Liberals' legacy of mass migration is at stake

If Tony Abbott becomes Prime Minister next year, he is going to have to make a decision:  what to do about immigration?

Not asylum seekers:  immigration.

After all, the size and composition of the total immigration intake is certain to shape our nation much more than the few thousand people who arrive by boat.

While the parties shout themselves hoarse over refugees, we're at a unique juncture in immigration politics.

For the past 70 years, the party that has most embraced permanent migration in government has been the Liberal Party, not Labor.

Permanent and long-term arrival numbers vary every year;  and not all of those variations are driven by Commonwealth government policy.  But most are.

(For those interested in playing along, the Immigration Department offers a spreadsheet of historical migration numbers since 1945 here.)

The largest declines in our migration intake have occurred under Labor governments.

When Gough Whitlam, that darling of the progressive movement, came into power, immigration plummeted.  In 1970, the Liberal government of John Gorton had admitted 185,000 migrants.  The Whitlam government shrunk that to just over 50,000.

This was a deliberate policy decision.  Whitlam even shut down the Department of Immigration, placing migration under the Department of Labour and Immigration.

That might seem a minor institutional change but it wasn't:  when merged with labour, immigration policy came under the influence of a traditionally pro-union bureaucracy.  And unions don't like it when the government imports foreign workers.

There's long been a debate about whether it was Whitlam who ended the White Australia Policy or Harold Holt.  Both did their part.  But even though Whitlam proclaimed the end to the infamous policy, the sharp decline of total immigration on his watch meant that few non-European migrants could come to Australia regardless.

In March 1974 The Age pondered whether Gough Whitlam was doing as every government had done:  ''preaching tolerance while still practicing discrimination''.

Bob Hawke described himself as a ''high immigration man''.  But when he took government in 1983, the immigration intake dropped by more than a third.  To Hawke's credit, migration crept up over the next decade.  But when Paul Keating took over, it plummeted again.

The Liberals have a much more impressive record.

Post-war immigration was at its peak under John Gorton.  And Malcolm Fraser reversed the Whitlam backslide.

Under John Howard — that bête noire of pro-migration progressives — immigration jumped up well above the Gorton heights.  In 2007, the number of permanent migrants arriving on our shores hit 191,000 — the largest cohort since the Second World War.

As George Megalogenis wrote in The Howard Factor, the real story was how ''the former Hansonite belt ... think Howard is keeping out all the foreigners, when he is bringing them here at a rate Paul Keating never contemplated''.

Yet Howard's record-breaking immigration intake is apparently an awkward truth.  In the standard text on this subject, From White Australia to Woomera:  the Story of Australian Immigration, the academic James Jupp briefly acknowledges the Howard record — in one sentence.  But the real issue for Jupp is that Howard was considering a temporary guest worker scheme, and such a scheme would hurt unions already battered by WorkChoices.

But then came the Rudd government, and the partisan pattern broke.  Rather than immediately shrinking the intake, Rudd continued the trend upwards — hugely.  More than 224,000 migrants entered Australia in 2010.  And that terrifying guest worker scheme?  A pilot program was eventually introduced not by the union-hating Liberal Party, but by the ALP.

Even Julia Gillard's government — she of small Australia fame — has not appreciably reduced the number of migrants we take.

Given the showy anti-population rhetoric of the 2010 election, it is remarkable that we're taking nearly twice as many foreigners than we did under the government of Bob ''high immigration'' Hawke.

There's one obvious lesson here.  Don't trust what politicians say about immigration.

But when Rudd broke the pattern, he also broke the Liberal Party's cover.  After Labor prime ministers had lowered the intake, Liberal prime ministers were free to raise it;  they gained no political benefit from doing otherwise.  The Coalition could bang on about multiculturalism and refugees, but it would still bring in many more people than Labor.

Thanks to Kevin Rudd, Tony Abbott faces different incentives to his predecessors.  And the 2010 election demonstrated the Coalition's willingness to play the anti-population card.

So there is perhaps an added significance to the Abbott's announcement last week that he would reduce the Gillard government's refugee intake by 6,000 places.

It's one thing to call for temporary protection visas and off-shore processing.  It's another thing to actually reduce the refugee intake.  His announcement was reported through the standard stop-the-boats prism but it hints at something deeper:  the Coalition may sense an opportunity to rehash the 2010 themes in 2013.

Abbott has previously said that he would like to make skilled migration — that is, 457 working visas — the mainstay of a Coalition's immigration program.  But he has framed it in a peculiar way.  Businesses should be able to bring in workers, ''provided there aren't Australians who could readily fill particular jobs''.

This sees immigration as a mechanism to solve problems, not way of building Australian economic strength in and of itself.  And remember, 457 visas are temporary visas — not permanent ones.

Admittedly, this is like reading tea leaves.  History cautions us to not take anything politicians say too seriously.  The real story of immigration is only ever found in statistical appendices.

But should Abbott win government next year, immigration will be a major question for his new government.

Does he want to continue the Liberal legacy — a legacy of mass migration and population growth?  Or, as he has at times unfortunately suggested, does he want to repudiate it?

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Gillard is right about GST

At last Julia Gillard can be congratulated for something.  She's ignored Rob Oakeshott's call to review the GST.

On Tuesday the PM said there'll be no review and there'll be no change to the rate.  Yes, promises like that have been heard before about the carbon tax — but this time hopefully the PM will keep her word.

Tony Abbott also promised not to change the GST.  He said ''I invite Rob Oakeshott to campaign in his seat for changes to the GST, if he thinks they are necessary.''

The last thing the country needs at the moment is the Prime Minister with her hands on more money.

In theory the GST rate should be increased, and the GST exemptions removed.  A broad-based consumption tax has numerous theoretical advantages over taxes on income or capital.

But reality is different.  The Treasury Department assured Kevin Rudd that in theory there'd be no problem implementing the mining tax.

The reality is that if the GST goes up the chances are almost zero that the additional revenue will be used to cut other taxes.  All that will happen is that the government will keep the cash.

Even if somehow an increase in the GST rate is used to cut other taxes, it's likely the wrong taxes will get cut.

The taxes that the business associations and the politicians like to talk about cutting are the corporate tax rate and the so-called ''inefficient'' taxes levied by state governments.  It's funny how business and government always put personal income tax low on the list of what should be cut.

There's no lobby group in Canberra for cutting personal income tax.  The problem is also that because the federal government collects twice as much in income tax from individuals as it does from companies, reducing personal tax is much more expensive than reducing company tax.

But, the main reason why left-of-centre governments don't want to cut personal income tax is simply because left-of-centre governments generally have an aversion to people keeping and spending their own money.  The Gillard government is no exception.

Left-of-centre governments especially dislike people keeping their own money if they are wealthy enough to no longer be regarded as ''middle class''.  In the United States, Barack Obama's tax increases are targeted at anyone with an annual income of more than $250,000.

An increase in the GST shouldn't be used to fund a cut in the corporate tax rate.  It's naive to suggest Australia would become a substantially more attractive destination for international investment if the company tax rate was cut by a few percentage points.

The mining tax, the carbon tax, and the broader question of sovereign risk are bigger issues for overseas investors than insignificant cuts in company tax.

The very worst thing that could happen is raising the GST and then having the federal government pay state governments to abolish state taxes like their mining royalty and transaction-based tax regimes.  ''Inefficient'' state taxes are basically the only sources of revenue the states have left that they control.  Abolish those taxes and the states as viable political entities virtually disappear (an option that unfortunately is quite palatable to many people).

Instead of the commonwealth using GST payments to alternate between bribing and blackmailing the states to get them to eliminate their inefficient taxes, the GST should become a tax exclusively used to fund federal government activities, and state governments should be able to levy their own taxes on the income of individuals and companies.

If state governments were able to use their tax systems to genuinely compete against each other, their transaction taxes would be the first taxes states would abolish.

One of the prevailing assumptions of Australian politics over the past few years is that as the population ages and demands for government spending grow, taxes must therefore go up and the overall tax burden must increase.  And it's automatically assumed that raising the GST is the answer to the problem.

For politicians, one of the least politically painful ways of raising taxes is to increase the rate of the GST, which is why in the wrong hands the GST is so dangerous.  It should be as hard as possible for governments to raise taxes.  When Julia Gillard ignores what Rob Oakeshott says about the GST, she is doing the taxpayers of Australia a great service.

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Proposed law a further attack on free speech

The law that was used to silence Andrew Bolt has been supercharged by the Gillard government's proposed changes to anti-discrimination laws.

Bolt was found to have breached section 18C of the Racial Discrimination Act, which says it is unlawful to offend or insult someone on the basis of racial or ethnic characteristics in a public space.

But Attorney-General Nicola Roxon's proposed changes massively expand the list of characteristics people can be offended by, expanding the jurisdiction into shops, workplaces and sporting clubs.

The regime will provide a new weapon in the war on free speech by even including ''political opinion'' as a ground on which people can be discriminated against.

This extraordinary change makes even innocuous political expressions subject to the law — a person need only be offended or insulted in order to make out a claim.  Shop owners displaying signs in support of a political candidate may now be legally discriminating against employees who want the other guy to win.

By now we're used to politicians undermining our legal rights.  But rarely is it as blatant as the Gillard government's changes to anti-discrimination laws.

Not only do the changes represent an extraordinary attack on freedom of speech, they also undermine fundamental legal principles derived from 800 years of common law.  They would reverse the onus of proof, forcing employers to prove that they are innocent of discrimination.

English lawyer William Garrow coined the term ''innocent until proven guilty'' in 1791.  That statement has become one of the most famous and enduring terms in the legal sphere.  Garrow was referring to one of the most important principles of our legal system in the context of legal proceedings, a person is entitled to a presumption of innocence.

Central to this principle is the idea that the burden of proof rests with the person bringing the legal claim to the court.  This ought to be the norm in all cases:  whether it is the state attempting to prosecute an individual for alleged criminal activity or an individual suing another in civil proceedings.  Placing the onus of proof on the prosecution or plaintiff is the hallmark of a mature and just legal system.

The rationale behind this principle is simple:  it is difficult, even impossible, to produce evidence of a thing that does not exist.  In a free society, it is a principle of utmost importance that we protect the innocent even if it makes it harder to punish the guilty.

A reversal of the onus of proof tends to result in absurd and unjust outcomes.  And this is precisely what the Gillard government's proposed changes will achieve.  Section 124 of the draft legislation reverses the onus of proof in the case of a plaintiff providing some evidence that discrimination could perhaps have occurred.  After jumping this small hurdle, it is then up to the defendant to prove otherwise.

For some reason the Gillard government doesn't see this as a reversal of the burden of proof, but a ''shift''.  It at least gets points for creativity.

Discrimination claims will also cost the complainant nothing even if they lose.  The laws have been designed to create a no-cost regime (at least for those who allege discrimination).

This is not how civil cases are usually run.  Sure, free lawsuits may sound appealing but generally the losing party must pay all legal costs, which helps discourage any frivolous claims from making it to court.  Instead, the already struggling court system will be burdened with a flood of new litigation from people who no longer have to take any financial risk.

Indeed, the new law creates a regime that skews so heavily towards plaintiffs that it actually encourages false allegations.  Most employers, faced with potentially substantial costs in terms of time and money, will settle even spurious claims out of court.  Smart lawyers already know how to squeeze ''go away'' money out of employers.

Transferring the lessons learned under the present industrial relations regime to a new anti-discrimination regime is a recipe for huge problems.

Current definitions of discrimination vary among the five pieces of commonwealth legislation that govern this area of law, including the Racial Discrimination Act 1975.  The new anti-discrimination law will have just one definition:  ''unfavourable treatment''.

Harmonisation of all the various laws aimed at reducing discrimination is a good idea in principle but the method used by the government in this case is to draft a definition of discrimination that is broad in the extreme.

Unfavourable treatment could cover almost anything, and simply ensures an increase in the number of discrimination claims being made.

The proposed legislation also makes just one defence available to employers.  The defence of ''justification'' is an important one in the context of discrimination law, and it is right that it has been included, but there are a range of defences that should be available.  Mistake, duress and a range of other defences also could have been included in the legislation.

The reversal of the onus of proof only increases the importance of having a robust defence framework if claims can be made out so easily;  the legislation should at least allow employers and others accused of discrimination a number of grounds on which to defend themselves.

We've already seen the consequences of the Racial Discrimination Act for freedom of speech.  If you thought that was a miscarriages of justice, just wait until you see the extraordinary wave of free speech litigation Roxon's new laws will unleash.

The politics of consensus has a dark side

Memory is a funny thing.  ''In the days of the Accord,'' Business Council head Tony Shepherd told an audience last week, ''different sectors were able to agree on a common purpose and a plan to foster productivity, competitiveness and growth ... there is no reason we cannot do this again.''

Shepherd is not alone.  Hardly a week goes by without another CEO recalling the ambitions of past governments, and lamenting the timidity of current ones.

Their story has been repeated so often it's become a banal cliché:  in the days of Bob Hawke and Paul Keating, businesses, government and unions put down their swords, held hands, and made beautiful microeconomic reform together.  We need to rediscover the politics of consensus and conciliation.  It's time for an end to partisanship and to get on with ... anyway.  It's boring to write, let alone read.  Imagine hearing it in a speech.

But let's be clear about what that cooperation would be in practice:  institutionalised collusion between big business and big government.

This is the unacknowledged truth behind the business lobby's complaints that Australia has left its reform era behind, or that politics is too divided to make the big historical changes.

Getting business and government around a board table isn't necessarily a good thing.  In politics, cooperation can be dangerous.

Big businesses are no fans of the free market.  They only like competition in the abstract.  In the real world, competition is traumatic.  So when they are given the opportunity to set the rules of the game, they always try to fix it in their favour.  That's why we talk so much about lobbyists.  That's why we talk about crony capitalism.  And that's why we talk about regulatory capture — when a business promotes regulation to shut down its competition.  The politics of consensus has a dark side.

One of Adam Smith's most famous quotes comes from his Wealth of Nations:  ''People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public.''

Most people citing Smith's warning leave it there.  You can see the appeal.  Business cartels are bad, said the neoliberals' favourite economist.

But he went on:  ''Though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies;  much less to render them necessary.''  That is, cartels are bad — so the government should be careful not to create them.

On Monday, Julia Gillard announced that she wanted to do just that.  Writing to the Business Council and the Australian Council of Trade Unions, she proposed a National Economic Reform Panel.  This new body would encourage Australia's biggest businesses, largest unions, and most well-connected community groups to build a national consensus on reform.

Happily, it won't go anywhere.  Remember Kevin Rudd's relationship with Sir Rod Eddington, announced in a flurry of publicity in the 2007 election?  It's not clear that Eddington gave any advice, or that Rudd took any.  The post-election Business Advisory Group didn't seem to go anywhere, either.  Similarly, it is doubtful historians will mark Julia Gillard's tax summit in June this year as a key moment in Australian economic history.

We are haunted by memory of the Accord.  When Hawke and Keating convinced the ACTU to restrain wages in return for social reforms in 1983, they created one of the few hero moments in Australian history.  In our national mythology, the Accord was a necessary first step for the liberalisations of the next decade.

But the Accord was explicitly corporatist.  It was a way to buy off the unions and (although they did not formally sign the Accord) a fair chunk of the business sector.  It may have brought these bodies inside the tent, but it also gave them new influence and power over government.

Yes, many special interests gained from the Accord.  But it does not follow that the Accord was in the general interest.

For instance, given Keating's later efforts liberalising the labour market, we forget that the Accord constituted one of the most significant increases in industrial relations control in Australian history.  To their credit, some unions recognised this.  Not all unions signed up.

By the end of 1980s, advocates of liberalisation were arguing that, by locking the biggest unions within the policy system, the Accord was actually holding back reform.  Privatisation, tax changes and tariff reduction were made harder, not easier, by the government's newfound special relationship with labour.  As Des Moore wrote in 1988, the Accord had granted unions a ''privileged position ... to defend their own narrow, short-term interest at the expense of the Australian community and of their own members''.

The politics of consensus is really the politics of privilege.  It's easy to understand why special interests want control over the levers of power, but it's hard to see why we would give it to them.

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The Coalition's impressionist platform paints the wrong picture

The Queensland state election was only held in March.  But it feels like such a long time ago.  Nobody would feel the distance between then and now more keenly than Tony Abbott.

After Campbell Newman's extraordinary landslide, Abbott and the federal Coalition were being told by polls and commentators that they, too, were looking at a record win.  Julia Gillard would lose Queensland-style.

It made sense.  Labor was crippled by leadership questions, multiple scandals, and the imminent introduction of the carbon tax.  The polls even suggested the Coalition could win the Senate.  If not, then a quick, comfortable double dissolution would sort that out.

Eight months later, the polls are back roughly where they were at the last election — the one the Coalition didn't win.

Tony Abbott is increasingly unpopular.  Colleagues are telling the press he should cut down media appearances.  His disapproval rating is the highest of any opposition leader since Alexander Downer.

Is this comparison unfair?  Of course.  Abbott has had Labor on the back foot almost continuously since 2009.  Under Malcolm Turnbull, the Coalition would have been on the receiving end of a Queensland-style wipeout.  But it's not true to say Abbott is the most effective opposition leader in history.  The only mark of success in opposition is becoming the government.  And Tony Abbott is going to have to change tack if the Coalition wants to remain competitive at the next election.

Sure, if an election were held today, the opposition might win it.  But an election is probably a year away.  Victory requires more than optimism.  Ask Mitt Romney.  The Coalition has long believed it can win government on an impressionist platform:  a few bold, strong strokes (stop the boats, axe the tax, pay back the debt) that, if voters step back and squint, offer a picture of what an Abbott government might look like.  Those strokes are looking worn and colourless.

Asylum seeker policy has been so fudged that it's not clear which party is promising to be toughest any more.  More boats are arriving than ever.  But in retrospect Julia Gillard irretrievably confused the whole issue with the Malaysia solution back in 2011.

The carbon tax no longer resonates as it once did.  It will do nothing to halt climate change.  It is designed to get more costly every year.  But people are already forgetting about it.  Voters tend to tolerate policies — even intensely hated ones — once they've been introduced.  It still should be repealed, but it's hard to see the Coalitionwinning on that alone.

And certainly, it seems unlikely the government will soon bring the budget into surplus.  But few people care about the deficit, per se, they care about a government being so reckless with the public purse that it goes into deficit.  So, until the opposition offers an alternative plan, the government just has to pretend it is sweating blood to fix the problem.

Yes, offer an alternative plan.  Impressionism isn't working.

One alternative would be to roll out a series of clear, detailed, and memorable policies that will stand alone long after Julia Gillard has left the stage.  Nothing makes an opposition look more like a potential government than policy debate.  Drafting policy is risky without the bureaucracy backing you up.  It is a necessary risk.  Or the Coalition could embrace abstraction, and present a fresh, philosophically driven vision of government.  Even today, politics is still about ideas.

Abbott is better placed than most politicians for this latter approach.  His 2009 book Battlelines is a manifesto of a modern, activist, big-government conservative philosophy.

Joe Hockey offered a different direction in his ''End of the Age of Entitlement'' speech in April — a wholesale rethink of how government relates to its taxpayers.

But Abbott steers clear of the philosophy of Battlelines.  And nobody grasped Hockey's nettle.  This lack of story about what would drive an Abbott government is why Coalition supporters are wrong to blame character assassination for their troubles.  The polls were heading down long before Julia Gillard made the misogyny speech.

Every government says the opposition is being negative.  Negativity is only a problem if it looks opportunistic.  A cohesive philosophical vision is a shield against such charges.

And claims that Abbott is unpopular because he is too effective a critic of the government ... well, that's like saying in a job interview that your biggest weakness is you care too much about your work.

Personal unpopularity is not a barrier to success.  Australians don't want to be seduced by their politicians.  We are not romantic about the prime ministership.  Quirks are appealing.  Gaffes are easy to forgive.

But right now, the Coalition has to start looking like a government, not a pressure group.

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Privatised power cheaper and better than alternatives

Energy issues are rivalling political scandals as a preoccupation of the news cycle in both America and Australia.

In the US, reduced costs of extracting gas and oil from shale are delivering cheap domestic oil and gas — with implications for renewable energy policy, global gas prices and the US Navy in the Persian Gulf.

Cheaper US fossil fuels have also increased the fretting about greenhouse gas emissions, including by the Paris-based International Energy Agency's climate change activists.

Global energy developments have unpredictable implications for Australia, where electricity prices have risen 72 per cent over the past four years (50 per cent more than general inflation) and the industry's productivity has declined.  These experiences have triggered a cascade of reviews including an Energy White Paper and a Productivity Commission inquiry.

Australia's electricity price increases stem from a combination of regulations, carbon taxes, increased demand for peak power and overdue replacements of poles and wires.

Productivity declines owe much to regulations, including excessive reliability standards and requirements to use high cost renewable energy and the paper burden costs associated with this.

Victoria generally comes up smelling of roses in its handling of all three components of electricity supply:  retailing, networks and generation.

This is largely due to the reforms that the Kennett government implemented 15 years ago.

Although bitterly opposing these reforms at the time, once in office the Bracks/Brumby government embraced them.

This was partly because they delivered a debt-free Victoria, providing scope for increased spending, although this did not prevent the ALP in government from eventually once again racking up net debts.  With regard to retailing, all other state governments interfere in setting final consumer prices.  These prices were deregulated in Victoria by the Brumby government.

The regulators in the other states have suppressed retail prices at below costs (though NSW is trying to unwind this).

THE wash-up has been losses imposed on two of the nation's major energy companies, AGL and Origin Energy.  Such losses, if sustained, will rebound on consumers by bringing reduced competition or even market exit.

As well as a privatised retailing sector, Victoria has fully privatised its networks and generation.

By any standards, Victoria's Latrobe Valley generators have achieved legendary heights in reducing costs.

With regard to network businesses, Victoria's privatised firms outperform their interstate government-owned counterparts:  they have lower costs and, on balance, a better reliability record.

Even so, Victoria could go further in reducing regulatory costs from electricity regulations.

First, it could abandon the subsidies of $75 million on coal R&D — even if there were a potential for breakthroughs, such publicly funded R&D is seldom successful.

Secondly, Victoria could abandon the obligation it places on retailers to buy, at consumers' expense, the surplus energy from rooftop photovoltaics;  the subsidy level was previously exorbitant and, although it is being wound back for new installations, considerable costs remain.

Thirdly, the Victorian Government should ditch its scheme involving cross-subsidies to encourage such outcomes as lower energy lighting.  Consumers are perfectly capable of trading off cost for economy in choosing their own light bulbs.

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The art of telling the truth

Getting political journalism to focus on fact checking is appealing in principle.  It is disappointing — even futile — in practice.

You can understand why people find fact checking seductive.  Our politicians pander to prejudices, fudge policy details, vilify their opponents, and exaggerate their own virtues for votes.

But as good democrats we put the winners of this squalid electoral contest in charge of the levers of government.  So it would be nice to know which politician lies least.

And there's clearly frustration with journalism as it is practiced today:  why not make its new duty to judge political untruths?

Fact checking was a feature of the 2012 Presidential campaign.  One frustrated Mitt Romney advisor said he wouldn't ''let our campaign be dictated by fact-checkers''.

But, in a column over the weekend, Australia's Laurie Oakes unintentionally demonstrated how faddish and illusory the fact checking idea really is.

Writing that he expected fact checking to become a central part of Australian journalism, Oakes identified two recent falsehoods:  Julia Gillard's ''there will be no carbon tax under a government I lead'', and Tony Abbott's claims about the future economic cost of that tax.

If only it were so clear.

Did Julia Gillard lie about the carbon tax on 16 August 2010?  Well, yes.  And no.

She probably thought she wouldn't introduce a ''carbon tax'' in the next term of government.  But that didn't mean she wouldn't introduce an emissions trading scheme.  And what we call a carbon tax in 2012 is actually the latter with an initial fixed price.

Yet free market economists have long insisted that, contrary to popular wisdom, there's not a big conceptual difference between a tax and a trading scheme.  They both price carbon.  A tax could be described as a ''market mechanism'' too.

The point is these are terms of art, not science.

The idea that a journalist — or scientist, or economist, or philosopher — would be able to provide anything near a definitive statement of whether Julia Gillard was being factually accurate is nonsense.

Anyway, how on earth could the press gallery fact check a prediction?  Tony Abbott's claims about the carbon tax's economic impact are almost entirely rhetorical.  Yes, he understates how much of recent electricity price rises have been due to the changes in the energy industry — an understatement which is regularly pointed out in parliament and the press.  But as to the carbon tax's real cost?

Models of future economic costs merely reflect the assumptions they're built upon.  We don't know how much a policy hurts until long afterwards.  Even then it's still quite hard to tell.  Fact checking of such predictions is just arguing the toss.

This problem is clearly illustrated in the latest piece on The Washington Post's Fact Checker blog.  Run by a veteran correspondent, Glenn Kessler, Fact Checker is apparently the gold standard in the field.

The story goes like this.  Republicans have been citing an Ernst & Young study saying tax increases on the rich would ''destroy nearly 700,000 jobs''.

Kessler notes that a) the jobs are lost over a decade or more, b) 700,000 jobs is only a tiny fraction of total employment, c) the study ignores the benefits of reducing the deficit, and d) there's a different study that says otherwise.

For their ''misleading'' analysis, he awarded the Republicans three out of four Pinocchios.

But who is being misleading here?  The Republicans aren't wrong.  At best they are guilty of an ungenerous presentation of the evidence.  The Ernst & Young study says 700,000 jobs will be lost — just not immediately.  You can't refute rhetorical excess.

What Kessler isn't doing isn't fact checking, really.  It's just more argument.  Which is fine, but let's not pretend that more argument is a journalism revolution.  And it's definitely not new.

Even apparently clear falsehoods — for instance, Mitt Romney's ad saying Barack Obama ''sold Chrysler to Italians who are going to build Jeeps in China'' — are more subtle than they've been presented.  In a confusingly worded Bloomberg article, Chrysler was reported to be considering exactly that.

Kessler gave Romney four Pinnochios for his Chrysler ad, but his actual conclusion was more modest.

The ad was ''a series of statements that individually might be factually defensible, but the overall impression is misleading''.

In the hands of partisans this has become a classic Romney ''lie''.

Certainly, Romney had confused the Chrysler issue in an earlier speech in Ohio.  But senior politicians are usually very clever with their words.  They don't lie.  They dissemble.

Kessler to his credit is relatively even-handed.  He goes after both left and right.

Such non-discrimination is unusual.  Fact checking is more common as a political attack than journalistic technique.  Hacks of all sides push their own fact checkers.  It's just another weapon in the partisan's armoury.  Smugly purporting to be on the side of ''reality'' is a fashionable way to hit your opponent.

There's a more critical problem with the fact checking fad.  Political journalism is a business of generalists not experts.  The best reporters know a little about a lot, not a lot about a little.

That, indeed, is why the ''he-said, she-said'' model of journalism was developed.  He-said, she-said has a bad reputation these days — it is often used unthinkingly — but it exists for a reason.  It reflects a modesty that generalists cannot rule definitively on all issues.  Sometimes you need to call a specialist.  If something is controversial, you may need to call two.

Political rhetoric is rarely true or false.  When an issue is simple, politicians will fudge it.  When an issue is complicated, it requires experts to unpack.

Either way, self-conscious and self-satisfied ''fact checking'' is no magic bullet.

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Attacks on free speech

The Tasmanian Government is the latest to join the growing anti-free speech movement.

The most recent attack comes in the form of the State Government's proposed amendments to Tasmania's anti-discrimination laws.

Some of the proposed changes in the Bill before State Parliament this week will have a crippling effect on Tasmanians' freedom to express their opinions in workplaces, businesses and even at local sporting clubs.

Currently, it's unlawful to ''offend, humiliate, intimidate, insult or ridicule'' someone based on six traits listed in the Act.  The Tasmanian Government wants to add 16 new traits to that list.

Some of the characteristics being added include political affiliation, religious belief and race.

This is ridiculous.

Democracy can only be effective when we have the freedom to offend others.

How else can we debate each other and, in the end, ensure that worthy ideas spread?

Taking topics of conversation off the table only results in bad ideas thriving in secret, and never allows controversial but important ideas to grow.

If these changes are passed, Tasmania's anti-discrimination laws will become the most onerous in the country — no other state has as many grounds on which individuals are able to sue each other for discriminatory unlawful conduct.

And although Tasmania will go further down this path than any other jurisdiction, it is not the first to move in this general direction.

Federal racial discrimination laws prohibit offensive behaviour if it is directed at the race of an individual or group.  These laws were infamously used last year to silence Andrew Bolt.  The popular journalist was hauled before the courts and forced to publish ''correction notices'' in the name of ''public vindication''.  It's disturbing to hear that kind of language used by courts in a liberal democracy.

And all Bolt did was publish two opinion pieces on the issue of racial policy in Australia.

Restricting the free expression of opinion is a growing problem.  And it's happening on the grounds that a person's feelings might get hurt.

Until recently, legislators weren't concerned with how opinions might impact on the emotional states of individuals.  But ''I'm offended'' has become a tool of incredible potence.

In Australia, governments are now consistently choosing to prefer a right not to be offended over the right to free speech.  In fact, the proposed Tasmanian law highlights just how powerful this idea has become.  The changes to the Anti-Discrimination Act move the state closer than ever to a general law against hurting someone else's feelings.

The fact that it is now unlawful to offend someone on the basis of 22 separate attributes is significant enough.

The logical next step — removing the attribute requirement altogether — is even more outrageous.

To its credit, the Coalition has recognised the idiocy of such restrictions.

In a significant victory for supporters of freedom of expression in Australia, Opposition Leader Tony Abbott promised during a speech made earlier this year to repeal the law that muzzled Bolt.

But restricting free speech based on hurt feelings is not the only threat to this cornerstone of democracy.

The Gillard Government is currently considering media restrictions, including licensing of the press.

Two inquiries into media regulation — the Finkelstein Inquiry and the Convergence Review — have recommended higher levels of government control over the content and ownership of Australia's media.

Among Finkelstein's recommendations was the setting up of a tribunal that would have the power to censor sections of the media.

Current threats to free speech are extremely concerning.  It is far too valuable a right to give up because someone might be offended, insulted or humiliated.  Nor should governments ever get to decide what ideas we see, hear and talk about.  Freedom of speech is more important than that.

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US vote: where left isn't right

A British conservative website captured the story of the United States election.  ''Disastrous for the Republicans or simply disappointing?''  The result was closer to the former for anyone committed to economic freedom and private enterprise.

On a scale 1 to 10, with 1 being the election of Ronald Reagan in 1980 and 10 being the election of Franklin Roosevelt in 1932, the re-election of President Barack Obama is an 8.3.

It's hard to disagree with Salon, the journal of the American left:  ''President Obama's re-election represents a victory for the Democratic ideal of activist government and a mandate for more of it.''

The trouble is that activist government doesn't actually work.  The US unemployment rate of nearly 8 per cent proves activist government doesn't work in the short term.  Europe proves activist government doesn't work in the long term.

Conservatives may talk about the popular vote being close, and the Republicans holding a comfortable majority in the House of Representatives and so on, but when it comes to the presidential race, a loss is a loss.

Obama may have had 131 campaign offices in Ohio compared with Romney's 40.  And a hurricane may have stalled Romney's momentum.  However, none of this overcomes the reality of a failing economy that should have handed victory to the Republicans.

Much has been made of the demographics of the youth, women, African-Americans and Latinos favouring the Democrats.  That's true.  However, a lot of white males still voted for Obama.  The President easily won New Hampshire.  As that state's most famous resident, commentator Mark Steyn, put it:  ''But New Hampshire is overwhelmingly white — and the GOP [Grand Old Party] still blew it.  The fact is a lot of pasty, Caucasian, non-immigrant Americans have 'shifted', and are very comfortable with big government, entitlements, micro-regulation, ObamaCare and all the rest — and not much concerned with how or if it's paid for.''

There's a paradox about the political left of the 21st century.  Its members claim they care deeply about future generations when it comes to the environment.  Yet when it comes to government spending, the left has no qualms about future generations paying for the demands of the current generation of voters.  British historian Niall Ferguson was right.  ''If young Americans knew what was good for them, they'd all be in the Tea Party.''

It's hard to disagree with Steyn.  ''I wish we'd at least had a big picture election — the motto of the British SAS is 'who dares wins','' he says.  ''The Republicans chose a different path.  A play it safe, don't frighten the horses strategy may have had a certain logic, but it's unworthy of the times.''

Prime Minister Julia Gillard will be a lot happier with the US election result than Opposition Leader Tony Abbott.  If Obama won, Gillard can.

Our PM will have learned three things from Obama's victory.  The first is that politicians who pass unpopular taxes for which they have no mandate can still get re-elected.  Obama had ObamaCare.  Gillard has the carbon tax.  The second is that relentlessly negative advertising works.  Romney allowed his opponents to define his public image as a multi-millionaire leveraged buyout merchant.  Abbott is at risk of being defined as a woman-hater.  The third point is related to the second.  The Democrats claimed the Republicans would launch a ''war on women''.  Whether true or not, the claim helped swing female voters to Obama.  Gillard has already played the gender card, and she'll keep on playing it.

For Abbott the worry is that maybe voters in Western liberal democracies have stopped worrying about where the money is coming from.  If Americans don't seem concerned by their national debt of more than 70 per cent of gross domestic product (twice the level it was five years ago) it's difficult to believe Australians would be any different, particularly as we face a comparable debt figure of less than 10 per cent.

With the Gillard government promising to create a national disability insurance scheme and more funding for schools and dental care, it comes across as mean-spirited to ask where the money is coming from.  And the pressure will be on the Coalition to match whatever Labor pledges — because more government spending is what people say they want.

After Obama's re-election, William Voegeli, one of the US's leading conservative writers, said:  ''In our system, the people are sovereign.  That does not mean they're infallible.''

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Cometh the storm, cometh the climate lies

By circulating commentary that suggests hurricane Sandy was exacerbated by human-caused global warming, the Climate Commission is wilfully misleading the public.  Let us be clear, Sandy was barely a category 1 hurricane as it crossed the densely populated north-east United States.

The enormous damage resulted not from wind, but from flooding and inundation over low-lying areas where housing and commercial development was not designed to cope with such an extreme event.  Compounding the issue, vital infrastructure such as levees, public transport systems and power stations were not adequately hardened.

The flooding resulted from heavy rain and a large coastal storm surge at a time of spring tides, all eventualities that could have been predicted.

Many scientists, and now the Climate Commission, have suggested that in a warmer world tropical storms will be more frequent or more dangerous than those previously experienced.  This assertion is contentious, and evidence for it is lacking.

As has already been stressed by senior scientist Martin Hoerling from the US National Oceanic and Atmospheric Administration, and many other scientists, no evidence exists for any influence of global warming, let alone human-caused warming, on the intensity of hurricane Sandy.

Sandy was a decaying hurricane whose wind intensity was decreasing as it moved north across subtropical waters.  Importantly, the presence of a second large weather system in the north-east Atlantic Ocean and Canada blocked the passage of the hurricane and caused its impact and storm surge to be focused in the New Jersey-New York area.

The coincident alignment of a hurricane and a large extra-tropical storm is what gave Sandy its extra intensity.

In a broader context, the lack of recent global warming is also an impediment to those who argue that Sandy was influenced by industrial carbon dioxide.  There has been no significant atmospheric warming since 1996 and no ocean warming since the Argo buoy network was deployed in 2003.  In consequence, global atmospheric and oceanic temperatures are now close to their average over the past 30 years.

Suggestions that higher concentrations of atmospheric carbon dioxide have somehow influenced the formation and development of Sandy are therefore simply untrue.

The Climate Commission appears to consider it opportune to use the harrowing Sandy event, with its loss of lives and immense destruction, to push its political agenda.  But in favouring action to try to ''prevent'' global warming, the commission is propagating a wrong and costly message.

For most parts of the world, there exist 200-year documented records of severe weather events and their impacts.  Nowhere should we be taken by surprise by a severe storm and its attendant impacts.  Our understanding allows accurate estimates to be made of the frequency with which particular weather-climate hazards will recur.

Regrettably, over the past 50 years such knowledge has often been ignored as development has encroached onto flood plains and low-lying coastal margins.  There are exceptions, such as the long-established levees that protect many inland river cities.  Counter to that, building is now often approved within sand barrier dune systems that, before modification, protected coastal communities from flooding.

It is both costly and futile to try to minimise climate hazard through global engineering.  In particular, reducing atmospheric carbon dioxide does not reduce climate risk.  Instead, the cost-effective approach to dealing with all climate hazard, both natural and possibly human, is to prepare better for, and adapt better to, damaging events as they occur.

The wilful misuse of science by lobby groups to support their agendas has now become an epidemic.  The view that more frequent or extreme climate events are occurring, as advanced by many commentators, directly contradicts the considered advice of scores of climate experts, including all those who wrote the reports of the Intergovernmental Panel on Climate Change (IPCC) and the Non-governmental International Panel on Climate Change (NIPCC).

That formal government advisory bodies such as the Climate Commission are supported in their flagrant disregard for scientific principles and facts by senior CSIRO and university research managers is cause for severe national concern.

A Climate Commission that had the safety and welfare of Australians at its heart would be advising Parliament to expend resources on community infrastructure that mitigates the hazards associated with climate extremes.  It would resile from opportunistic attempts to link human tragedies such as Sandy with speculative anthropogenic global warming.

About 70 per cent of natural disasters are weather and climate related.  Building resilience by ensuring early warning and planning robust infrastructure will enhance the safety and amenity of our communities.  Sensible planning will also ensure that economic loss is minimised and that there is quick recovery in the aftermath.  These are positive actions that carry a guaranteed benefit.

Why cannot Canberra politicians and their advisers work out for themselves that climate hazard is most effectively handled using prudent and cost-effective policies of preparation and adaptation for extreme events?

Barack to the future

Barack Obama and his supporters in America and abroad are understandably thrilled after winning a remarkable electoral victory.  They are entitled to gloat over those of us who doubted he'd win or deserved to win.

Throughout the year, Obama seemed in danger of following Herbert Hoover in 1932, Jimmy Carter in 1980 and George H. W. Bush in 1992 as a one-term president.

He presided over skyrocketing levels of national debt and the most sluggish economic recovery since the Great Depression.  Polls showed that between 60 and 70 per cent of the American people believed the US was heading in the wrong direction.

But yesterday the President won far more than the 270 electoral-college votes needed to win the election.  Republicans and conservatives are already blaming hurricane Sandy, which helped freeze the Romney momentum in October.  Perhaps.  But there are more fundamental explanations for Obama's victory.

So, how did a US President win re-election at a time of widespread anxiety and even widespread dissatisfaction across the nation?

Well, it will take time to study the exit polls in detail.  But here are a few preliminary observations.

• Changing demographics:  Whereas Republicans predominantly represent middle-aged and older whites, Democrats are increasingly making bigger inroads among Hispanics (a rapidly rising minority) and African Americans as well as younger voters, who are consistently well to the left of their elders (abortion rights, gay marriage, less interventionist foreign policy).

  Democrats did a good job of encouraging these groups to turn out to vote, and more than enough did in the all-important battleground states to swing the contest in Obama's favour.

  Such trends could portend big dangers for the Republicans:  as the minority populations increase (especially in Colorado, Florida and even Texas), the share of the white vote will continue to decline in future presidential elections.  This is especially the case so long as Republicans continue to adopt a hardline stance on illegal immigrants from south of the border.

• Mitt Romney:  The former Massachusetts governor, by temperament a moderate, always seemed uncomfortable with the conservative and Tea Party agenda.  When he addressed social issues or championed entitlement reform, he seemed insincere, and people sensed it.  Since the divisive primary contest a year ago, the Republican base had always been suspicious that Romney was not one of them.

  To be sure, conservatives were more energetic in 2012 than 2008, just as many Republicans had predicted.  But it was not nearly enough to match the enthusiasm of young predominantly Democratic voters (aged between 18 and 29) and minorities (especially Hispanics and African Americans).

  Meanwhile, Obama's auto industry bailout, and Romney's equivocal response, influenced enough white, working-class voters in Michigan as well as Ohio, the battleground of battleground states, to win the rust belt.  These are the so-called Reagan Democrats — or, in Australian parlance, ''Howard battlers'' — and they help swing national elections.

  In fairness, it's a fair bet Romney's cautious and reasonable demeanour helped attract more independents in the political centre than any of the other more conservative Republican primary candidates — Santorum, Gingrich, Paul, Perry — whom he faced in a bitter primary contest earlier this year.

  Indeed, the available polling evidence indicates that Romney drew even with Obama among independents.  Ultimately, it did not matter, because the rank-and-file Democratic turnout remained nearly as strong as it was four years ago.

• Republican brand:  The spectre of George W. Bush haunts the Republican Party.  Despite his best efforts to distance himself from the Bush era throughout the campaign, Romney failed to convince enough crucial battleground state independents, who straddle the political centre, that today's Republicans mark a repudiation of the war party that dominated Washington during the Bush era.

  The Bush reputation is tainted by two costly wars, big spending policies and the Federal Reserve's housing and mortgage mania, which led to soaring debt, budget deficit and the financial crisis.  US economic growth has been lacklustre ever since, and there is little hope of a rapid return to vigorous growth.

  The exit polls suggest that by a margin of 53 to 38 points, Americans are far more likely to blame Bush than Obama for today's economic ills.

  To add insult to injury were a couple of divisive Republican Senate candidates in Missouri and Indiana, whose strident remarks on abortion and rape aggravated political centrists, especially small-l liberal women, and cost the Republicans two Senate seats.

  In coming days, the twin flanks of the party's conservative base — the free-market Tea Party as well as social conservatives — will be subjected to a great deal of criticism.  By adopting a doctrinally purist stance on economic and social issues, both groups alienate rising segments of middle America that is increasingly more progressive.

So what now for Barack Obama?

The history of second-term presidents is sobering.  Some such as George W. Bush are early lame ducks (post-hurricane Katrina);  others such as Richard Nixon (Watergate), Ronald Reagan (Iran-contra) and Bill Clinton (Monicagate) are prone to scandal.  In fairness, Reagan redeemed himself, for he primarily focused on legacy (tax reform, winning the Cold War) and history records him as one of the greatest or at least most consequential presidents.

That is why Obama is unlikely to sit on his hands, even though he still faces a Republican House of Representatives.  Whatever you think of the 44th President, he can hardly be accused of thinking small.  His first term was all about large projects (big spending stimulus, nationalised healthcare).  He will continue down the path of vastly expanding the size and scope of the federal government.

In 2008, he campaigned that he would be a ''transformational'' president.  Translation:  just as Reagan had presided over an ideological realignment in the 1980s and in the process made America a more conservative place, Obama would reshape the political landscape a generation later and move the US in a more progressive direction.  Expect the re-elected President to try to complete that course.

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Grandstanding about mobiles won't reduce the road toll

It's an old principle of policing — if you can't enforce the laws on the books, demand more laws.

More than 55,000 people in Victoria were booked for using their mobile phones while driving last year.  That's around 150 people a day.

So on Monday, the front page of the Herald Sun reported that Victoria's chief highway patrol cop wanted the government to force drivers to switch their phone off in cars.

Never mind that a ban on phones in cars would be completely unenforceable.

Victorian road rules are clear.  The Road Safety Act bans mobile phone use while a car is running.  The only exception is receiving calls or using navigation functions with a commercially fitted holder.  Even then, the driver cannot touch the phone at any time.  The fine is $300 and three demerit points.  New South Wales enacted similar laws last week.

Yet one survey suggests around 60 per cent of Victorians still use their phone while driving.  That 55,000 people booked isn't a lot, considering more than two million of the state's 3.7 million licensed drivers are breaking the rules.

The Herald Sun article said ''thousands of rogue motorists flout the law''.  No — millions do.

First things first:  it is incredibly stupid to use a mobile phone while travelling at speed.  Driving is a complex task.  Sending a text message on a phone increases the risk of accident up to 23 times.  That much is easy to demonstrate in simulations and in-car experiments.

But things get less certain from there.

The ''while driving'' data is a bit misleading.  They include a lot of circumstances we wouldn't usually call driving — like checking your phone while stopped at a traffic light.  But if the engine is running, it counts.

The NSW government commissioned a study into the extent of the problem earlier this year as part of a parliamentary inquiry.  The results were striking and counter-intuitive.

Seven per cent of accidents in NSW in the last decade involved driver distraction.  And within that 7 per cent, only 1 per cent involved a handheld phone.

Don't get too hung up on the specific numbers.  There are many complicated definitional issues.  There's a large body of academic research on driver distraction but it's not all comparable.  And, obviously, the ideal number of accidents is zero, whether related to phones or anything else.

Yet it still remains that mobile phones are extremely small proportion of the causes of distracted driving involved in accidents.  The majority of distractions come from outside the car.  Then there are those within the car — like fellow passengers, grooming, or eating and drinking.

There are even three times as many accidents involving police pursuit as mobile phones.

The overwhelming majority of accidents involve exactly what you'd expect:  speed, fatigue, and drink.  Mobile phones hardly rate.

But you wouldn't know that from the press.  Phones dominate the popular discussion of car accidents.  Using a phone while driving seems to be the ultimate in recklessness.  It is terrifying to imagine there are people speeding down the freeway while tapping out text messages.

Smart phones are a novelty, and novelty makes news.  Stories about how mobile phones cause accidents has all the characteristics of a moral panic — a disproportionate reaction to a small problem.  Drivers face worse distractions.  There are more disconcerting risks on the road.

For instance, one 2005 study found in-car entertainment systems are a far bigger real-world distraction than phones.  You have to take your eyes off the road to change a CD or radio station.  Handheld phones are problematic not because they impair drivers physically, but because talking while driving takes extra mental effort.  It's the conversation which is dangerous, not the phone.  (This explains why some studies have found hands-free phone systems are no safer than hand-held ones.)

These are uncomfortable findings.  No politician wants to challenge the right of drivers to chat with passengers or listen to the radio.  Anyway, that's why we have careless driving laws, and take recklessness and negligence into account in criminal accident proceedings.

Nevertheless, there has been a remarkable decline in car fatalities over the past few decades.  The Commonwealth government has been tracking road deaths since 1925.  Deaths have reduced from 30 per 100,000 population in 1970, to seven in 2008.  If anything, that understates the decline:  we're driving twice as much as we did 40 years ago.  And the death toll is still going down, even as more people buy more complicated phones.

A society should try not to have too many unenforceable laws.  They breed contempt for the law as an institution.  If people get used to disobeying one law, they may become comfortable with disobeying others.

As the American writer Radley Balko has argued, calls to increase restrictions on mobile phones in cars aren't about safety;  they're about symbolism.

It's already illegal to use phones in the car.  Lots of people do it anyway.  But political grandstanding about mobiles is not the same as reducing the road toll.

The 50,000+ staff draining our economy

''Fiscal austerity'' has become the phrase of choice for Western countries that need to rectify the excesses of recent decades, culminating in the spending and debt binge of the 2008-09 global financial crisis.  Even though the budgetary condition of Australia's federal government is superior to that of many countries in the Organisation for Economic Cooperation and Development, the fact remains that Australia must address its own circumstances — so a local brand of fiscal austerity is also necessary.

An important aspect of the policy debate about the Gillard government's aspiration to return the budget to surplus this financial year concerns the means by which this overall objective is to be met.  In the simplest of terms, there are two methods available to policymakers to consolidate a government budget:  reduce spending or raise extra revenues.  Which method represents the best approach to achieve the overall budget outcome?  A series of papers by economist Alberto Alesina draws on the experiences of numerous Western countries to provide some crucial answers to this question.  The conclusions Alesina derives are difficult to ignore:  that governments should reduce spending, rather than increase tax, should they wish to return a budget to a state of normality with the least reduction in economic output.

It is on this basis that I recently released a paper that provides a proposed road map of public sector employment cuts for the federal government to pursue.  The paper, Razor cuts, not paper cuts:  a framework for right-sizing Commonwealth government employment, says such reductions should be closely aligned to broader policy actions to reduce the government's overall size and scale.

First, the government should consider divesting a range of entities to the private sector, which therefore entails a transfer of employees from the public sector.  Privatising the ABC, Australia Post, Medibank Private and SBS alone should transfer about 44,000 people to the private sector.  Such reforms would not only improve the efficiency of entities now held under government ownership, but would help the Commonwealth's fiscal consolidation efforts by furnishing it with asset-sales revenues and removing future labour cost commitments.

Second, the Commonwealth could transfer a substantial number of its employees to state and territory governments to decentralise spending and reduce duplication of public sector roles and activities within Australia's federal system.  Existing federal education and health functions are obvious candidates for transfers back to the states, potentially reducing Commonwealth employment by a further 8100 people.

Consistent with the Commonwealth's responsibilities enumerated in the constitution, other activities and staff that should be returned to the states include those in the areas of agriculture, families and community services, infrastructure and transport, regional policy, resources and sustainability.

Third, the Commonwealth could cut its spending and staffing levels by abolishing a range of activities which either do not correspond with the economic conception of ''public goods'' or impose unwarranted economic costs on the community.  My paper nominates climate change and industry policy as two aspects of government activity that should be abolished outright, as well as areas such as the arts and sport, foreign aid, gender equity, preventive health and wheat export marketing.

Implementing this tripartite reform framework would be expected to deliver substantial cuts to public sector employment, which contrasts sharply with the positions adopted by the two major political parties to date.

The Gillard government outlined in the 2012-13 budget a menu of proposed employment reductions across general government sector agencies to the tune of about 3100 full-time-equivalent staff averaged over the financial year.  This announcement has raised concerns in some quarters about the potential effects on policy-making and service delivery.  However, my analysis notes that the targeted level of job cuts is significantly lower than the annual number of separations from the Australian Public Service in recent years.

Subsequent developments in the Mid-Year Economic and Fiscal Outlook show the government is effectively watering down its initial target through extra funding to hire more Customs and Taxation Office compliance officers.

During the 2010 federal election, the Coalition outlined its aspiration to reduce Commonwealth employment by about 12,000 staff over two years through natural attrition.  On the basis of public service separations data supplied by the Public Service Commission, the Coalition would have easily achieved this target if it had won the last election.

My alternative road map to public service reform unashamedly adopts the position that government job cuts tied to broader spending cuts are essential to expanding the relative size of the private sector and promoting economic growth.  Public administration will remain essential to ensure that the federal government provides basic goods and services, such as defence and a customs union, allocated to it under the constitution.

However, an excessive level of public sector employment entails a serious risk to economic robustness and vitality for three reasons:

The salaries and entitlements needed to maintain public sector jobs are coercively financed through distortionary taxes, which impede economic performance.

Growth in employment opportunities within the public sector tends to attract labour towards that sector, and away from the private sector where labour tends to be used more efficiently.

Public policy bureaucrats are engaged to advise or administer tax or regulatory policies that attenuate private sector growth, and government service delivery staff tend to deliver services at lower levels of efficiency relative to their private sector counterparts.

References to the smaller relative size of Australian government compared with governments in Europe overlook the fact that our public sector, and therefore government employment, has in itself grown too large in size and scope relative to the basic roles and duties demanded of government.  Our current federal government has tended to lean towards increasing existing taxes, and introducing new tax bases, to consolidate its budget.  However, this approach is proving to be economically risky.

The Australian economy, especially its non-mining sectors, is growing at a rate far below its potential, leading internationally mobile owners of capital to openly ask previously unheard questions about the safety of investment returns from new and future tax incursions.

While it's somewhat late in the day this financial year to do so, the government should pause and rethink its strategic emphasis on the mix between spending cuts and tax increases to deliver its budget surplus objective.  Should it choose to lean towards spending cuts, and associated staffing reductions, as I suggest, for this and future financial years, the government should expect to find a much easier road to surplus, along with beneficial flow-on effects for private sector activity.

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In praise of ticket scalping, horse eating and trading in human organs

Should we be able to buy horse meat at restaurants or for home cooking?  It is not as if horses are a protected species.  We already export them for human consumption.  Australian food markets sell goat, kangaroo, camel, buffalo, crocodile, even wallaby and alpaca.  Why not horse?

Yet when a Perth butcher and a Melbourne chef tried to introduce horse meat two years ago, they were met with a storm of protest, and had to withdraw it from sale.

If horse meat seems a bit banal, then what about pets?  How would you feel if somebody slaughtered their family dog and sold the meat?  Disgust?  More likely repugnance.

These odd questions are among the valuable contributions to humanity by the 2012 co-winner of the economics Nobel Prize, Alvin E. Roth.

Roth won for devising a system where donor organs are matched with patients.  There is a global shortage of organ donors.  One Australian dies every week waiting for a transplant.  A strategy to help deserves all the recognition it gets.

So where does repugnance come in?  We already have a great way to harmonise organ supply and organ demand — markets.  If donors were able to charge for their kidneys, there would be more kidneys available.  People respond to incentives.  And a legal, regulated, safe market for organs would be better than today's dangerous illegal market.  Yet it is unlawful to compensate someone for donating a kidney.  We are relying on altruism to meet our transplant demand.

Roth devised an algorithm to efficiently allocate what little organ supply there is with some of those who need transplants — given that legislators have decided it is immoral for people to trade organs for money.

The Nobel committee described this anti-market bias as ''ethical grounds''.  Some ethics.  By limiting the amount of organs available, those ethical grounds are killing people.

Roth published an influential paper in 2007, Repugnance as a Constraint on Markets, in the Journal of Economic Perspectives.  We find all sorts of things repugnant.  And we do so instinctively, not rationally.

Take gambling.  Many find sports betting obnoxious, as if it undermines the purity of sport.  Calling for a ban on internet betting, Nick Xenophon once complained cricket had been ''reduced to just another event to have a punt on''.  Likewise, some political professionals believe that gambling on an election is highly distasteful.

When, in 2003, a team of Pentagon economists tried to set up prediction markets — that is, using betting to predict the likelihood of future events — for terrorist attacks, they were pounced upon.  One congressman described the program as trading in death.  ''There is something very sick about it,'' said Senator Barbara Boxer.

Just ''something''.  Sure, betting on future terrorist attack probabilities is unorthodox.  But it might have worked.  The purpose was to predict attacks and stop them.  Yet for those politicians, it felt wrong.  The program was quickly shut down.

What we think is repugnant is determined by our culture.  Historically, lending money at interest has been unacceptable.  This makes some strange sense.  Lenders who charge for the privilege of borrowing money seem a bit heartless — it is not like idle money is being used.  And why should people get rich just for sitting around?

Ticket scalping is another repugnant market.  It somehow seems unfair to pay more than the cover price for concerts.  But a basic lesson of economics is that markets allocate goods to those who value them the most (that is, those who are most willing to pay).  Scalping is a good thing.

Ticket scalping also shows how special interests can use repugnance as cover for their own private gain.  Ticket sellers want governments to stamp out the secondary ticket trade.  They don't like the competition.

Yet anti-scalping laws make it harder to get tickets to popular events, not easier.  Just like outlawing the organ market makes it harder for sick people to get transplants.  Or banning horse meat restricts the availability of tasty horse meat.

It is fine for individuals to object to certain practices.  If you don't want to be compensated for your organ donation, you don't have to charge.  And nobody is forcing you to bet on future terrorism.

But it is a real problem when feelings obtain the force of law.  That gut reaction — ''there is something very sick about it'' — can sometimes cause real harm.

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The Western Way of Economic Decline

''Imperial overreach'' is sometimes used to describe a United States that is less and less able to maintain its global dominance.  The phrase reflects upon the fall of ancient Rome and the demise of the British Empire.

Britain's decline followed its economic exhaustion and the growing unacceptability of political controls by one nation over others.

American world domination has never entailed much direct political control.  And, unlike Rome, America obtains no tribute from other nations and in fact subsidises them (something the Soviets also did with their satellites).  A topical illustration of this is the $1.5 billion a year aid to Egypt, described by President Obama as not an ally, though of course strictly speaking it is.  Egypt, under its present leadership, may however be better considered as a state opposed to the USA and its interests, and that $1.5 billion a year to constrain its hostility is considered good value by the US government.

But comparing America's eroding world domination to the collapse of ancient Rome does reveal some uncomfortable similarities.

Ancient Rome was undermined by revenue shortfalls.  Aside from bureaucratic needs, funds were required for ''bread and circuses'' to placate a largely unemployed Roman mob, which had a tested capacity to overthrow governments.  Imperial Rome also needed revenues to pay mercenaries who, like the indolent Roman mob, had a proven ability to replace emperors.

In this respect, America's resemblance to Ancient Rome is more chilling.  America is facing a crisis — which Europe and Australia share — due to increasing proportions of economic output being directed to unproductive expenditures.  These are social expenditures including old-age pensions, incapacity-related benefits, health, labour market programs, unemployment and housing.

The expansion of social entitlements has far surpassed the effect of an ageing population.  Since 1980, social welfare entitlement spending has risen from 16 per cent to 23 per cent of GDP in the EU and 13 per cent to 20 per cent in the USA.  In Australia it has risen from 10 per cent to 16 per cent.

This increase has not occurred as a result of hard times but in a period of considerable affluence across the board.  Scandinavia has usually been at the frontier of entitlement spending.  In Denmark, out of the population of 5.6 million only around 1.8 million are not dependent on the state for their income and even they have considerable benefits in housing, child care and so on.

Alongside the increasing provision of entitlements is a corresponding revenue shortfall.  Taxation increases create incentives for people to avoid tax by reducing or concealing taxable activities.  This compounds the inducement that an entitlements mentality legitimises for people to become tax recipients, by reducing the available income and the share of it retained by producers.

Borrowings have allowed budget deficits to be bridged in the modern era but, as Greece and Spain are demonstrating, debt levels store up even greater future problems.  The USA's vastly expanded entitlement spending has been fundamental to its situation whereby revenues now cover only 60 per cent of spending.  Out of its annual $3.8 trillion in expenditures, $2.25 trillion is on social security, health and so on.  America's annual budget deficit is $1.5 trillion with its debt now being equivalent to 25 per cent of world income.  Such borrowing levels cannot last.

Mitt Romney, in drawing attention to the ''47 per cent'' of people who receive income from government transfers, did more than recognise the expenditure and deficit problems the USA faces.  He addressed an undermining of self-reliance by a culture of dependency.

The Democrats and the media depicted Romney's use of the 47 per cent figure, with its corollary of expenditure cuts to balance budgets, as a ''gaffe'' that might cost him the election.  This underlines a serious problem faced by modern democracies.  People will vote for politicians who promise them benefits even if the delivery of the benefits undermines the productive capacity of the economy.

The impasse of rising demand for spending and constrained capacity to pay was the major theme of the biennial Mont Pelerin conference of (mainly) free market economists, held in Prague in September.  The host, Czech President Vaclav Klaus, lamented what he saw as the failure of the optimism following the ''Velvet Revolution'' that overturned communism.  Klaus spoke of how this optimism had faded into a new form of socialism, the genesis of which we should have detected with the popularity of the Club of Rome and the dominance of the intellectuals with their socialist proclivities.  Among the problems he identified were the 1960s liberation, when the anchor of long-standing traditions of self-reliance was jettisoned, subsequent NGO dominance and the development of the human rights ideology which replaced and usurped civil rights.

Independently of the Romney remarks, the Swiss journalist Gerhard Schwarz summarised the danger to the West's economic well-being posed by democracy in its current form.  A democratically elected majority government can demand wealth transfers to the unproductive, regulate the productive and reward the agitational, thereby creating adverse incentives towards work, savings and investment.  Schwarz concluded, ''Democracy belongs in its proper place, namely wherever decisions are taken on matters affecting everyone and where public goods are involved.''

Every democracy has constitutional provisions designed to prevent the ''tyranny of the majority'' but these provisions have been eroded under the modern state.  The Australian Constitution, like all constitutions, was developed to stop the governing party — whether comprising a minority or a majority — from looting those on the outer.

Those wanting to extend government controls in Australia used to deride the 1901 ''horse and buggy'' Constitution for the constraints it imposed.  But its capacity to prevent government seizing and redistributing income and controlling the economy and people's lives has been progressively destroyed.  Constitutional niceties have not prevented government intrusion at levels unthinkable by those who developed the restraints on government more than a century ago.  In 1901, the federal government had only 258 regulatory laws compared to 150,000 today.  Few of these laws have simply been transferred from state jurisdictions to federal.  In 1901 the Commonwealth was responsible for taxing and spending just 3 per cent of national income compared with 24 per cent now, while state government has also grown.

In Australia as elsewhere, constitutional restraints on government have proved insuff­icient to prevent the looting and debasement of individual liberties, constraints on which focused the minds of the ancient Greek philosophers and the thirteenth-century English barons at Runnymede alike.

If government is not once again confined to these more restricted functions, we will see a continuation of the economic decline of affluent nations that has been evident for the past five years.

The challenge is, how do we get there from here?

The regulatory and tax impositions are now deeply entrenched.  Romney's 47 per cent as the share of people who are beneficiaries might be even higher in other democracies.  Ruth Davidson, the Scottish Conservative leader, has demonstrated that only 12 per cent of Scottish households pay more in tax than they receive in public services.

Persuading the many to forgo benefits they extract from the few may only be achievable if the consequent economic ruin becomes an immediate threat to the availability of plunder.  Perhaps this point has been reached in the USA and, together with Romney's superior political skills, will bring a Republican election win.  But even that would be unlikely to result in more than a temporary check to the stultifying outcome of unconstrained democracy.

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