov could appoint a new government or issue writs for a new election.

But we no longer have a bog-standard Westminster system. If you’re looking for someone to blame for the crisis, blame Labor’s decision to move to fixed terms a decade ago.

In 2003 the Bracks government introduced a four-year fixed parliamentary term, taking the decision to call an election out of the hands of the premier, and stripping the governor of their reserve powers.

It’s now obvious there is a fundamental contradiction between a Westminster system and fixed terms.

In the Westminster system, government is formed on the floor of the house. The ability of the premier to call an election provides the fail-safe mechanism if they lose control of Parliament. A secondary fail-safe mechanism is vested in the governor.

In 2003 those fail safes were eliminated. Instead, the electoral reforms jerry-rigged a complex workaround if the government lost control of the house outside predetermined election times. But – here’s the problem – that workaround relies on the opposition introducing a vote of no confidence in the government.

If the opposition refuses … well, then the whole process gets stuck.

Right now the only political actor with room to move is Andrews. Yet Andrews won’t pursue a no-confidence motion in the government because he says Shaw’s vote – necessary for a successful motion – is “tainted”.

Instead, he wants to simply to kick Shaw out of Parliament. What an undemocratic, unjust and entirely political ploy.

Vote taint is not a thing. Votes don’t go off. They don’t get spoiled. Vote taint wasn’t a thing when the federal Coalition claimed Craig Thomson’s vote was tainted. It isn’t a thing in Victoria now.

Yes, Shaw is dislikeable. He is anti-abortion. He is also a duly elected member of Parliament. The voters of Frankston chose him as their representative. He has a political constituency and his views are shared by a sizeable minority of the population.

Nor has it been shown that he has committed any crime that would make him ineligible to hold public office.

In an opinion piece last week former Labor speaker Ken Coghill suggested the basic problem is that Victoria lacks a corruption watchdog with sufficient heft to turf Shaw out of Parliament.

The argument that a corruption watchdog could sort out an essentially political problem is as strong an argument against such bodies as ever devised.

Shaw misused his parliamentary car for personal business. He shouldn’t have done so. But it’s clear that Shaw’s biggest misdeed is simply that he is in the way – that he holds the balance of power, has strong policy preferences, and is disinclined to compromise.

Obstinate? Absolutely. But Shaw isn’t being much more obstinate than Andrews is.

Shaw has one thing going for him. He isn’t so morally bankrupt as to try to banish a legitimately elected fellow member of Parliament for political convenience.

Labor’s legal advice suggests parliament can expel a member as long as the stated reasons for doing so are sufficiently “general”. Apparently detailing too many particulars – that is, particulars of what mortal sin Shaw is actually guilty of – would expose the expulsion to legal challenge.

One anonymous Liberal told The Age this weekend “We can’t just get rid of someone because they’re a tool.”

But, ultimately, a well-designed parliamentary system should be able to function or dissolve itself even if some of its members are tools.

Victoria’s Parliament is no longer well-designed.

There’s no reason to believe that fixed parliamentary terms has given us better government. Has there been any discernable increase in “long-term thinking”? Are we better off for letting the Shaw saga stagger along?

It’s easy to be seduced by grand plans for social reform. Fixed terms was one such plan – a parliamentary rule change that was supposed to reduce political uncertainty. We’re now living with the disastrous consequences of that seduction.

No Vote Of Confidence In ID Laws

Policy change happens when events meet ideas.

And so it is with voter ID laws – the idea that we ought to be required to show formal identification when we vote on election day.

Currently our electoral system is based on trust. Voting simply requires a voter to state their name and have it crossed off a list.

It’s incredibly insecure. Charmingly so. Alongside the sausage sizzle, the old-fashioned electoral procedure is no small part of what creates the romanticism of Australian democracy.

On Thursday, during Senate estimates, the Australian Electoral Commission said it was referring 8000 cases of multiple voting in 2013 to the Australian Federal Police. (Voting more than once, in case you didn’t know, is illegal.)

This is a lot. After the 2010 election, only 19 cases were referred to the AFP.

After the loss of 1400 ballots in Western Australia, the reputation of the AEC – and, by implication, the integrity of the electoral system itself – is understandably shaky. There is a strong political desire to do something about the AEC. Something. Anything.

Hence the political push for voter ID laws, which are supposed to prevent multiple voting. Last month, Queensland introduced its own voter identification laws as part of its electoral reform package.

But voter ID is a non-solution to a non-problem.

Let’s start with the non-problem.

Clive Palmer reckons Australians can “vote 10, 20, 30 times if you like”. A voter could visit more than one poll booth and vote under their own name multiple times. Or they could vote multiple times by impersonating other voters, at the same or different booths.

In each case, they would be abusing the trust system. (A person could also potentially enrol multiple times. But enrolment fraud is much harder to pull off.)

Yet just because a law is occasionally broken doesn’t mean it is an urgent problem.

We know when multiple voting happens because once the election is over, the AEC compares the booths’ lists to see if some names are crossed out more than once.

The large number of multiple voters referred to the AFP this year reflects the fact that the AEC is taking the phenomenon more seriously – for political reasons – not that multiple voting is getting more common.

Sure, 8000 cases sounds like a big number. But 10,000 further multiple votes are recorded simply because of human error by booth workers.

In other words, we’re talking well within the election’s margin of error here.

The vast majority of multiple voting instances – usually above 80 per cent – are attributed to confused elderly voters, who often speak English as a second language or not at all. (This 2009 AEC paper details the findings up until the 2007 election. From the evidence given by the AEC to estimates last week that proportion is unlikely to have changed.) Only a tiny fraction of multiple voters have admitted that they were “trying out the system”. Maybe a few hundred in 2013, spread across 14 million electors.

Others say they were drunk. Okay.

One reason the AFP prosecutes so few multiple voters is because there are so few of them. Another reason is that the problem is just not consequential enough to spend scarce resources on.

It is certainly possible to imagine a scenario where multiple voting could strategically alter election results; to swing tight races and thus steal power. That seems to be the underlying concern about multiple voting.

But the concern is misplaced. In a detailed study for the New South Wales Parliament earlier this year, the University of Sydney’s Rodney Smith concluded that “stealing elections is hard … large-scale multiple voting is highly unlikely to emerge as a problem”. Our trust system might facilitate multiple voting, but such behaviour is easy to detect after the fact. Questionable election results can be disputed.

As Smith pointed out, there is no evidence to suggest that multiple voting is directed towards marginal seats, which is what we’d see if one party was trying to game the electoral system.

But Parliament is about finding solutions to problems, not figuring out whether those problems exist.

So, with the AEC’s reputation at a low ebb, there is a push for a voter ID requirement to eliminate multiple voting. The push is coming mostly from the Coalition.

Voter ID would tackle only one of the ways to multiple vote – the impersonation of other voters. It wouldn’t do anything to stop people visiting different booths under their own name. (Unless of course the lists were somehow digitally tied together and updated in real time. This would be incredibly complex, and it’s not on the table.)

Not every change to an electoral system is necessarily self-interested and anti-democratic. But that’s not a bad rule of thumb.

In the United States, voter ID requirements are used to suppress the vote of traditional Democrat constituencies: the young, poor, and minorities. Those groups are less likely to have and carry appropriate identification.

But voting is voluntary in the US. Australia’s compulsory system means voter ID would create a different dynamic. Those voters who find producing identity documents too troublesome and fail to vote will be fined for not doing so. This punishment to vote may (partly) counterbalance the disincentive of having to show identification.

The Queensland reforms allow voters to show a reasonably broad range of identity documents – not just photo ID. If none are on hand, voters would be able to sign declarations of their identity.

But you can imagine how such new rules will gum up the works on election day. Confused voters sorting through identity papers. Booth workers trying to guide non-English speaking elderly through declaration statements.

What an enormous amount of hassle and complexity to fix a non-problem. Voter ID is yet another bureaucratisation of our little democracy.

Chifley’s Time Bomb 70 Years In The Making

Joe Hockey’s father named his son “Joseph Benedict” after Ben Chifley.

Little did the family expect their child to be struggling with the legacy of his namesake at the most critical moment in his political career.

Hockey’s first budget is haunted by a political bait-and-switch Chifley made way back in 1942 and 1943.

The story goes like this. Wars are incredibly expensive. During WWII, the Australian government inflated the currency and borrowed massive amounts of money. Nevertheless, when Labor took power in 1941, there was still a huge budget shortfall that needed to be addressed.

And like the Coalition today, Labor had made much political capital opposing the previous government’s taxes, particularly those levied on low income earners.

Once in government, the new Prime Minister John Curtin doubled down. When the first uniform tax case came before the High Court (which effectively eliminated state income tax in favour of Commonwealth income tax) Curtin promised the electorate that the Commonwealth’s new power would not be used as an excuse to raise income taxes.

Labor’s no-tax pledge was unsustainable.

Throughout 1942 it became clear to Curtin and his treasurer Chifley that the government had to close their huge revenue-expenditure gap.

There was a war to be fought, so cutting spending was out. Printing money was out too. Inflation was already a problem. There would have to be some additional taxation. And some would necessarily hit those on incomes below £400 per year.

(There was another rationale for higher income taxes being pushed by the government’s young Keynesian advisors: the need to suppress excess consumer spending during war.)

The solution devised by Chifley was a classic example of policy misdirection.

For the previous decade, parliament had been debating whether to introduce a national social security scheme. One of the key questions in this debate was whether it should be funded by general taxation, as Labor traditionally favoured, or individual contributions, as the conservative Lyons government had proposed in the late 1930s.

So when Chifley announced that they would increase income taxes on rich and poor alike, they also announced a “National Welfare Fund” alongside it.

This National Welfare Fund would fund welfare measures like pensions, unemployment relief, child endowments, even health care. The fund is often seen as the launch of Australia’s welfare state.

Unlike a contributory scheme, the fund would be financed by the new income tax increases. But there were two tricks.

First, Chifley said the revenue from the tax increase was specially earmarked for the National Welfare Fund. Thus Labor wasn’t breaking its promise not to increase the burden on low income earners – they would be getting social security for their money. (Think of the fund like our Medicare Levy today.)

And second, most of the great new social services weren’t to start until after the war. Cabinet agreed that only £5 million of the estimated £40 raised would be directed towards immediate social spending. Money is fungible. The rest could quietly be used for the war effort.

As the historian Rob Watts points out in his book The Foundations of the National Welfare State, what looks like groundbreaking Chifley welfare reform was really just a smokescreen for unpopular wartime tax rises on lower income earners.

The Menzies government folded the National Welfare Fund money into general revenue a few years later. (It is good budget practice not to hypothecate specific revenues to specific programs). But the fund remained in name until the 1980s.

The social contract has always been a complex mish-mash of popular mythologies about what the state owes to the citizen. We are still living with the political consequences of Chifley’s clever little political ploy.

His scheme made it seem like the Australian tax system was a quasi-contributory and fully-funded insurance program.

One former Department of Social Security employee summed up this belief well in Green Left Weekly: “In the late ’60s and early ’70s, many applying for the pension would say, ‘I’m only getting back the money I paid into the National Welfare Fund’.”

The National Welfare Fund has long passed into historical obscurity. But the mythology of welfare contributions it engendered remains – one that imagines the welfare state as a giant piggy bank.

In 2014, Joe Hockey has come smack-bang up against Chifley’s fiscal illusion.

Hockey says he wants to end the Age of Entitlement. But welfare measures like the pension feel a lot less like unjustifiable entitlements to those who believe they’ve already paid for state retirement benefits.

As one aggrieved person told the Treasurer on Q&A, “many pensioners have worked all their lives and paid tax in order to receive the pension and Medicare”.

In other words, the piggy bank model of welfare is not about the well-off supporting the less fortunate. It’s about churning everybody’s money back to them.

So there’s no place for means testing if welfare is less an old-age safety net and more a de facto retirement savings account. (In fact, quite the opposite. The more you put in the piggy bank the more you deserve what you get out).

If the welfare state is just a big piggy bank, there is no case – for instance – to include the family home in the pension assets test, something the Audit Commission recommended.

It’s easy to ridicule people living in multi-million-dollar homes clinging on to the pension. Yet, thanks to Chifley, many Australians worked and paid taxes all their lives believing that was exactly what the social contract made possible.

Is Chifley’s welfare-system-as-piggy-bank good policy? Certainly not. Over time it will fade away as superannuation carries the burden of the pension system.

But right now, as Joe Hockey has learned, it is a very real constraint on economic reform.

Budget Creates A New State Of Play For Premiers

Possibly the most unexpected part of the 2014-15 federal budget is what it means for Australian federalism.

Tony Abbott is the last person you would expect to be withdrawing the Commonwealth from areas of state responsibility.

Under the Australian constitution responsibility for the health and education systems rest with the states.

But over the last century the federal government has steadily, slowly, inexorably spread its tentacles throughout these policy areas.

In his 2009 book Battlelines, Abbott enthusiastically defended this federal takeover of state responsibilities, arguing that the constitution’s divisions of power were anachronistic and inefficient.

In his view at the time, any withdrawal of Commonwealth involvement or spending in health and education “would rightly be seen as a cop-out”.

A lot has apparently changed since then. Now, we read in Abbott’s first budget:

State Governments have primary responsibility for running and funding public hospitals and schools. The extent of existing Commonwealth funding to public hospitals and schools blurs these accountabilities and is unaffordable.

Thus, more than $80 billion in Commonwealth commitments to the state governments for schools and hospitals are being abandoned.

Of course, this is in part sheer opportunism. It helps the budget bottom line for health and education costs to be more borne by the states.

The policy shift would be more coherent if it came after the release of the forthcoming white paper into federalism.

Nevertheless, those caveats aside, the budget represents a new stage in the relationship between the Commonwealth and the states, whose responsibility the national government has usurped.

Kevin Rudd once spoke of the “deep structure, folklore and mysticism of Commonwealth-state relations”. Central to that mysticism has been one article of faith: that with Commonwealth money comes Commonwealth power.

Hence the complex web of grants and regulatory agencies that govern Commonwealth-state relations and use money as a tool for policy control.

Now that the money is being pared back, the states should take the opportunity to reject Canberra diktats as well.

For instance – wouldn’t this be a good opportunity to abandon the Gillard government’s national curriculum?

One of the most common claims in Australian politics is that federalism is dysfunctional. Indeed, that was one of the themes of Battlelines: a century of Commonwealth policy imperialism has left us with overlapping responsibilities, unclear areas of accountability, and widespread voter confusion about what level of government does what.

But in truth the system is only as dysfunctional as any other political system that requires constant negotiation and compromises.

Where the true dysfunction lies is in the politics of federalism, not the structure of federalism itself.

Federalism is constantly the subject of reformist impulse, constantly the subject of complaint, and in a constant state of mutability. Collectively, Australian politicians do not have a clear idea of what they want the federation to look like.

This is not a run-of-the-mill political disagreement. It’s something more fundamental to our political class. They don’t quite know how to handle the fact that political power is divided between two levels of government.

Australian federalism is confused and unstable because the political class is confused and uncertain about federalism.

The easiest political position to hold has always been centralisation – clear away all that confusion by handing everything to Canberra.

John Howard was an unashamed centraliser. Particularly during the last years of his government, Howard made it clear he had no truck with “states’ rights”.

But federalism was once a core Liberal Party belief. Robert Menzies wrote in his book Central Power in the Australian Commonwealth that “in the division of power, in the demarcation of powers between a Central Government and the State governments … resides one of the true protections of individual freedom”.

The end result of Howard’s centralism was WorkChoices – a federal takeover of industrial relations.

Rudd proposed “collaborative federalism”. This model was supposed to forge a new relationship between Commonwealth and states that was based less in hostility and more in harmony.

But Rudd’s kumbaya utopianism was paired with by his technocratic desire for Canberra control. One proposal to end the “blame game” was an outright federal takeover of health – a takeover brought about, if necessary, by a referendum.

In 2009 Rudd even suggested the Commonwealth take over urban planning. It is hard to imagine a less “national” policy area than city design.

Now Abbott – the passionate centraliser, student of Howard – is trying to strengthen the traditional division of powers. No wonder Australian voters are confused about which level of government is responsible for what.

In a crisis meeting in Sydney over the weekend, the state premiers said they hoped to enlist federal senators to their side for the budget contest.

Technically, you see, senators are supposed to represent the states. That’s how our political system was designed.

But in practice they do no such thing. The Senate is just a slightly more patrician group of the usual party politicians. The idea that senators would go against their party interest in favour of the interests of the states they represent is laughable.

The premiers’ suggestion underlines just how disorientated they are by Abbott’s federalist revival.

As, indeed, all Australian politicians are about the purpose of Australia’s federal system.

Budget Won’t Slow Government Spending

For all the fire and brimstone that accompanied last week’s commentary on the budget, the bottom line is simple: under the Coalition, government spending is going up, not down.

This is the long-term significance of Joe Hockey’s first budget.

A modest 1.7 per cent real reduction in expenditure next financial year will be more than offset by 0.4 per cent growth the year after, 2.1 per cent growth the year after that, and 2.6 per cent growth in the 2017-18 financial year (the end of the Treasury’s forward projections).

And tax? Well, while this year the government will collect $363 billion, by 2017-18 it plans to collect $467 billion. That’s a jump in the tax take from 23 per cent of GDP to 24.9 per cent.

Yes, the budget does things like abolish 70 government bodies and 230 programs. Some of that is great.

But, ultimately, a party which was elected promising to reduce the size of government and reduce taxes, will preside over large expenditure growth and is hiking, not axing, tax.

It’s widely appreciated that deep down Tony Abbott is a tax-and-spend conservative. Now we know his is a tax-and-spend government.

But there’s a lot of trickery in the budget to conceal that fact.

The most controversial policies (like the “learn or earn” welfare changes, the increase in the pension age, and the university reforms) sound like classic austerity measures but in truth don’t alter the fiscal equation all that much. They’re social reforms being smuggled in under the cover of a budgetary crisis.

And most of the big spending cuts to health and education have been punted far into the future – beyond the next election, and many out past the Treasury’s forward estimates.

Hockey says it would hurt the economy to cut hard immediately. Here’s a more cynical explanation. He’s hedging. The Treasurer is pledging but delaying cuts in the hope the Coalition will be able to rescind those cuts for future election sweeteners.

The budget is also full of policies that superficially look like aggressive cost reductions but are in fact new spending.

For instance, the $7 GP co-payment is, astonishingly, being poured into a huge new medical research fund. It will apparently be the biggest in the world.

This is a bizarre decision. The policy case for a co-payment is that introducing price signals will give patients a financial stake in their healthcare choices. But using that money to fund an entirely new government program makes the $7 charge look less like a co-payment and more like a research tax.

Likewise, the reindexation of the fuel excise isn’t to fix the budget emergency, but for new road projects. This is so Tony Abbott can live up to his self-applied “infrastructure prime minister” nickname.

Abbott said in August, 2013 that “the only party which is going to increase taxes after the election is the Labor Party”. It’s worrying the Coalition now pretends no such commitment was made.

In opposition Coalition spruikers said Abbott offered two things: the integrity Julia Gillard lacked, and the fiscal discipline Kevin Rudd lacked. After this budget, what’s left?

So this is a significant budget. In opposition, the Coalition was rhetorically committed to reducing the size of government – probably more so than any opposition since the time of John Hewson.

But now it has power, it can’t bring itself to make significant long-term change.

Abbott is no Gough Whitlam-of-the-right. He has no plan to redefine the relationship between state and citizen, despite his stirring oratory from opposition.

Nor, contrary to Joe Hockey’s assertions, has the age of entitlement come to an end. The paid parental leave scheme puts a lie to that little fantasy.

Governments think election to election. But Australia’s fiscal problem is measured in decades, not electoral cycles. Political logic means spending is popular and taxing is not. This encourages governments to go into deficit.

When the next economic crisis arrives, it seems unlikely a government of whatever stripe will be able to resist the calls for deficit-financed stimulus.

If the budget has not recovered by then – if we do not have the sort of surplus that was available to Kevin Rudd in 2008 – we’re going to be in trouble. The European fiscal death-spiral was driven by the fact that their budgets were ruined before the Global Financial Crisis hit.

Politically, however, Joe Hockey’s budget may work. At least for a bit.

Until now the Abbott government has lacked that patina of authority which marks a confident government. Things like reintroducing imperial honours have made the Coalition look indulgent.

The budget itself will be unpopular but it has at least given the government a purpose.

But the question the Coalition needs to ask is this: how will voters respond when they realise that, for all the harsh measures in the budget, it’s for very little? All that pain, and still both spending and taxation are going up.

Beware The Border Force Fetish

The Abbott Government’s proposed Australian Border Force is an incredible and serious militarisation of our borders.

On Friday Immigration Minister Scott Morrison announced the Government would create this new top-level super agency to combine all the enforcement functions of Immigration and Customs.

The Australian Border Force will sit beside the Australian Defence Force, Australian Security Intelligence Organisation and the Australian Federal Police as a core national security agency.

The result will be something like America’s Department of Homeland Security.

Morrison’s speech from Friday is worth a look. It is the embodiment of the bizarre border fetishism that has been building over the last decade.

Back when the Coalition unveiled Operation Sovereign Borders, the name seemed like a bizarre non sequitur – how could a border be sovereign?

Turns out there was no such non sequitur. The Coalition is trying to give the border a sort of independent moral value. Morrison wants to elevate the notion of the “border” to the centre of liberal political philosophy:

“Like national defence, protecting Australia’s borders is core business for any national government.”

“Our border is a national asset … Our border creates the space for us to be who we are and to become everything we can be as a nation.”

This is stirring rhetoric but very strange.

A nation’s borders are a means to an end, not an end in and of themselves. They are only useful insofar as they facilitate more central roles for government: that is, national and personal security, the maintenance of a legal order, and the furtherance of social goals.

There is no reason to suggest their function – that is, creating a space for us to be who we are – is under any threat. Certainly no threat that would justify building a grand bureaucratic empire.

For instance, regardless of where you stand on the asylum seeker issue, large scale boat arrivals are only a threat to the orderly management of our refugee quotas, not our borders.

The “securing our borders” stuff is a catchphrase, not a policy. Our borders are among the most secure in the world. Honestly – when asylum seekers arrive in Australian waters, they phone the authorities.

The Australian Border Force is formally part of the 2014-15 Budget. It is supposed to save taxpayer money. We’ll see. Administrative savings have a habit of disappearing.

But Morrison told the Lowy Institute the Australian Border Force is not a mere efficiency measure. It is structural reform. The idea is not just government restructure but to recast immigration control as a pillar of national security. This is a big shift.

Until now, the Immigration Department has had a pretty simple role: to stamp the visas of foreigners. It is a glorified customer service agency.

Accordingly, the department’s role in national security is extremely limited. It administers the Movement Alert List: a database of identities of concern that is triggered when those identities want to have their visa stamped. But Immigration doesn’t create this list. Most of the identities are identified by intelligence agencies.

It’s the same with the famous refugee security assessments. The Immigration Department just administers the assessments made of asylum seekers by ASIO.

Still, while Immigration Department practice may have little to do with national security, the politics of immigration is drenched in it. The Coalition has often tried to tie refugees to national security. And this confected relationship provided the obvious spark for the development of the Australian Border Force.

Immigration is not a national security agency and never should be. Yet as disturbing as that change is, Morrison’s vision appears to be even grander. Customs is receiving a big promotion too.

Until the 2013 election, Customs was part of the Attorney-General’s portfolio. This makes sense. Customs traverses a wide range of ministerial areas. It enforces things like tariffs, import and export controls, as well as prohibitions on importing illegal goods like drugs and firearms.

Where Customs sits in the administrative hierarchy is significant. Before Customs was with the Attorney-General, it was variously ensconced with the Department of Industry, Trade, and Business, reflecting its role enforcing protectionism.

When the Coalition won in September, Customs became the responsibility of the Minister for Immigration.

Recall the big song and dance Morrison made about guns imported to Australia: “If you cannot trust Labor to stop the boats, then it is no surprise that we cannot trust them to stop the guns either.”

Now that it is being integrated into the Australian Border Force, Customs too will be ranked alongside the Australian Federal Police, ASIO and the Defence Force.

Smuggling drugs and firearms are serious crimes, but not quite on the level of terrorism and warfare.

So here’s an easy prediction. Bumping Immigration and Customs up the bureaucratic hierarchy will give those two organisations new influence, ambition, and ultimately power.

And by recasting them as part of our national security infrastructure, those agencies will orientate their core business towards that new, sexier, and more threatening security role.

Why easy to predict? Because that’s exactly what happened when the United States created the Department of Homeland Security. That monstrosity is expensive, expanding, and working to gain new powers. Until recently, its Immigration and Customs Enforcement division was lobbying forthe power to track citizens’ movements through licence plate scanning.

The last thing Australia needs is yet another grand and ambitious security bureaucracy pushing for powers that reduce our civil liberties.

The Australian Border Force may turn out to be one of the most significant, and dangerous, decisions of the 2014-15 Budget.