It is appropriate that the political mechanism do the bulk of the work in resolving conflicts between the Executive and the Parliament. That's why the Prime Minister's first option fails the test. It would reduce enormously the incentive of the Executive to cut a deal to have a Bill pass the Senate, as a relatively short delay can trigger the joint sitting.
The second option maintains most weight on the political mechanism but gives some real meaning to the constitutional mechanism. It means that a government which wants to govern will need to negotiate to get its legislation adopted. Allowing a standoff to go to the people for resolution in the following parliament has real risks for both the government and the opposition parties in the Senate.
The government might not be re-elected. The Bill might be electorally unpopular, like selling the balance of Telstra, and not the kind of measure the government wants running as a de-facto referendum during an election campaign. The opposition parties face equal pressures of risking electoral setbacks by staring down Bills.
But there will be 'icon' type issues which the political mechanism will never resolve. Labor will not accept the sale of Telstra, or the unfair dismissal laws which limit workers job security. On these issues, the government can legitimately claim to have a mandate, while the Senate opposition parties equally claim a mandate to reject them.
Conflicting political mandates over icon issues need a constitutional mechanism to come into play. The second option in the Discussion Paper has the core of the solution, but it needs the four year term component to get the balance right.
I disagree. The prime minister has an almost unlimited right to call early elections. All I can see happening under Option 2 is that every deadlocked bill will become a whip over the Senate and a strong temptation to call an early election. It's like catching goldfish with a shotgun.