So, it’s fair to give credit where it’s due.

In a long piece in Saturday’s Sydney Morning Herald, Peter Hartcher looks to have talked to a range of folks in the ALP to join the dots and reveal that Kevin Rudd contemplated a double dissolution in March on the blocked ETS bills.

Rudd’s stated view about parliamentary terms was the same as John Howard’s – that governments should serve, as closely as possible, their full three years. But this was an exceptional circumstance.

Rudd had long asserted that climate change was ”the great economic and moral challenge of our time”. And he had made clear that it was not just another policy. It was personal: ”We had deeply held views within our family. Therese and the kids have a deep conviction and view about the need to act.”

He had earlier told political intimates that he had been careful to hoard his popularity for two great causes. Although he had been criticised for avoiding tough decisions merely to retain his popularity, he had explained privately that he was husbanding his poll strength for the really big issues. And they were? One was climate change. The other was tax reform.

Here was crunch time for the first of those. The clash with the Senate over the emissions trading scheme was the test of the very purpose and point of Kevin Rudd, Prime Minister.

Hartcher goes on to detail what happened next:

By January, Rudd was starting to doubt he could fight and win an election on the ETS. As the difficulties mounted, the Labor Party secretariat urged the Prime Minister to dump the plan.

The ”retail politics” of fighting off a scare campaign on electricity prices and the cost of living were too hard. Too many seats would be vulnerable, in the outer-western suburbs of Sydney, but also the coal and electricity industry-affected seats in NSW, Queensland and Victoria. Labor would lose power with the loss of eight seats. In three of its tightest marginal seats – Dawson, Robertson and Bass – the incumbent Labor members are standing down and the party is extra-vulnerable.

In any case, even a victory in a double dissolution election would not guarantee Rudd a majority in the Senate. In all likelihood, the Greens would be the biggest winners in the upper house, and they were implacably opposed to the ETS.

Debate raged inside the government and Rudd hesitated. The conspiracy of events and counsel of pragmatism overpowered Rudd’s own sense of political purpose. His confidence in his own ability to run a successful campaign in the face of a big scare wavered. January drew to a close and the option of an early election died with it.

The conclusion is inescapable:

This decision has turned out to be the most important event in the life of the Rudd government. It has galvanised the fastest collapse of support for a prime minister in the 20-year history of Newspoll and one of the two sharpest recoils from a prime minister in the 40 years of the Nielsen poll.

He had hoarded popularity to wage a fight on a big issue, but, ironically, he has lost his popularity by failing to attempt the fight.

The electorate wants a leader with the courage of his, or her, convictions. Rudd instead allowed one of his deepest commitments to become immersed in the counsels of political pragmatism. He will probably survive, but it is the most excruciating lesson of his political life.

The Liberals have one sensible option, and one only – fold their hand, and pass the thing.

Kevin Rudd’s strategy in 2007 was to minimise disagreement with John Howard except where a contrast on key issues was favourable to Labor. Abbott should learn the lesson. If he chooses to go down the oppose everything path he’s so far adopted (despite a slight shift of rhetoric earlier on health), he hands Rudd two advantages: the ability to paint him as a negative naysayer with no substantive policy alternatives, and continued focus on health all the way to the election – just where Rudd wants it to be.

It’ll be interesting to see which way Abbott goes. I suspect it may well be the negative road – because his leadership appears to have been premised on a bunch of angry Liberals railing at Malcolm Turnbull for having the gall to support the government when he thought it warranted. Naysaying is the default reflex of the opposition parties at the moment, but primal cries of rage are not election winners.

*As Bernard Keane points out, neither WA’s holding out nor the 1999 agreement on the GST poses a legal obstacle to the implementation of the health reforms. So there is a deal. The only obstacle is the Senate.

You know the script.

I’m not sure that we can be that definitive in either predicting no outcome or in assessing the subsequent politics.

Aside from funding incentives, a lot of the cards are still in the Commonwealth’s hand.

I’ve been most impressed with Kristina Keneally’s strategy throughout the manoeuvring around health. Her advocacy of what is essentially a single funder model, a pooled fund into which both the Commonwealth and states contribute, with the states hypothecating GST revenue rather than the Commonwealth clawing it back, seems to me to represent a compromise which comes very close to the original intention. And her presentation of the arguments has been assured.

She has an end in mind, and a path to that end.

By contrast, John Brumby’s intransigence seems to me to have a limited shelf life. A range of health experts have queried his claims about the superiority of Victorian hospitals, and in any case, the plan largely mirrors the Victorian system. Part of Victoria’s advantage is that its population is more concentrated over a smaller geographic space, allowing it to avoid the problems of coordination that states like Queensland, WA and NSW confront. He should also realise that his position is unsustainable in the longer term.

Brumby has to face his own electors, and deal breaking might get you so far with the admirers parochial tub thumping, but if there is no deal, Kevin Rudd will be lining him up as a duck in a row alongside Tony Abbott as an obstructionist. If he really wants a federal campaign, including a referendum, which would see him aligned with the naysayers on health (because that’s how it will be played), that’s his choice, but it seems to me to be poor political thinking.

I’m also not so sure that the conventional wisdom on the health referendum is right. Tim Dunlop argues it’s not. And it’s being reported that the referendum bills have already been drafted. So it’s quite possible to envisage a lose-win strategy for Federal Labor emerging out of a COAG defeat. But I think the forces for agreement have been underestimated.

NB: Previous discussion on LP here.

Update: The ABC is reporting that every premier bar Colin Barnett has signed up to the Rudd plan, including the cession of 30% of the GST to the Commonwealth. Barnett is negotiating one on one with Rudd. I think it’s a safe bet to say NSW’s strategy changed the game.

Update: More from The ABC. As I said in comments, I suspect Colin Barnett will come on board after one on one negotiations for “special arrangements” for WA.

Presumably the press gallery wizards got these stunning insights direct from Liberal spinners, or maybe Laurie Oakes. But, it’s always interesting to see how quickly and unanimously these memes develop, and how they reinforce the existing ‘media narrative’, which brooks no contradiction.

However, most of those claims are themselves deeply contradictory. It’s interesting, for instance, to contemplate how relevant most of the self-referential commentary from the media is, if no one actually takes any notice outside election time. Perhaps, on their own logic, they should all shut up shop?

But let’s take a look at one of the elements of the ‘it doesn’t matter’ cluster of themes (would it have mattered, incidentally, had it been credible to declare Abbott the winner?), with a little help from Essential Research:

Do you support or oppose the Federal Government’s plan to take over the responsibility for funding hospitals and health services from the State Governments?

Males were more likely than females to support the plan (61% v 56%). Support for a Federal takeover was highest amongst 55 – 64 year olds (67%).

27% of Coalition voters neither support nor oppose the plan and 22% oppose it.

[Table courtesy of Possum]

Now, let’s have a think about something former Howard advisor Grahame Morris said tonight on the 7.30 Report.

Morris articulated a more colourful version of the ‘no one watched’ line – it was just political tragics, a few journos, and people waiting at home wanting to watch Days of Our Lives. A more colourful, and more arrogant version. Everyone else, apparently, everyone who counts to Morris, is at work.

But who’s likely to be watching day time tv? Join the dots…

It’ll be interesting to see what the ratings actually are.

Let’s not forget too, for all the quibbling over The Worm, there is not really such a thing as a pure undecided voter. And let’s not forget that the health plan has close to majority support among Coalition voters, and that over 1 in 5 Coalition voters are undecided on the policy. And, remembering that Kevin Rudd actually won the election on the back of the same lines The Worm liked in his debate against Howard, I’m not at all sure that Abbott’s fans should make a virtue of the fact that voters are turned off by his shtick.

So I wouldn’t be so quick to assume that the only way voters are influenced by the debate is through the commentariat and the journosphere. I’m sure Rudd’s office took some care in researching the reach and demographics of day time tv.

Update: The ratings are in.

I don’t know if The Great Pretender’s distaste will have that much impact in the Coalition ranks, but you’d have thought there’d be enough other reasons for Liberals to think twice about the wisdom of the Abbott experiment.

It’s been widely observed that Abbott’s business impost disables his ‘Great New Tax On Everything’ line, because – unlike Labor’s ETS, which hands out money to big business – it probably would be, as large companies pass on the tax to consumers.

I haven’t noticed anyone pointing out that the parental leave plan also contradicts the theme Abbott was developing against Rudd – that Rudd’s announcements were over ambitious and it was better to go with more incremental, smaller scale policy. This was the political logic of the ‘Direct Action’ slogan, and to my mind, it’s not a bad line of attack. But it can hardly be credibly pushed when, as Costello says, Abbott has taken the ‘my policy’s bigger than your policy’ road.

Then, there’s the fact that this ego driven strategy on Abbott’s part shifts the focus from the government back on to his own credentials and capability to be Prime Minister, which is pretty dumb opposition politics at this stage of the game. After the insulation debacle, the Liberals should have been reiterating their story about the government’s policy woes. Instead, they’re defending their own policy. Not smart.

Silver doesn’t mention this explicitly, but what jumps out at me is the sheer irrationality of the primary process – so much depends on the order in which states vote and the nature of the vote (ie closed or open primary, caucus). Then there’s the unrepresentativeness of some of the states which are most important in the primaries by size and demographics, not to mention the fact that primaries tend to privilege an electorate which is closer to the ideological extreme than those voters who will actually decide the general election. All of that applies to the Democrats too, of course, but it’s unlikely they’ll have competitive Presidential primaries in 2012.

In the intervening period, I’ve been surprised that so little attention has been paid to the negotiations between Senator Penny Wong and Senator Christine Milne on behalf of The Greens, which began last week. I’ve sought to emphasise that there are possibilities of Senate passage via a Liberal floor crosser (perhaps Judith Troeth, who is retiring) and Nick Xenophon. In any event, I’ve argued that there are political benefits for Labor in staking out a new position which could demonstrate the desire for immediate action, and perhaps take a different bill to a double dissolution.

Perhaps it’s inevitable that the media would ignore these developments, but I’ve also been surprised at the attitude of a number of commenters on several threads, which seems to assume that Labor’s posture is somehow frozen in stone.

So, in light of all this, I was very interested indeed to hear Bob Brown give a very articulate and well argued interview to Tony Jones on Lateline tonight where he discussed these negotiations, and revealed that he had also been talking to other non-Government Senators.

In comments on another thread, Sir Henry Casingbroke has a great summation of the new Liberal leader’s appearance on Lateline tonight, and his political tactics. The ‘base’ he appears to be aiming at is the ‘battlers’ – it’s a defensive strategy to stop further Labor gains in outer suburban and regional seats. How that will be squared with the resurrection rebadging of WorkChoices remains to be seen.

But there’s another aspect to Abbott’s strategy – one I alluded to in my Overland post (also discussed here). Ironically, opposing market solutions (albeit with something completely illusory) might, in Abbott’s mind, work wonders for the parties of the right. The denialist dog whistling and the claims that ‘warming has stopped’ are just the ideological icing on the cake:

So business as usual is popular, with the odd twist that it’s now the political right who oppose market solutions. But Tony Abbott may be onto something; he’s playing to the politics of a vague desire that ‘something be done’. Install a solar panel, and forget about it – the state will sort it out. It won’t happen, but it has an appeal above and beyond market solutions which by necessity create winners and losers, and precisely the uncertainty and fear that most would rather wish away.

The federal Liberals are sounding and thinking a lot more like the Nats than a week ago…

Norton disagrees, and something like his position has been put to me recently from another quarter, so I suspect he’s accurately portraying what the opposition think they’re up to:

Simply agreeing with what the government is doing will get the Opposition minimal current credit with the electorate in the short term at the price of a clear long-term message about the Liberal alternative. There is a difference between what Liberal state oppositions have done, which is just ‘constant negative harping’ without a real theme or sense of an alternative, and a strategy which goes against the current mood to establish a message that could resonate at a later time.

There are at least two problems with this.

First, I’m not at all clear that any political alternative is being argued – some musing about ‘Liberal values’ is pretty content free, and doesn’t cut through in any case. Kevin Rudd has framed what the Liberal party stands for at the moment. So pervasive is the ‘back to Howard’ narrative. The Libs have played into this with their obsession with ‘defending the legacy’. It’s backward looking, not carving out some positive territory for a future when Labor goes off the boil. There’s really no getting around the fact that there’s just no political contest whatever at the moment – the Libs may as well be on Rudd’s payroll, as someone remarked here recently.

Secondly, you have to pick your battles in politics. You don’t spray negativity everywhere, in the hope that one of the “risks embedded in current policy” will come to pass. (And while I agree that – naturally – there are such risks, I think Norton’s characterisation of their nature is just more Liberal ideology, frankly.) First impressions last in politics, and Turnbull will find it very very hard to shift perceptions from here on in. Worse, the positives in the public mind about him when he came to the leadership have probably been buried. While Possum’s right that there’s probably not all that much that Turnbull can do from here on in, the Libs do have to get rid of him – which is something of a paradox, but it follows from the other argument that Rudd is completely dominant, and there’s really no evidence that any ground is shifting.

The Labor Party won’t want issues such as health, which remind voters that it’s had eleven years in office, to be central to the campaign.

Rather, the ALP will want to differentiate its economic approach from the LNP’s. Anna Bligh will be arguing that the state government is doing all it can to kickstart the slowing economy – an argument previewed by Fraser when he pointedly observed that the government had chosen to continue to borrow for infrastructure spending rather than cut its borrowing cloth to the demands of Standard and Poor’s. Jobs above all else was the message.

Graham Young’s polling for the National Forum shows infrastructure still in first place among voter concerns, but the economy rocking up the charts. There’s an obvious connection to be made between the two issues, and the Borg’s constant mantra about debt and the evils thereof boxes the LNP in and prevents them from making big ticket announcements. If they do, they’re destroying their own claims about public debt, and suggesting there’s tons of interest at the moment in public-private partnerships is hardly going to be credible in this economic climate. Labor ends up with a twin focus on the economy and leadership, and it’s hard to see this favouring the opposition. From the point of view of where governments’ political support goes when put to the test in an economic downturn, this will be an interesting campaign.

Elsewhere: Derek Barry:

Embarrassing or not, Dr Nicholas Gruen thinks the downgrading could spread to other states. Gruen is the CEO of Lateral Economics and writes for Club Troppo and is a frequent contributor to the Australian Financial Review. He told Woolly Days today that although he was not across the specific budgetary details of each government, it seems likely there will be a trend given worsening budget positions. He also defended Fraser’s position saying that now is not the time to cut back on capital works. As Gruen wrote in the AFR in September (unfortunately no link, the article is behind a paywall) “the electorate likes to see governments investing in the future. And the alternative – arbitrarily restricting investment whilst commuters nurse their resentments in traffic jams or waiting for late trains – is a political road to nowhere.”

Meanwhile UQ academic and economist John Quiggin believes that an AAA rating is overrated and rating agencies are themselves part of the problem. He says the global crisis has exposed fundamental weaknesses in the way in which ratings are determined and adjusted. According to Quiggin, the likes of Standard and Poor’s and Moody’s have suffered credibility issues in the crisis and a need a lot of improvements to restore independence and transparency. “The privileged position held by these agencies can no longer be justified,” he writes.

In any case, downgrading is not a purely Australian problem. Both Spain and Greece were downgraded earlier this year. Now the Telegraph.co.uk reports that Britain too could be stripped of its AAA rating. The Telegraph says Standard & Poor’s have indicated it might downgrade Britain’s rating because of its asset protection scheme. The scheme provides insurance for so-called “toxic debt” but the Telegraph warns the scheme leaves “the taxpayer exposed to losses on billions of pounds of bad loans made by the banks.” Yet as the article itself points out, it is very unlikely the UK Government will ever default on its debt commitments. A credit rating downgrade is clearly not the end of the world.

Nicholas Gruen thinks credit ratings should be taken seriously but governments need to take risks in tough times. That means taking on projects and debts that the private sector is now shying away from. He says that an obsession with an AAA rating now stands as an obstacle to governments playing their rightful role in dealing with the economic crisis. “There’s a dynamic to fiscal responsibility and fiscal management,” he said today. “Had the Queensland Government invested more in the easy times, it would be worth more now.”