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(generated from captions) First, our other headlines. That's coming up. and social critic, Gore Vidal. with the iconic American writer we screened earlier this year we'll run an interview Instead tonight, raised by the two cases. to answer the serious questions has agreed to speak to us Senator Chris Ellison and the Minister for Justice tomorrow night but we do plan to run it for technical reasons, to bring you that story tonight Unfortunately, we're unable on the island of Bali. at exclusive hotels while they were holidaying were sexually abused that their very young children by two Australian families on allegations a special investigation Tonight we were planning to run I'm Tony Jones. Good evening. Welcome to Lateline. This program is captioned live. you've heard in a long time. one of the silliest suggestions return to the past - It would be a 15 years our industrial relations systems. not some backdoor way to undermind of corporations, for the purpose of regulation The States provided those powers new industrial relations plans. or they'll move to block to deliver on GST funding State leaders tell the Commonwealth upping the ante. Tonight -

for business. it would be disastrous with the Commonwealth, a five-year deal be breaking not only would the states The Treasurer says industrial relations system. to undermine our not as some backdoor way of corporations for the purpose of regulation The states provided those powers industrial relations system. to introduce a national the Commonwealth's plans That could undermine used to regulate companies. of corporations law, to take back control WA is supporting Queensland's threat that comes to our states. the way we spend the GST money should try and determine that the Commonwealth of our nation It's not in the interests is co-operating. where only one side any relationship thrives We don't believe that Now some states are fighting back. certain taxes. unless they abolish to the states, which delivers GST revenue to tear up a deal Peter Costello threatened ended in a stalemate. counterparts and his state and territory the Treasurer The last meeting between seems to end. But that's where the agreement in the nation's interest. I believe we should be co-operating We should be co-operating. relationship. we want a co-operative with the Commonwealth, We don't want war with states and territories. to co-operate My government stands ready governments are at one. the Commonwealth and state On the surface its sounds like Narda Gilmore reports. From Canberra, abolish other taxes. unless the states to scrap the GST funding agreement isn't backing away from its threat But the federal government industrial relations system. for a national which could block John Howard's plan back control of corporations law, Some states are threatening to take over GST revenue. in the ongoing debate have flared again and state governments Tensions between the federal big money earners to get tax cuts. with calls for Australia's for major economic reform, And a renewed push anti-Japan demonstrations. after two days of angry China begins to rein in protestors funding arrangements. through its new the government is playing favourites Environment groups claim Hard rain.

Concerned the current tax system Michael Rowland. More from finance correspondent returning to the workforce. often faced by welfare recipients the financial penalties and the removal of of the corporate tax rate The BCA also wants a review as a way of boosting productivity. of their income in tax to pay no more than 40% wants high-income earners The Business Council of Australia to the top personal tax rates. calling for big cuts with Australia's peak business group is getting louder, Meanwhile, the chorus for tax reform Narda Gilmore, Lateline. works both ways. is that co-operation to the federal government The states message within the next few weeks. The treasurers will meet again the tearing up of agreements. his bullying of the states - Peter Costello should stop and territory treasurers. of the federal, state There'll be further meetings will prevail. I'm hopeful that good sense to negotiate. but say they're willing either, The states aren't backing down the other taxes. and that's why we need to abolish and the other taxes You have the GST and the other taxes. You can't keep the GST is standing firm the federal government On the issue of GST revenue distant health bureaucracy. of management by a more hospitals and communities by the disadvantages to local would be outweighed Any possible gains control of public hospitals. for the Commonwealth to take formally rejected a proposal But the Prime Minister has now unified and efficient system. to move towards a more streamlined, it reasonably can the government will do what by the states, In the absence of referrals industrial relations starting with senate majority using the government's responsibilities to state and federal with some reforms but he has vowed to push ahead to trample on state rights, that his government is trying where he rejected any suggestion on federalism the PM has given a speech Amid this latest debate, you've heard in a long time. one of the silliest suggestions return to the past - It would be a 15 years

And I think it is a benchmark for the question of the current taxation debate that we think should be lively at this time. Topping the Business Council's wish list is the cutting of the two top personal tax rates to 40%. The BCA also wants the 30% corporate tax rate reviewed with a view to lowering it and it also wants to remove the often hefty financial disincentives faced by welfare recipients wanting to return to the workforce. The peak business group says high marginal tax rates act as a brake on productivity and they hinder Australia's ability to attract skilled workers from overseas. We face increasingly strong competition for capital and skilled labour from traditional competitors, whether it's the United States or elsewhere. All around the world, there's competition for skilled labour. It's a view shared well beyond the top end of town. Interestingly, if a lot its own blueprint for change. the Business Council has released international competitiveness, is undermining Australia's of those skilled people and capital flows into Australia, it can actually make our unskilled people more productive and they'll actually end up being winners down the track. John Freebairn is one of Australia's leading tax academics. He says far too many workers find themselves paying the top marginal tax rate of 47%. And I suppose what is so peculiar about Australia is that those top rates come in at a very low level. $80,000 is really only double average weekly earnings and a lot of skilled engineers, scientists, even tradespeople, as well as sports and arts people are earning those sorts of salaries. At the other end of income spectrum, people on welfare often find they go backwards if they seek to enter the workforce. The Business Council wants action taken to cut the sometimes prohibitive effective marginal tax rates paid by people who lose their welfare payments as their incomes rise. The real problem is if we take many of the social security allowances, once your income gets up a little bit, it's withdrawn at between 30, 50 and 70 cents in the dollar. The Business Council's entry into the tax reform debate comes on the eve of a Cabinet discussion on next month's budget. And while the Prime Minister has been stressing the need for fiscal restraint, corporate Australia feels the government has a golden opportunity to make long-lasting changes to the tax system. The BCA believes that now is the time when prosperity is high, that we have the best capacity to manage change. Now we understand, so I'll repeat again, that takes political courage to do it when things look to be running so well. The government would have to be particularly courageous when it comes to funding lower personal tax rates, particularly if it means the scrapping of popular tax concessions. And that would be like getting rid of work-related expenses, getting rid of concessions on capital gains tax, removing the last concessions on the fringe benefits tax. High tax rates aside, the other big business bugbear is the sheer complexity of tax legislation. Now don't tell me John Citizen or Joe Sixpack understands the Tax Act. I don't know who does. I think I'm right in recalling that even the Commissioner said he had difficulty in understanding the Tax Act and if the citizens don't understand the Tax Act, don't think they will respect it. We have to simplify these issues. Whatever its shape, tax reform will be no easy task. Michael Rowland, Lateline. The battle with the states isn't the only fight the federal government has on its hands. Some environment groups say they're being punished financially because they've criticised government policies. The Commonwealth has decided to cap grants at $10,000 a year, which means a major reduction in funding for state and territory conservation councils. From Canberra, Peta Donald reports. In Queensland, the state's conservation council claims an end to broad-scale land-clearing as one of its victories and before that, it says it was one of the main agencies lobbying for the World Heritage listing of the Great Barrier Reef. Now the group has lost up to half its funding, with this year's grant from the federal government reduced from $92,000 to $10,000. It's a very, very decimating cut and we will struggle to actually fulfil our services to our 70-member organisations. The federal Environment Minister has decided to cap grants to environment groups at $10,000 a year. Organisations will be funded for work on the ground, like planting trees, but not for lobbying or raising community awareness. The state-based conservation councils, who've been receiving much more than $10,000 a year in public funding, will be the main groups to miss out. We're not apologising for focusing this multimillion-dollar scheme on small to medium-sized volunteers who do real work on the ground to help Australia's environment and to help our built heritage. The opposition says it brings to an end 30 years of bipartisan support for environment groups who criticise government policy. This can only be seen as a back-door way of trying to silence these groups. If we don't have community groups and environment groups out there saying, "The environment's in a bad state, what can we do? "Action needs to be taken," then the funding for these programs may as well not happen. The government says it wants to provide practical support to smaller groups that need it the most. Peta Donald, ABC News, Canberra. The Israeli Prime Minister, Ariel Sharon, has arrived in Texas ahead of a meeting with president George W. Bush in a just a few hours' time. Top of their agenda is the forthcoming Israeli withdrawal from the Gaza Strip, due to start at the end of July. Mr Sharon desperately needs Washington's continuing endorsement of the plan because of the intense opposition he is facing at home. Meanwhile, security in Jerusalem remains tight after 24 hours of scuffles and confrontations between Israeli police, ultranationalist Jews and Muslims. Extremists from both sides are intent on forcing their respective leaders to abandon the fragile peace accord - agreed upon in Egypt earlier in the year - and to give up on the withdrawal plans from the Gaza Strip. Beijing has called on Japan to do more to repair soured relations between the Asian powers, after a weekend of sometimes violent anti-Japan protests across China. Japan, in turn, has demanded that China protect Japanese firms and expatriates, but has said the best way to resolve the bilateral tensions was through dialogue. The protests erupted as a result of what many Chinese see as Tokyo's whitewashing of World War II atrocities and its bid for a permanent seat on the UN Security Council. China correspondent John Taylor has this report. State media isn't mentioning the greatest anti-Japanese protests It's as if the weekend never happened. There's no mention of the roughly 30,000 people who took part in anti-Japan protests. They happened in three cities, including the capital, Beijing. Sparked by Japan's approval of a school textbook that China says glosses over war-time atrocities. Japan's embassy had windows smashed. Japanese businesses and restaurants were also targetsed. Today the jap piece embassy was trying to make sense of it all. I have concern sense of it all. I have concern that in China, there is a misunderstanding towards Japan and China's people have somehow unbalanced image about Japan and Japanese, so this is what I have concern. China's Foreign Ministry says Japan must address the says Japan must address the feelings of the Chinese people. It's not the conciliatory response Japan wants. We need to clarify what Chinese Foreign Foreign Ministry really means by this statement. Earlier this year, China's premier admitted the bilateral political relationship bilateral political relationship was strained. The leaders of both countries haven't exchanged visits for seven years. For the first time in centuries, both countries are powerful at the same time, and powerful at the same time, and vying for greater international recognition. Millions of Chinese have signed Internet petitions against Japan's moves to join the against Japan's moves to join the UN Security Council. But this couple living in Beijing believe they show

harmony isn't impossible. He is Chinese and she is Japanese. the Chinese and Japanese the Chinese and Japanese governments and leaders can be like us as a couple, he says. Quarrelling can bring the smiles. Smiles can bring happiness. I think the Chinese governments and leaders should governments and leaders should learn from us as a couple as an example when they negotiate." They believe Japan has to shoulder some blame Japan has to shoulder some blame for the bad state of the relationship, but not all. A media ban is in but not all. A media ban is in force in China, but gnashalist activist JiwHua had still find photos of the protests on the Internet. Japan has no excuse at all to demand the Chinese people apologise. It is ridiculous, he says. He believes Chinese gnashalism is growing and that a strong China overshadows any public desire for a democratic one. "To talk about democracy and freedom, it seems unrealistic", he says. We should focus more on the development of our nation, the unification of our nation, and the strength of our nation. But that strength of our nation. But that can too easily lead to scenes like this. There were no more anti-Japanese protests in China today. But the ugly face of Chinese hostilities to Japan has been revealed. While the two countries are basking in a warm economic relationship, plit complee, things are becoming increasingly icy. John Taylor, Lateline. Now to our interview with Gore Vidal from earlier this year, which, it should be said, many people asked us to rerun. For unexpected reasons, tonight they'll get their wish. Gore Vidal's latest book is called 'Inventing a Nation' and its forward is penned by an Australian politician - none other than NSW Premier Bob Carr. Carr is a lifetime enthusiast for American history and longtime friend of Gore Vidal. In the forward, he springs to his mate's defence, claiming that "blundering neo-cons" and "ultranationalists" have tried to impugn his patriotism. But Carr too has his differences with the man he calls a "lonely genius". Bob Carr paints Gore Vidal as a committed isolationist who believes that "projecting American power will always make a situation worse". 'Inventing A Nation' is devoted to examining the lives and motives behind America's founding fathers. But Vidal uses that as a vehicle for attacking the Bush administration. His central treatise is that today's America and its foreign policy would be unrecognisable to the founding fathers and betrays many of their ideals. I spoke to Gore Vidal in California. Gore Vidal, thank you for joining us. Well, thank you for inviting me. Now, your inspiration for writing this book came from a question President Kennedy put to you at Hiannas back in 1961. Could you start by recalling that conversation for us? We were sitting out overlooking the cold Atlantic Sea in the Kennedy compound - they have about four or five white-frame houses on the beach - and we were playing backgammon, and as usual I was winning and as usual he was swearing, and then he said, "You know, your Uncle Lefty was here a day or two ago, "and he said - "'Why is it that the United States, "this little backward agrarian country with 3 million people, "should have produced, in the 18th century, "three of the great intellectual geniuses of the 18th century: "Benjamin Franklin, Alexander Hamilton and Thomas Jefferson?'" Needless to say, I did not provide him with a satisfactory answer, because I still don't have one, other than it was a throw of the dice, as so many things are in life, and a throw of the dice it was that we had three exceptional men, and when it came to inventing a nation, I started to think about them,

so I decided to put together a book in which you can actually hear the real conversations that went on, preserved in letters and diaries and so on, between the founders, James Madison in particular, the great friend of Jefferson - he is called the father of our constitution - and you hear the other voices of the very wise Benjamin Franklin, who didn't much care for the handiwork of the Constitutional Convention, which was held in 1789. Could I just pick you up there? You mentioned one of those exceptional men was Benjamin Franklin, and as you say, he seems to have been rather pessimistic about the constitution and, indeed, the future of the republic. Tell us why and what he actually said when he signed off on the constitution. He said, "Well, I say 'yes' to this constitution, with all its faults. We need good governance for a while, and this constitution will assure us of good governance for a number of years." Then he said, "This constitution will fail, as others have before it, and that will be due to the corruption of the people, for whom in the end only despotism will serve." This was a famous speech in its day. I went through a dozen high school history books of the United States. Part of the speech is given; what I just quoted is never quoted. So that was the first "nay" vote to the constitution, which I think most thoughtful people - the good thing about it is the Bill of Rights, which guarantees us freedom of speech and so on. The bad things are the powers given to the President, which have now been absolutely inflated out of control, where the President is almost a permanent dictator with the power to declare pre-emptive war any time he likes. Now, George Washington would be out of his mind, and he was the first President. He didn't want powers to say, "I think terrorists might be livin' over there. "I think we better hit Denmark. Denmark's a good place to hit. "We'll hit 'em because there could be terrorists there." This is the rationale of the so-called Bush doctrine, and it is insane. If I could just interrupt you there again. Looking at the dark prophecy of Benjamin Franklin is where you book verges off into suggesting that America has actually already moved towards despotism. It's a pretty longbow, though, isn't it? Well, of course. We've visited despotism many times before - never to the extent that we have now. We've never before gone in on two countries which had done us no harm, were friendly to the United States - Afghanistan and Iraq - and knocked them to bits. We spent a lot of money on the armaments to do that, and now we're spending a big fortune, through the Vice President's company, Halliburton, to repair what we just knocked down. So two sets of money have been burnt up in destroying two countries which had done us no harm and were in no position to do us any harm, despite the numerous lies told about weapons of mass destruction. There weren't any in Iraq, and presumably nobody said that about Afghanistan, and now they're starting to mutter about Iran. This is where what I call isolationism - which Bob Carr and I did not finish talking about the other day on the radio - this is where we come in, which is: you do not interfere in a predatory way in the affairs of sovereign nations because you think they might one day get atomic weapons and blow us up in the night. We ascribe to everybody else our own motives. Why should they do it? What would be the motivation? What's the provocation? So we, the isolationists, are the peacekeepers and, I thought, should be properly valued. Isolationism is a bit of a moveable feast, though. I mean, American power was used to defeat Hitler and imperial Japan and, more recently, for example, to force Slobodan Milosevic out of power in Serbia. Do you see a use for American power against despotism? I don't think arbitrarily or pre-emptively - which is the key adverb here - no, I don't. I think in union, as we behaved in the Balkans - that was essentially a coalition of nations, United Nations amongst others - yes, of course; we belong to a certain world. Listen, remember, when you hear the word "isolationist" said by an American right-wing politician, he's sneering: "And they say they believe in a flat Earth and no relations with foreign countries because we're protected by two oceans." Nonsense. That was true 200 years ago, but in today's misuse of the word, it simply means those who object to our forcing ourselves upon other countries; going into the Middle East not to bring liberty and justice to the Iraqis - we didn't even know who they were, we don't even know where the country is, most Americans; we're there for the oilfields. Let's leap forward to the latest - or the last - State of the Union address and President Bush, in a way, rewriting the guiding principles of foreign policy. In his recent address, he said the ultimate goal now was to end tyranny in the world. (chuckles). Tell us what you make of that. I think he believes that we can eliminate tyranny everywhere on earth if we allow it in our own country first. We will then provide a model. He is a tyrant, as much as he can be under our system, and our system in many ways is crumbling, so it's open season on the republic that Benjamin Franklin feared for. Despotism, though, and tyranny implies a suppression of dissent. I mean, there's no bar to open dissent in the United States; just simply whether you can get on to the corporate media. (chuckles) Well, isn't that - that is how it's controlled. The great networks are owned by the great corporations. Sometimes a corporation - why, there's a native of your country who's come to join us who's buying up all sorts of radio stations, TV stations, newspapers, in a conglomerate, which was not allowed under our laws, but somehow they've all been bent, and doing very well with it. That is how you control what the people know. It's beyond anything Orwell dreamed of. Isn't it the case, though, that fewer and fewer people in fact are actually getting their information from the corporate-owned media? Where do you think they're getting it? That's a very good question. I mean, partly from the Internet, but they seem to be drawing information from all sorts of areas now. Is the power of the corporate media waning, do you think? It's absolute. Is its credibility waning? Yes, of course it is. Prime-time television is nothing but propaganda, and almost everything said contradicts itself, because they don't bother to sound logical in what they say. They say the message very loud. That is what the people around Bush have discovered: you repeat the lie, and if people look slightly doubtful, you repeat it again more loudly, and you go on and on. Bush went on for about three years getting ready for the Iraq war, saying that Osama bin Laden, responsible for the 9/11 attacks on New York and Washington, was working hand in glove with Saddam Hussein, who was equally guilty; therefore, we were going to remove Saddam Hussein, because he was so vicious. Well, he would have been very vicious had he been responsible for any of the attacks on the United States, but he wasn't. Let me ask you this, though, if I can: when you see the majority of people in Iraq, particularly the Kurds and the Shi'ites, expressing their will for the first time in an election and beginning to form a government in much the same way that the founding fathers formed a government in the United States, does it not give you some pause as to whether perhaps that is the right thing? Well, the founding fathers did not form the government of the Republic of the United States while occupied by France. We did it on our own, having invited the British to go home, which they had done. So it's not comparable at all. We are an invading power. We have fixed an election, which I think in due course, the press will say, "Well, I guess we got that one wrong, too. It was corrupt", and so on. I notice that today's press, Shalabi - who has been totally discredited - he was a refugee to the United States, in various troubles around the world for banking and so on - but he's back and he's standing up and they say he's going to be the next Prime Minister. Well, if he is, they're going to have a revolution. What are we doing interfering - we with our disastrous elections in the last 20, 30 years - what are we doing prescribing elections in a country and a culture that we know nothing about? This is beyond hubris; this is just crazy time. It's true, though, that neoconservatives might point out that Thomas Jefferson observed just before his own death - and you quote these observations at the end of your book - talking about his Declaration of Independence, he says, "May it be to the world what I believe it will be: "the signal of arousing men to burst their chains." Now, based on those kind of comments, he might well have endorsed a war to bring democratic principles to another country. Well, he never showed any sign of wanting to do any such thing. He was not one for foreign wars. He was rather opposed to having a standing army. Most of the founders didn't want a standing army, on the sensible ground that we would use it, and we'd use it for dark ends, like stealing other people's property, as we did in Mexico, as we did in the war against Spain, which we picked in order to grab not only Cuba and Puerto Rico but, more importantly, the Philippines, which made us a Pacific power. We were talking about dissenting voices a short time ago and the importance of dissent. Can I just ask your thoughts on the passing of one of the great dissenters of recent American history, Arthur Miller, a man brave enough in his day to stand against the despotism of Senator McCarthy. We always have these treacherous figures in society who are there to denounce others as traitors, heretics - all sort of false religious language they use. No, Arthur Miller had the virtue of being an honest man, not easily intimidated. It came naturally to him to write plays about those like himself or perhaps like the way he would have wanted to be. None of us is as brave as he wants to be, but some get closer to it than others. Is there the like of Arthur Miller in today's America? No. There are voices that speak out, writers that write out. The problem is, the media will not let them on. People ask me, "If you end up with such boring candidates as Mr Kerry and Mr Bush - "are there no Americans in public life "who might be more useful, more representative of the people, "the best elements of our nature?" I say, "Yes, there are, "but the New York Times will not report their speeches. "Television will not let them on "unless they're surrounded by eight neoconservatives "who all talk at once and shout and howl." It's like a menagerie. There is no political debate because it's not allowed; it's not commercial television. So the result is there are many great voices - if I may paraphrase Grey - that are muted across the land. They are there. Gore Vidal, finally, can I ask you to engage in prophecy just for a moment? Look down the track. Four more years of George Bush. What will America and what will the world look like, in your opinion? Well, an unholy mess. The dollar declines in value. There is no way that you can up it. There's nothing you can do. The wars will continue. There will be an attempt made in Iran and Syria, other places that look exciting. The United States will go broke; it's as simple as that. That's what ended the British Empire. One of the reasons we got into World War I was that in 1914, under the Asquith Government, the government fecklessly ran out of money, and here they were, supposed to be fighting the central powers, Germany and so on. The same thing is happening to us. We don't have the money to pay the debts. Now, great nations that are rich in a sense don't go bankrupt the way individuals do, 'cause you can't put a valuation on them, but you can certainly show lack of confidence in their currency if it goes down, down, down, which it is now doing, and interest rates go up, up, up. As the interest rates go up, then we have the problem of inflation, which will give social insecurity to everybody, because the price of bread will suddenly get very high, which it has never been in the United States since the early '30s. So I would say that, in the long run, the world will be saved American despotism by the coming bankruptcy of the country. Now, that will have awful fallout for everybody. I don't even want to look into that crystal ball. Gore Vidal, I think you are living proof, however, that dissent is still living in the United States. We thank you very much for taking the time to come on Lateline. Thank you. To the markets now. The All Ordinaries ended the day weaker, as falling resource stocks put downward pressure on the market. Now to the weather. That's all for this evening. If you'd like to look back at tonight's interview or review any of Lateline's stories or transcripts, you can visit our web site at - I'll be back again tomorrow, so join me then. Goodnight. Captions by Captioning and Subtitling International.