THE dysfunction in our democracy has been no better exemplified than this week’s publication of two very sound tax policies by the independent public-interest organisation the Grattan Institute.

They were on the case for a tax on sugary drinks and an end to tax concessions for people over 65. They come after a Grattan reports earlier this year on capital-gains tax, negative gearing and superannuation.

And what is the reason these reports show how dysfunctional our democracy has become? It is that all of the Grattan Institute’s recommendations are soundly argued and should be put into effect, but they will not be, or will be heavily watered down because of the power of special interest groups.

The well-heeled and benignly named Beverage Council of Australia, representing the likes of Coca-Cola Amatil, will not swallow this pill however it is coated.

The Independent Retirees Association, with copious amounts of time on its hands, will bombard the politicians.

The Property Council and Real Estate Institutes railed across the airwaves, internet and newspapers against changes to gearing and capital gains.

The Association of Superannuation Funds of Australia, representing $2 trillion in funds, in its own words, worked “closely and credibly with politicians, regulators and the media” when concession removal was mooted. The result was that the really significant concessions remain.

James Madison got it quite wrong when he argued in the 1788 Federalist Papers that special interest groups were good for democracy because the disparate voices would ensure the public interest would prevail.

Ho-hum. Where is the well-organised and well-funded Struggling Couples in Their 30s Trying to Buy a Home Association? Where is the Dependent Retirees Association?

These people are too busy just surviving and with too little surplus cash or time to form associations to defend and push their interests. No air-conditioned offices in West Deakin (within megaphone distance of Parliament House) and staffed with talented PR writers and professional ear tuggers for them.

The irony is that affluent industries, such as mining, pharmaceuticals, real estate, grocers and beverages and so on, should not need special lobbying organisations. They are doing OK and would still be doing OK without them. But the people who really need someone to speak for them don’t have them.

As for voting power, there is little voting power when voters are duped in a land of coast-to-coast Murdoch press and ground-to-ionosphere shock jockery.

Basically, the undemocratic deal is that special-interest groups in total spend more than $1 billion a year to keep in place perhaps as much as $40 billion in unjustified tax breaks and subsidies and to prevent several billion or more justified new taxes or regulatory measures.

Here are two quick examples.

Clubs Australia spent just $3.5 million to destroy the Gillard Government’s plans to rein in poker-machine damage caused by $9 billion in losses a year to gamblers. The campaign was so powerful that Gillard caved in despite the fact the very survival of her government depended on anti-pokies Independent Andrew Wilkie.

The mining industry spent just $22 million to cause the Rudd Government to virtually abandon its resource rent tax which would have raised several billion a year.

The gas industry is doing it now – paying virtually no tax and lobbying furiously behind the scenes to keep it that way.

No-one gets bribed or blackmailed in a criminal-law sense. They just engage in reciprocal altruism and “highly persuasive” arguments. Industry donates and politicians deliver policies. Industry threatens publicity campaigns and politicians do nothing. And it takes surprisingly little in gifts and benefits to give rise to a feeling of obligation on the party of the politician to reciprocate.

I wonder what the beverage industry will do to thwart a sugar tax: threaten to scream “backdoor GST hike” or up the donations to all or some of the political parties.

Anything to prevent a perfectly sensible and well-argued case that would raise $500 million that could reduce the deficit and save a vast amount more in the extra money spent on pharmaceuticals and hospitals in treating the obese.

But this week Treasurer Scott Morrison said: “We will return to surplus when expenditure is less than revenue. . . . You do not have to be a rocket scientist to work that out.”

For him budgetary balance is only a matter of cutting spending.

In fact, a rocket scientist would not look at it that way at all. Rocket scientists look at all forces that contribute to equilibrium – the equilibrium of orbit.

Only by doing that do you prevent the rocket either being in a fiery crash back to earth or lost to the depths of space.

A good rocket scientist looks at both speed and trajectory. A good treasurer should look at both expenditure and revenue.

Of course, that is very hard to do when you have well-heeled lobbyists incessantly arguing that revenue cannot be touched. Not even a rocket scientist could deal with that lack of equilibrium.

In fact, we do not have a budget-deficit problem we just have a spineless politician problem. It may be easier to pick on the already hard-done-by. But at those edges of the Budget, the pickings of their nature are slim. To balance the Budget the Treasurer needs to look at where the pickings are bountiful.

But what of the Grattan Institute itself, you might well ask. Well, it is not a special-interest group. It is what is called a think tank, policy institute or research institute.

The difference is critical. Think tanks produce research and policy ideas based on evidence. They are independent of industry or political parties. They are funded by donations from a variety of sources.

The Australia Institute is another example of an independent policy institute or think tank.

But beware of names. The Institute of Public Affairs, for example, has close links to the Liberal Party, largely financed by corporations and in its own words promotes “public policy based on individual liberty, limited government and free markets . . . ”.

Australia is fortunate to have the Grattan Institute and the Australia Institute, to at least get good policy in to the public domain, even if its chance of surviving the formidable lobbies is remote.

The shocking thing for our democracy is that our political parties, governments, parliaments and even bureaucracy seem to be incapable of even coming up with sensible, fair and sustainable policies, let alone enacting them.

And we are left with a position that many would prefer a think tank to be in charge of tax policy rather than any of the democratic institutions.

www.crispinhull.com.au