Turnbull’s Policies Aren’t Liberal, They’re Incoherent

It’s hard not to conclude that Bill Shorten has the measure of Malcolm Turnbull. Policy after policy the Government is chasing the Opposition, rather than leading it.

For instance, this weekend’s talking point – negative gearing – is only on the table because Labor announced their negative gearing policy in February.

The Government’s reforms to the Australian Securities and Investment Commission are obviously because Labor called for a royal commission into the banks.

The assistant treasurer, Kelly O’Dwyer, announced a new public register of shell companies last week. Does anybody believe the Government would be so keen on this issue if Labor hadn’t made corporate tax avoidance a centrepiece of their economic message?

Labor declared earlier this year that it would hike tobacco taxes. Lo and behold so will the Coalition.

And the mooted superannuation reforms we heard about last week appear to be specifically calibrated to trump Labor’s proposal. Where Labor will increase taxes on those earning more than $250,000 a year, the Coalition will increase taxes on those earning more than $180,000.

These aren’t marginal issues: if the leaked script for the post-budget advertisements is correct, multinationals, tobacco and superannuation are exactly what the Government wants voters to think about.

More damningly, those three budget centrepieces all constitute tax hikes. (Any policy that increases government revenue is a tax hike, no matter how it is dressed up in the language of “loopholes” or “concessions” or “savings”. The Australian commentariat can be embarrassingly gullible when it comes to political euphemisms.)

If the political parties were only ever neutral policy shops freely picking and choosing ideas from across the political spectrum this wouldn’t be remarkable. Simple models of political competition suggest that in a two party system, party policies are likely to converge.

But the Coalition is not supposed to be a neutral policy shop. The Coalition is supposed to be – indeed, professes to be – the low-tax party, reducing the burden of government on the citizenry rather than increasing it.

Shortly after becoming Treasurer, Scott Morrison declared that Australia had a spending problem, not a revenue problem. Language ought to mean something. If our budget problem is not a revenue problem, then why are revenue grabs at the centre of the Government’s economic message?

Messiness in policy formation can always be overlooked … But messiness in policy direction is harder to ignore.

Prime ministers usually set the standards by which they are judged. Tony Abbott was unable to deliver the steady government he promised after the turmoil of the Rudd-Gillard years, and surrendered his “freedom wars” less than a year into office. Turnbull set his standard – to lead a “thoroughly Liberal government” – at the moment of the spill. It is a standard he has yet to live up to.

On the positive side of the ledger, there was the successful effort this month to abolish the Road Safety Remuneration Tribunal. This price-fixing regulator was established by the Gillard government yet left untroubled by the Abbott government.

But on the negative side of the ledger we have tax hikes and new spending promises, the latter amounting to $10 billion of expenditure announced since Turnbull took power. And the bevy of new powers being granted to ASIC will also represent a substantial increase in the regulatory burden – and a substantial empowerment of the regulatory state.

The Turnbull Government’s policy suite isn’t thoroughly Liberal – it’s incoherent.

Messiness in policy formation can always be overlooked. Government is a human enterprise not a divine one. And few voters are engaged enough in political news to identify complication and contradiction before policies are formally announced. But messiness in policy direction is harder to ignore.

This is one reason why Bill Shorten looks more electable by the day. To Labor’s credit, they have announced a suite of policies that fit together nicely and tell a coherent story about the world. It’s not a very pleasant story – banks are ripping off their customers, multinational corporations are ripping off the budget, rich taxpayers with large super balances are ripping off poor taxpayers – but it does give a picture of what Labor stands for and what a Shorten government will mean.

Voters still lack this information about Turnbull. After the entirely-forgettable innovation statement, the Government has been on a constant backfoot – chasing the legacy of decisions made by Tony Abbott’s team, such as the tax reform process, as much as trying to keep up with a stream of Labor announcements.

Some of this dynamic has been forced upon the Government. Leadership changes are disorderly. But not all of Turnbull’s problems have been forced by circumstance.

Turnbull needs to grab the agenda, and grab it in a way that is thoroughly – discernibly – Liberal, rather than an emulation of Labor. After all, if voters want the Labor package, why would they vote for the Coalition?

Why Anti-Bank Populism Is A Fundamental Part Of Australia’s Political Culture

It’s not really a surprise that two-thirds of voters support Labor’s royal commission into banking,as the Fairfax/Ipsos poll found yesterday. Anti-bank populism is a fundamental part of Australia’s political culture.

Back in 2012 Essential asked voters how, specifically, they would like the banks to be controlled. Ninety per cent wanted the government to fix bank fees. Eighty-one per cent wanted the government to fix the salaries of bank CEOs. Seventy-four per cent wanted to forcefully peg interest rates to the Reserve Bank’s monthly interest rate determinations.

It seems likely that voters would welcome a return to the pre-1980s regulatory regime where the government fixed interest rates and micromanaged the products and investments of the banks – where credit was scarce and you had to beg banks for a loan.

So this fortnight’s debate over the royal commission into banks and the government’s alternative – to boost the powers and funding of the Australian Securities and Investment Commission (ASIC) – is not just a minor election year spat.

It’s a revealing window into how the government changed the way it controls business over the last few decades.

The market-oriented reform of the 1980s and 1990s revitalised the Australian economy after the stagflation of the 1970s. But in the wake of that reform grew up a complex regulatory state that pleases no one.

Now control of the economy has been delegated to arms-length independent regulators. They oversee vast regulatory regimes that create uncertainty and impose heavy costs, while at the same time doing nothing to satisfy the anti-corporate populists who imagine that industries like banking have been left up to the “free market”.

We can debate how heavily regulated companies should be, but surely we can agree that the regulation should be transparent.

Take, for instance, the complaint last week in the Sydney Morning Herald by Allan Fels – himself a former regulator – that ASIC has failed to be the “tough cop” on the corporate beat because it has been too eager to sign negotiated settlements with the firms it is supposed to regulate. Fels would rather ASIC take more firms to court.

No doubt many readers nodded in approval, the report further confirming their belief that ASIC is soft and that we need a royal commission.

But the idea that the increasing use of negotiated settlements and so-called “enforceable undertakings” is a sign of regulatory softness is bizarre.

The practice of negotiating enforceable undertakings – essentially promises made by firms to do certain actions which can be enforced in court – was developed to give regulators discretion to be more intrusive, not less.

The idea is this: rather than going to court every time the regulator wants a firm to do something, it can negotiate. Negotiation is cheaper for all involved, but it also gives the regulator more power. With a negotiated settlement, the regulator can persuade firms to do more than the letter of the law would require: do this, and we won’t take you to court.

Enforceable undertakings are a big part of the “responsive regulation” idea that was supposed to strengthen the power of regulatory agencies. ASIC is a big fan of responsive regulation.

Now, in my view, this sort of regulatory practice is bad policy. Firms should know exactly what is lawful and what is unlawful. Regulation shouldn’t be a matter of discretion – it should be clear and unambiguous. Uncertainty is bad for the economy.

But it’s bad politics, too. Recall that old aphorism: not only must justice be done, it must also be seen to be done. Regulatory agencies spend their life negotiating in private with firms rather than publicly enforcing clear rules in court. No wonder voters think those agencies are a bit hopeless.

We can debate how heavily regulated companies should be, but surely we can agree that the regulation should be transparent.

Into that political void has fallen Bill Shorten and his royal commission into banks – an exercise that appears more about adverse publicity rather than a genuine desire for reform.

After all, if Shorten had any grand regulatory dreams for the sector he had ample opportunity to chase them in the three years he spent as Minister for Financial Services and Superannuation.

But it is hard to imagine a royal commission that did not recommend more regulation. They’re structurally designed that way. Lawyers tend to be more sympathetic to legal controls on market transactions than the economists that dominate most other forms of banking inquiry.

The Coalition government has its own policy to strengthen ASIC – with new powers, a new funding model, and some more resources.

None of these options is likely to resolve the deeper problem – that the discretionary, arms-length, ambiguous regulatory state offers nothing but uncertainty to firms and the public.

No wonder voters don’t have confidence in the system. No wonder they like the idea of a populist royal commission.

Are The Panama Papers Really Such A Scandal?

What, exactly, is the scandal with the Panama Papers?

You might have read in Time that it “could lead to capitalism’s great crisis” and the Guardian that it depicts “the corruption of our democracy”.

It’s easy to draw political conclusions from the leak of 11.5 million files from the Panamanian law firm Mossack Fonseca – even take a guess how it will play out in Australian domestic politics, which we will come to shortly – but put aside the hyperbole for a moment.

Is the scandal that Vladimir Putin’s inner circle has extracted billions of dollars of the wealth of the Russian citizenry and state? Or is it that they are trying to avoid paying the Russian statutory income tax rate of 13 per cent?

Is the scandal that you can accumulate incredible wealth as a member of the Chinese government? Or, then again, is the scandal that some of that fortune isn’t being taxed domestically?

Twenty-nine per cent of all active companies represented by Mossack Fonseca were set up by its Chinese offices. But this doesn’t inherently suggest criminality. Wealth in China risks expropriation by the state. Investing offshore is good risk management.

Indeed, most of the foreign leaders named in or connected to the Panama Papers come from countries that are high on corruption and low on the rule of law.

Scan your eyes over the nationalities of the “power players” in the Panama Papers. Georgia, Iraq, Jordan, Qatar, Sudan, Saudi Arabia, the United Arab Emirates, Ukraine, Azerbaijan, Syria, Egypt, Pakistan, Ghana, Morocco, the Palestinian Authority, Cambodia, Kazakhstan. This is not a list of the world’s liberal democracies.

Some are, though. The prime minister of squeaky-clean Iceland, Sigmundur Davíð Gunnlaugsson, stood down last week after he was named in the Panama Papers. When his wife invested the proceeds of a sale of her father’s business offshore, Gunnlaugsson failed to declare his interest in the company. The company also held bonds in the very same Icelandic banks that the government was responsible for winding up after the Global Financial Crisis.

But Gunnlaugsson’s true crime is hypocrisy. Having professed an Iceland-first economic policy of capital controls, retaining businesses in Iceland and protecting the Icelandic króna, it understandably galls to see his own wife utilising global offshoring to – legally – maximise her wealth.

David Cameron is having similar trouble after his father was named in the papers. All evidence suggests that Ian and David Cameron paid all taxes on the dividends they received in Britainfrom this offshore investment. But the British government has spent the last few years trying to whip up a frenzy about complex tax arrangements. Not a great look.

Still, hypocrisy is a moral violation, not a legal one.

Tax havens perform an important function by putting downwards pressure on domestic tax rates. They are the global economy’s escape valve – preventing sclerotic Western welfare states from pushing taxes up and up.

As the Cato Institute’s Dan Mitchell wrote last week, the fact that law firms like Mossack Fonseca create corporate structures is no scandal. Even though what they do is completely legal, they are now being tagged with a vague sense of criminality. But Mossack Fonseca does not acquire the money, hold the money, or invest the money. And it is required to do due-diligence on its clients.

Most importantly, for all the impressive scale of the Panama Papers (11.5 million files comes to 2.6 terabytes of data) it tells us little about the extent to which offshoring erodes the tax base of non-haven countries. It is remarkably hard to identify any serious detriment to the revenue from offshoring, as even the OECD, the multinational body pushing the crackdown on tax avoidance, admits.

This is where the politics of the Panama Papers and their actual policy significance sharply diverge.

In Australia, Bill Shorten has made a crackdown on corporate tax avoidance the pillar of his economic policy. As Lenore Taylor writes in the Guardian, Shorten is relying on the revenue gained from closing tax loopholes to fund new social spending, and close the budget deficit.

Labor thinks it can squeeze another $2 billion in revenue from a crackdown on tax avoidance, but won’t release Parliamentary Budget Office estimates it says shows this. My Institute of Public Affairs colleague Sinclair Davidson has often pointed out that the Australian government is much better at writing press releases announcing how much extra revenue it will collect from a crackdown than actually collecting that revenue.

The Panama Papers helps Shorten keep the Turnbull Government on the back foot. Even though the Coalition has tried to beat up the tax avoidance issue itself, economic populism is not a game that nominally market-oriented parties can win. As the prime ministers of Britain and Iceland have learned, the politics of offshore investments is about impressions not policy.

To be mentioned in the Panama Papers looks bad. That the Panama Papers exist looks bad. It’s the vibe. It’s the optics of the thing.

Every article on the leak has a sentence saying something like, “There are legitimate uses for offshore companies”, but who reads the fine print? And in the middle of a frenzy about the super-rich and what they do in foreign, exotic countries, who would want to?

Federation Reform Is No Political Plaything

Every government dreams of reforming the federation, but dreams usually end in disappointment. Malcolm Turnbull should know this.

Consider his predecessor. Tony Abbott always had a love-hate relationship with federalism. His attitude to the states in Battlelines ranges from ambivalent to hostile. As Howard government health minister he helped orchestrate the “local” takeover of Devonport’s Mersey Hospital from the Tasmanian state government – a takeover underwritten by the Commonwealth government, of course.

But in his 2013 budget reply speech as opposition leader, Abbott suddenly declared that under a Coalition government the states would be “sovereign in their own sphere”.

It was an important moment. That phrase had been used by the Australian founders. During the 1897 federation conference Edmund Barton said the goal was “to create a system of government under which, as to over all the powers they retain, the States will be supreme and sovereign in their own sphere.”

The technical structure of our constitution says that everything not expressly given to the Commonwealth government is to be left to the states. But to say that the states are sovereign is to go further than legalities – it is to assert that the states have fields of control which cannot legitimately be usurped by the Commonwealth.

Of course, in the 21st century the states are anything but sovereign. There is no area of state constitutional responsibility that does not have the federal government slobbering all over it. These days health, education and infrastructure are all, in practice, joint Commonwealth-state endeavours. The Commonwealth dominates the collection of taxation and distributes funds for the states to spend. But funding tends to come with conditions, and the Commonwealth uses the leverage it gains from its revenue to pursue its own goals in the areas of health and education.

It is hard to imagine a system of governance worse for accountability, for transparency, even for democracy than to have one level of government raise funds and the other level spend it.

Abbott commissioned a taskforce in his own department to produce a white paper into federal reform. The taskforce produced a discussion paper and four issues papers but then quietly disappeared – the promised green paper (to be “released in the first half of 2015”) and white paper (“by the end of 2015”) never materialised.

One explanation for the quiet death of Abbott’s federation agenda was the general drift that characterised his last year in office. But part of it was almost certainly because the taskforce had thrown up some very radical solutions to the problems of Australian federalism – like removing the Commonwealth from schooling altogether, or the Commonwealth directly spending more of the money that it raises, or encouraging the states to raise more money themselves – that were a bit too bold for the Government’s taste.

There are fundamental structural problems with Australia’s federal system. Almost any solution is radical. Turnbull is not the first prime minister to propose returning income tax powers to the states, and he’s not the first to abandon it on political grounds.

Political strategists often point out that voters don’t care about which level of government is responsible for what policy area. If a road has a pothole, they just want it fixed. They don’t want to be told by a politician that it is a state or local responsibility. Newbies to federal politics quickly find themselves discussing local traffic lights with constituents rather than foreign policy.

Yes, vertical fiscal imbalance – the term which describes the disjuncture between the Commonwealth’s taxing and the state government’s spending – is an esoteric problem. But then again, the federation is an esoteric topic. Constitutional limitations on government are esoteric. Just because a problem is esoteric does not mean it is unimportant.

Unfortunately no government has successfully made these esoteric issues relevant – outlined the relationship between fixing the federation and practical policy consequences. “Stop the blame game” is a great catchphrase but it’s not quite great enough to justify major reform.

So Turnbull’s failure to win the state income tax argument against a group of self-interested premiers last week should not have been a surprise.

If, as some commentators have argued, Turnbull is playing a long game – by showing that the state governments would rather complain about being underfunded than to take financial responsibility for their own public services – then more power to him. The question is whether the goal of that long game is simply to justify reducing the amount the Commonwealth gives to the states for health and education in the 2016 budget, or to lay the foundation for a deeper reform of the federation itself.

Turnbull has a lawyer’s understanding of how Australia’s federation today looks nothing like the constitution originally prescribed, and he has a politician’s understanding of how to deal with the states. But the federation question is about more than just politics and law. It’s about how we conceive the Australian nation. It’s about whether power should be divided between states and the Commonwealth or whether we should accept the centralisation of power as inevitable. Are states sovereign? Or are they just subservient?

The Democratic Case For Splitting Queensland In Two

“Most persons think that a state in order to be happy ought to be large,” wrote Aristotle in his Politics, “but even if they are right, they have no idea what is a large and what is a small state.”

And 23 centuries later, not much has changed.

A group of Queensland MPs have renewed a longstanding call to split Queensland in two. They believe they can force a referendum on the issue. The Minister for Northern Australia, Matt Canavan, also supports the new state proposal.

But Annastacia Palaszczuk believes “Queensland should be bigger, not smaller”. She wants Queensland to take the Tweed Coast from New South Wales.

There are other proposals. Warren Entsch wants to split the top half of the country in two, creating a northern mega state.

Yes, redrawing the map of Australia is a classic holiday-season news story. It’s both fun and slightly frivolous.

But the question of the ideal size of a political jurisdiction pervades debates about everything from council amalgamations to whether Britain should leave the European Union – a political and economic alliance that has developed state-like characteristics.

The great Greek philosophers believed that the ideal size of a political jurisdiction was a small city. Aristotle put it this way. The city should be large enough to be self-sufficient. But a city with too many people is ungovernable. A city should be small enough so that the citizens know each other well enough to distribute offices according to merit. Plato decided that optimal city size had 5040 families.

Neither economic self-sufficiency nor knowing office-bearers personally are imagined to be important any more. But Aristotle did underline the basic tension in deciding whether to make states larger or smaller: between economic desires and democratic ones.

On the one hand, economic considerations suggest that larger states are better. Larger states can exploit economies of scale and deliver more services. It is as much work to write a school curriculum for two schools as 2000 schools. This is the intuition behind the steady centralisation of policy towards the federal government – the idea that it is more efficient to impose the same policy on everyone, rather than have regional governments develop their own approaches from scratch.

But on the other hand, economies of scale aren’t everything. Democracy – that is, genuine democratic engagement, not just attending a polling booth every few years – seems to thrive better in smaller jurisdictions. The idea that the people rule is more believable when it is possible to imagine ourselves as one of those rulers – something which is less likely in a giant unitary nation than a small community.

There is, simply put, a trade-off between the economic benefits of large size and the democratic benefits of small size.

That trade-off helps us understand why the Queensland government – any Queensland government – will fight a split. More economic power means more wealth that can be delivered to the government’s supporters, and the political class rarely welcomes any more democratic participation.

Nor is the federal government likely to welcome any new states. It is much easier to negotiate with one Queensland government rather than two. More states reduce the concentration of political power. Those who hold political power dislike that idea.

Back in 2009 Geoffrey Blainey argued that it was “absurd” not to establish a new state in northern Queensland because when Queensland was formed no one knew about the mineral resources in its north.

Yet as the Danish political scientists Martin Bækgaard, Søren Serritzlew, and Kim M. Sønderskov point out, the optimal jurisdiction size for any political community depends on what we want those communities to do. Aristotelian self-sufficiency is unnecessary in a world of international trade. But the high cost of modern militaries mean we need huge nations to pay for a single F-35 Joint Strike Fighter.

Bækgaard, Serritzlew and Sønderskov argue that for jurisdictions with minimal functions and responsibilities, smaller is better. For Australian local governments the optimal size might be as little as 5,000 people. Rather than amalgamating councils we should be splitting them up.

Blainey is right that it has been a long time since the map of Australia was first drawn. But the key change since is not the discovery of resources, but the long centralisation of power in the Commonwealth government. Policy areas that the constitution leaves to the states – like education – are increasingly being controlled by Canberra. This is as good a reason as any to rethink the number of states.

As state governments do less and less, there ought to be more and more of those governments. North Queensland should be just the start.

Turnbull’s Only Real Option Was Bluff And Bravado

If Malcolm Turnbull is bluffing about a double dissolution election, it’s a very committed bluff. A dramatic bluff. A bold bluff.

First, the Government had to pass the changes to the Senate. No point holding a double dissolution to clear out the Senate crossbench if that election would just throw up even more minor party crossbenchers. Lest the substance of this change be dismissed, consider that in order to hold a double dissolution which would result in the desired outcome, the Government had to change the voting system itself.

Second, Turnbull has asked the Governor-General to recall Parliament in April to consider the Australian Building and Construction Commission Bill – one of the pieces of legislation the Prime Minister would like to use as a trigger for the double dissolution. Constitutionally, the Governor-General can call sessions of Parliament. The Senate is less likely to seriously fight the Queen’s representative on a scheduling matter.

Third, the budget is being brought forward one week. As Antony Green explains, a double dissolution cannot be held within six months of the end of a term. This means a double dissolution must be called on May 11 at the latest. But the government needs to pass a budget each year for the machinery of government to keep ticking along – currently scheduled for May 10. One day isn’t a lot to pass budget bills, so the budget day is being moved to May 3.

One estimate has that small change of budget schedule costing one million dollars. I imagine we’re about to find out how much the April sitting of Parliament is going to cost.

Turnbull says if the crossbench passes the ABCC bill in April, then no double dissolution will be necessary. But that’s hardly the point. One column in The Age has described Monday’s double dissolution threat as “a colossal gamble the PM had to take”. “Had to”? Cleaning up union corruption is legitimate and necessary – even urgent – but not quite the emergency that calling a double dissolution implies. Rather the “had to” refers to a sense that the Government needs a narrative. It needs a reason for being. It needs to make a bold political move.

The media loves bold moves. Double dissolution gamesmanship fits the bill. It’s true that the outbreaks of high drama that have characterised Australian politics since Julia Gillard rolled Kevin Rudd have also been accompanied by hand-wringing about the decline of political stability and The End of ReformTM. But the very same press gallery has been damning Turnbull for weeks about the Government’s apparent purposelessness.

Tax reform has been on-again and off-again – characterised by half-hearted attempts at encouraging debate and subsequent backdowns. Part of this has been some of the transactions costs of the leadership change. The discussions about negative gearing, increasing the GST, and superannuation tax concessions were all started by the Abbott government. But the drift made a mockery of Turnbull’s claims to be a brilliant communicator. The new Prime Minister did not usher in the end of politics after all: just another stage of what the commentariat portray as our era of political crisis.

In this context a double dissolution looks like cut-through … great optics … agenda setting … finding a narrative. Double dissolution elections are rarely about the bills they’re purportedly called to pass. The Australia Card Bill – technically the subject of the 1987 double dissolution – didn’t even go to a vote when Bob Hawke failed to win a majority in the Senate.

Rather, if this election is like any other election, it will be at its core about the economy. Politicians like to talk about their superior “economic management”. But as I have argued on The Drum before, rather than being managers of the economy, they are in truth the economy’s hostages – riding waves of international capital flows and iron ore prices and financial market hiccups that small economies like ours can barely influence.

Take a step back and this is a defining feature of Australia’s political culture. We push against events we cannot control. We “take stands” on ground which will never be stable. Australian governments can only facilitate change. They cannot direct it or prevent it. So boldness – as brazen as possible – is the currency of Canberra. It unites Turnbull’s “ideas boom” with Tony Abbott’s promise to shirtfront Vladimir Putin. Confidence is a substitute for the control they will never have.

On Monday afternoon, Bill Shorten said “Mr Turnbull has a plan for his re-election, he just doesn’t have a plan for Australia.”

But in truth, an election is about the only thing he can plan for.

If You’re Worried About Privacy, You Should Worry About The 2016 Census

If you blinked, you missed it. On December 18 last year, the Australia Bureau of Statistics announced that at the 2016 census in August it would, for the first time, retain all the names and addresses it has collected “to enable a richer and dynamic statistical picture of Australia”.

Keeping names and addresses, we were quietly told, would enable government planners to do more rigorous studies of social trends.

It is only now that the significance of the ABS’s change is spilling out into the press.

For the past 45 years, it has been the ABS’s practice to destroy that identifying information as soon as all other information on the census forms is transcribed – first onto magnetic tape, and now into vast digital data banks that allow statisticians to slice and dice at their whim.

In the 2001 census, the government first offered Australians a choice as to whether they would like their name-identified information kept. This year that opt-in system will be a compulsory system. Your name will be kept whether you like it or not.

The risks to privacy are blindingly obvious. The safest way to protect data is to not collect it at all. The second safest way is destroy that data after collection. There is no such thing as 100 per cent safely secured information. We know this from bitter experience. The last decade has seen a constant stream of unauthorised releases of apparently secure private information: the 2015 Ashley Madison hack being just the most embarrassing of these.

After all, privacy risks don’t only come from hackers and other rogues. Government departments have a poor record of protecting information from their own staff. The Department of Human Services admitted there were 63 episodes of unauthorised access to private files by its staff between July 2012 and March 2013. The South Australian Police Force accuses up to 100 of its own members of unauthorised access to police files every single year. ABS staff are no more or less virtuous than any other public employee.

The ABS argues that identification information will be stored safely and separately from the rest of the census data, creating a firewall that protects against individual identification. A spokesperson told Radio National last week that the ABS “never has and never will release information that is personally identifiable”.

There are a lot of unanswered questions here. But no matter what firewalls the ABS places around access and matching, it is a truism that any data that can be used usefully can also be used illegitimately.

And of course, what are considered legitimate and illegitimate uses of data can change over time. Rules written in 2016 could be changed in 2026. The data collected now might be used in a very different way down the track.

Identification retention could have practical consequences as well. A population that is rightly worried about the security of their information is less likely to answer the census either accurately or at all. Indeed, this has historically been the ABS’s big concern with keeping identification. They told a parliamentary committee in 1998 that the reduction in data quality from a reluctance to answer questions truthfully was not worth the trade-off.

A lower quality census would lead to lower quality government statistics across the board. A lot of things hang off the census. Census data guides electoral redistributions, Commonwealth grants, education funding and so on. Risking the integrity of all that in the hope that future data might be marginally more interesting to genealogical researchers and government planners seems like a terrible deal.

Although they profess to have changed their mind on the risk of lower quality data, we can speculate these concerns might be why the ABS announced the new policy in the dead holiday season. The less publicity given to the change, the less likely Australians are going to hear enough about the new census rules to be worried about their privacy.

While the Coalition’s support for traditional rights and freedoms has taken a battering over the past few years, overriding the ABS decision would go some way to reclaiming its liberal heritage.

After all, it was a Liberal Treasurer, Billy Snedden, who first mandated the destruction of names and addresses in census forms in 1971 in response to privacy concerns. And Cabinet records show the Fraser government – at the behest of treasurer John Howard – unhesitatingly and immediately rejecting a 1979 proposal by the law reform commission to retain census names and addresses.

The digitisation of absolutely everything has made privacy one of the central problems of the 21st century. If anything, Australians are more aware of the dangers of identity theft and information insecurity than they have been at any time in history.

As the ABS change shows, the debate over warrantless mandatory data retention was just the tip of the iceberg.

It is true that modern governments are data hungry. Planners and regulators want more and more information about the populations they govern.

But to the extent we have an interest in protecting ourselves against government excesses, we have an interest in denying governments carte blanche to collect information. We are not just data points in a planner’s spreadsheet. They work for us.

There’s Little To Stop Trump Wreaking Havoc As President

The prospect of a Donald Trump presidency shouldn’t be as worrying as it is.

The United States constitution is specifically designed to prevent presidents from doing too much damage. But the carefully, intelligently designed checks and balances built into the American system of government have been so eroded over the last century that a president Trump could do the sort of harm the founding fathers wished to prevent.

The issue is not so much Trump’s policies. I complained in January that Trump was no conservative – particularly on trade – but then again, he wouldn’t be the first non-conservative president. In fact, policy-by-policy he looks like the most moderate candidate in the Republican field; the temporary ban on Muslim immigration to the United States notwithstanding.

Nor is being a “populist” a crime. Trump would hardly be the first president who got to power by telling voters only what they wanted to hear.

What’s worrying about Trump is his unpredictability, his disregard for any boundary between truth and self-serving fiction, his unbridled narcissism, his instability, and his apparent desire to pursue his enemies with the tools of high office.

He sees himself as a “strong man” – hence his apparent affinity with other strong men like Vladimir Putin. And at this stage it is easy to imagine a chain of events that puts him in the White House.

The American founding fathers were aware that a democratic political system could turn out a person like Trump. The Federalist Papers, the essays written in 1787 and 1788 to argue the case for the constitution, were motivated by a theory of human nature “that men are not to be trusted with power because they are selfish, passionate, full of whims, caprices, and prejudices,” in the words of one scholar.

Hence in the famous Federalist Paper 51, James Madison argued that power must be separated between different branches of government. Each branch – the executive, the legislature, and the judiciary – would vie for power against the others.

“Ambition must be made to counteract ambition,” Madison wrote. The institutional structures of the American republic would ensure that a strong man or narcissist, were they elected to the presidency, would be constrained by the other branches.

Yet those structures have been systematically degraded over the past century. The presidency has accumulated power at the expense of the legislature.

As the word implies, the executive’s intended function is to execute the laws passed by Congress. But the modern presidency has carved out an enormous field of action where it can operate virtually without the oversight of the other branches. The historian Arthur M Schlesinger Jr. called this the “imperial presidency”.

The most obvious example of the imperial presidency is foreign policy. Under the text of the constitution, only the Congress has the power to declare war. But the last war to be declared by Congress was World War II. Since then presidents have been asserting almost unlimited, unilateral power over military engagement and interventionism. The upshot is that, contrary to the founders’ intentions, the president can effectively send the country to war on nothing but their own counsel.

Trump says he now opposes the invasion of Iraq, but he also wants to take Islamic State’s oil. Whatever strategy he implements to do so, the combined forces of the United States military are in practice at his complete disposal.

Just as concerning is the power the president can wield over public policy. The original idea behind Western liberal democracy is that policy is made by the legislature as they negotiate and pass law. But the growth of regulation as a substitute for statute has vested more and more power in the executive government.

In 2014 federal departments, agencies and commissions passed 16 new regulations for every one law the Congress passed. As the economist Tyler Cowen wrote last month: “If there were a president who wished to pursue vendettas, the regulatory state would be the most direct and simplest way for him or her to do so.” Having the vindictive Trump responsible for all this is dangerous.

The shift from a constrained presidency to an imperial presidency has been cultural as well. In his book The Rhetorical Presidency, Jeffrey K Tulis argues that the presidency has assumed a symbolic role not envisioned by the founders.

Voters – and the press – describe one of the key requirements of the office as “leadership”. Yet as Tulis points out, this was not what the founders hoped. The Federalist Papers had only a dozen mentions of the word leader. All but one were disparaging.

During the 20th century, the presidency became about words as much as administration – presidents were rated on their personalities and ability to channel popular sentiment.

Trump is the apotheosis of this change: a demagoguing narcissist who is all surface and shine. But all democracies are vulnerable to such populist figures. The founders knew that. If only their great institutions had been maintained.

Furniture, Rent-Seeking And The Problem With Laws

Law often takes on a life of its own.

We see this all the time. First, parliament introduces a law to solve a public policy problem. Decades pass. Things change. Perhaps the problem might no longer be considered a problem. Technologies change. Opinions change. But it is easier to pass a bill than repeal an act. Special interests come to rely on the status quo. As a result, governments often reconceptualise why the law was first introduced in order to defend that status quo.

Nowhere is this pattern more obvious than in that cesspit of special interest rent-seeking that we call intellectual property law.

The United Kingdom has decided to increase the intellectual property protection for design – which covers manufactured artistic creations like furniture, jewellery, and architecture – from the life of the creator plus 25 years for registered design works, to the life of the creator plus 75 years. An extension of 50 years.

In practice this means design works will get the same length of protection enjoyed by other artistic creations. Furniture, architecture and jewellery designs will be treated much the same as songs and movies in copyright law. Once their protection expires, other manufacturers are free to reproduce the designs, as long as they describe their products as “replicas” or “reproductions” of original designs (lest they violate trademark law).

In Australia, furniture designers want the same changes. Here design protection lasts just 10 years. An Australian manufacturer told BRW in January that Australian design protection was inadequate. A spokesperson from the furniture manufacturer Herman Miller told Fairfax’s Domain last week that companies selling replica design furniture are “tricking the consumer and undervaluing the original design”.

There’s a lot of money at stake. The iconic Eames lounge chair will set you back about $8,000 if you buy an authentic one produced by Herman Miller. But the chair was first designed in 1956 and is long out of design protection. So you can get a replica of the Eames lounge chair for a tenth of that price from any number of retailers.

A licensed edition of the even more ubiquitous, and older, Eames plastic moulded side chair will cost the better part of $1000. Or you could pick up a replica for $80 or so.

Part of this price difference is due to quality. Another is the price of the brand – manufacturers are able to charge a premium for customers who want the real deal rather than an inauthentic product.

But none of that price difference is because the designers have to recoup the cost of the original design. It has been a long time since Herman Miller recouped the design cost on their lounge chair.

And that is all that matters. Justifying the UK change, the minister for intellectual property, Baroness Neville-Rolfe, argued it would right the “unfair” imbalance between manufactured designs and other artistic production.

But what does fairness have to do with it? Intellectual property law is not about being fair to furniture designers. Intellectual property has a purpose.

Standard economic theory says the market will under-provide creative products because creative products are easy to copy. To fix this, intellectual property offers creative producers a monopoly over their work. But that monopoly is only available for a time, because we, the consumers of creative work, have an interest in accessing and repurposing the back catalogue of human creativity.

All these caveats mean that intellectual property isn’t really property, as I’ve argued in the Drum before – it’s a regulatory workaround to an assumed market failure. It only has value insofar as it resolves that failure. It does not exist to funnel consumers into high-priced authenticity.

Furniture design is an example of a creative market that thrives despite lacking much of the intellectual property protection enjoyed by other creative works. Indeed, the fact that Herman Miller can still charge enormous sums for a design available at a tenth the price shows that both the cheap and expensive wings of the market can co-exist.

The availability of replica mid-century design means more people can enjoy better aesthetics at home. It is hard to see what public benefit restricting these designs to people who can spend $800 on a single side chair – as the UK government is doing – would provide.

Sure, on the scale of national politics, how long the design monopoly over Eames chairs should last is a pretty minor thing. But it is an informative one. If the government establishes privileges for one group others will want equivalent privileges.

The content of intellectual property law is almost never considered from first principles – that is, what do we fundamentally want our intellectual property regime to achieve. Rather, it is a scruffle of political power, long divorced from the theory of market failure and a textbook need for clever regulatory intervention.

The Coalition Government has spent the last few years trying to crack down on copyright infringement. If policymakers cared about the purpose of copyright protection they would only do so if it was clear that such a crackdown would lead to the creation of more new creative works. Of course there is no evidence that it will. But the holders of the rights to movies and music believe that pirates are depriving them of revenue. And governments listen because they’ve forgotten why copyright protection was introduced in the first place.

In other words, intellectual property has become its own justification. Put down your textbooks. This is how law works in the real world.

Negative gearing changes aren’t bold or courageous

Why are we talking about negative gearing?

The simple answer is Bill Shorten released Labor’s negative gearing policy. (For better or worse, this is how you control the media cycle. Release policies.)

The more complicated, more worrying answer is that the economic debate is so empty – that the range of acceptable discussion is so narrow, that big picture ideas are so thin on the ground – that changing negative gearing is the boldest economic reform the political class can reckon with.

Removing negative gearing has been done before. Where in 2016 negative gearing changes counts as a courageous barbecue stopper, the Hawke government’s abolition of negative gearing barely rates a mention among the great regulatory upheavals of the era. It’s a sad illustration of how our vision of the range of possibilities has shrunk in three decades.

An even more depressing thought is how disconnected the negative gearing discussion is from the big economic challenges we face. There are two reasons one might consider negative gearing changes. We might want to gather more revenue for the Commonwealth budget. And we might want to ease pressure on the housing market.

That Labor has a more-tax-revenue approach to budget repair and favours negative gearing as an explanation for high house prices is well-known.

But it’s a worry that the Treasurer, Scott Morrison, while defending negative gearing in general,believes that the “excesses” of negative gearing need to be tackled.

First, this goes against Morrison’s apparently rock-solid belief that spending needs to be reduced, rather than revenue increased.

Second, it implicitly concedes the view that the house price boom is caused by demand – too many investors – rather than supply – restrictions on land release and NIMBYism.

Third, and most importantly, changes to negative gearing have nothing to do with economic growth. Nothing.

It’s true that you could make a creative, complicated, multi-stage argument that lower house prices might eventually lead to growth benefits. But all else being equal, it is hard to see why removing money from the economy – as any proposal that increases government revenue would – might help the economy, rather than hinder it.

The unfortunate conclusion is that both the Government and the Opposition are talking about negative gearing because they have so few ideas of what to do next.

Just look at Morrison’s speech to the National Press Club last week. As a generic political speech it was perfectly adequate – an outline of the economic climate and reiteration of previously announced policy positions. But as an attempt to articulate the economic direction of the Turnbull Government it was empty.

On the question of budget balance Morrison only managed to demonstrate that very little had been done to reduce the deficit – as his 7.30 interview made perfectly clear, the Coalition has spent $70 billion of the $80 billion it has saved.

Perhaps the problem is that the bank of reform ideas is empty. Property commentators have been hyperventilating about negative gearing for ages. Maybe it’s only being talked about because the political class has run out of other things to talk about.

Yet the Australian policy community is rich with ideas: big bang ideas and small marginal ideas. The Abbott government commissioned the production of many of them. We’ve had the Harper review into competition policy, the Murray inquiry into the financial system, and the encyclopaedic audit commission report. These reports offer hundreds and hundreds of pages of policy discussion, recommending everything from intellectual property law changes to returning some income tax powers to the states. So where is the shadow of that formidable ideas production in our federal parliament?

Morrison has given a partial answer. From a growth point of view, cutting the company tax rate could get the biggest bang for our reform buck. This would be hard politics, especially if the revenue loss was compensated with a GST rise. As the Treasurer explained, “the proposition that you tax mums and dads more so companies can have a tax cut has an obvious problem.” Yet that problem has been surmounted before. Company taxes were cut in 2000, and again in 2001, at the same time as the GST was introduced.

It seems clear that politicians feel more hemmed in than they were in the past. That’s either because they lack courage – or because they lack the stable foundations on which to be courageous. Australian politics has now experienced half a decade of leadership instability, brought about by the fractious decision to roll Kevin Rudd in 2010.

Our policy debate is more shallow, limited and parochial than it has been for decades. Yet at the same time the need for major changes – changes that would spark economic growth – is as pressing as it has been since the 1970s. That changing negative gearing is the best that Labor and the Coalition can come up with is a condemnation of their failure to lead.