A Note on the \'Reagan \'80s\'

Some readers of The New York Times â€" the version printed on trees â€" have noted that a headline on the front page of Friday's paper emphasizes a different aspect of our analysis of tax trends than the accompanying chart. The headline says, “Complaints Aside, Most Face Lower Tax Burden Than in the Reagan ‘80s,” while the chart compares tax rates in 1980 and 2010. And as Greg Mankiw notes, President Ronald Reagan took office in 1981.

Both headline and chart are accurate, but there is an interesting difference.

We focused on a comparison with 1980 to capture the full extent of the changes since Reagan opened an era of cuts in federal taxation. As the article says:

Most Americans in 2010 paid far less in total taxes - federal, state and local - than they would have paid 30 years ago. According to an analysis by The New York Times, the combination of all income taxes, sales taxes and property taxes took a smaller share of their income tha n it took from households with the same inflation-adjusted income in 1980.

It is also true â€" and important - that reductions in federal taxation continued after Reagan left office. Indeed, those cuts have been large enough to outpace increases in state and local taxation. As the article also says, “Tax rates at most income levels were lower in 2010 than at any point during the 1980s.”

The difference between the two time frames is that while upper-income households have seen the largest percentage decline in the overall period since 1980, the rest of the population has seen the largest percentage declines in the years since Reagan's presidency.

You can see these trends by income group, and year by year, in our interactive graphic.

For households making less than $25,000, taxes increased during the 1980s, then declined starting in the mid-1990s as both parties backed the expansion of government payments like the earned income tax credit.

Middle-income households did get a tax cut in 1981, but its value was steadily eroded by rising state and local taxes. Their taxes also began a fresh decline in the mid-1990s that continued unabated through 2010.

Upper-income households got the largest cuts in the 1980s, the largest increases in the 1990s, and the largest cuts in the 2000s.

There's an important caveat to the front-page headline: For many upper-income households, average tax rates in 2010 were higher than at the ‘80s nadir - particularly the top income bracket, which includes 1 percent of households.

But average tax rates increased sharply for upper-income households in recent years not because of changes in tax policy but because a smaller share of earnings for those households came from investments, which are taxed at lower rates.

In 2007, before the recession, most upper-income households also paid a smaller share of income in taxes than co mparable households during the “Reagan '80s.”

The \'Go Fast\' and \'Go Big\' Fiscal Challenges

Laura D'Andrea Tyson is a professor at the Haas School of Business at the University of California, Berkeley, and served as chairwoman of the Council of Economic Advisers under President Clinton.

Washington faces two urgent fiscal challenges in the next few months. Before the end of the year, the lame duck Congress, the most polarized in recent history, must negotiate an agreement with President Obama to protect the still fragile economic recovery from the so-called fiscal cliff - the $600 billion in spending cuts and tax increases scheduled to begin to take effect on Jan. 1. Then, early next year, a newly elected but still divided Congress must approve an increase in the federal debt limit. Failure to do so in a timely way would damage confidence, posing yet another threat to the economy's continued healing.

These two chall enges are manifestations of the long-running fiscal challenge confronting the country: the fact that the federal debt is rising at an unsustainable rate. That's why a political deal to address the fiscal cliff and the debt limit in the near term should be linked to a credible framework to put fiscal policy on a sustainable path in the long term.

By the end of this year, policy makers need to “go fast” to address the fiscal cliff and debt limit and to “go big” to establish the broad outlines of a significant multiyear deficit-reduction plan.

The economy continues to operate far below its capacity. The unemployment rate is at least two percentage points higher than what most economists consider consistent with a full recovery. Other measures, such as the high rate of long-term unemployment and the low labor-force participation rate, reflect an impaired labor market.

According to the Congressional Budget Office, gross domestic product is still about 6 percent, or about $973 billion, below the potential level the economy is capable of producing at full capacity. This is the largest gap between actual and potential output following a recession in modern American history.

The weakness of government spending at the state and local level and more recently at the federal level has been a significant factor behind the slow recovery. The phasing out of earlier federal stimulus measures, the expiration of temporary payroll-tax relief and extended unemployment benefits scheduled at the end of the year, and the tight caps on discretionary federal spending already in force mean more federal fiscal drag on the economy's growth next year even if the fiscal cliff is averted.

Ideally, given the shortfall in aggregate demand that is keeping the economy stuck below potential, a deal on the cliff should include an extension of both payroll tax relief and unemployment benefits, as well as other temporary policies to support job creation, such as the employment tax credit for small business and the increase in infrastructure spending proposed last year by President Obama as part of the American Jobs Act.

Alas, it seems unlikely that a deal will contain these measures. At best, if a deal is reached it will probably be limited to tabling the deep spending cuts automatically scheduled to take effect early next year, extending the 2001-3 tax cuts for the bottom 98 percent of taxpayers and raising taxes on the top 2 percent of taxpayers, especially those with incomes over $1 million, through some combination of higher marginal tax rates and caps on deductions.

To improve the economy's near-term growth prospects, the deal should also contain a promise that Congress will approve the debt limit when necessary without a destabilizing delay.

So far, negotiations about a go-big framework for deficit reduction have focused on cutting at least $4 trillion from the federal budget over the next decade, with the goal of stabilizing and then reducing the debt-to-G.D.P. ratio. The election and recent Gallup polls settled the debate about whether an increase in revenues will be part of the plan. The answer is yes.

The debate has shifted to how revenues should be increased and who should bear the burden. The proposition that revenues should be raised through tax changes that limit deductions, credits and loopholes, in lieu of or in addition to rate increases, is gaining momentum.

Economists believe that raising revenues for deficit reduction through base-broadening tax reforms is probably better for economic growth than raising marginal tax rates.

Although it may prove politically necessary for a bipartisan deal, however, there is no convincing economic justification for using some of the revenues saved from tax reforms to lower marginal income tax rates for high-income taxpayers. These rates are already at historic low s.

And there is no convincing evidence that real economic activity responds materially to changes in these rates, at least within the range of rates experienced in the United States during the last half-century. The tax code should be reformed to make it simpler, fairer and less distortionary and to raise revenues for deficit reduction, not to reduce tax rates on high-income taxpayers.

Over the last 30 years, income inequality in the United States has increased sharply. During the same period, the federal tax system has become less progressive and has contributed to the trend of rising income inequality and widening opportunity gaps between children born into different income groups.

A more progressive tax code, achieved through some combination of higher tax rates and capping deductions for high-income taxpayers, would be a powerful tool both to counteract these trends and to achieve long-term fiscal sustainability.

On the spending side, “go big” bipartisan proposals for deficit reduction, such as the Simpson-Bowles and Domenici-Rivlin plans, focus on curbing the growth of Medicare, Medicaid and Social Security. This is understandable as these programs already account for about 40 percent of federal spending and that share is projected to rise as a result of the aging of the population and the growth of health care costs.

But lumping Medicare, Medicaid and Social Security together is misleading and, given strong partisan passions on Social Security, could weaken the chances of reaching a bipartisan deal on deficit reduction.

Spending on Social Security is rising primarily because of demographics, not because of growing benefits per eligible person. Indeed, the Social Security Trust Fund has adequate resources to cover benefits until at least 2033, and the program's revenue shortfall is less than 1 percent of G.D.P. over the next 75 years.

In contrast, the argument for including Medicare and Medicai d in a framework for long-run deficit containment is compelling. The single most important factor behind the projected growth in federal spending is the growth in health care spending, driven primarily by the growth in Medicare spending per beneficiary.

The outlook has already improved as a result of significant changes in the delivery and payment of health care services in the Affordable Care Act. As a result of these changes, growth in Medicare spending per enrollee is projected to slow to 3.1 percent a year during the next decade, about the same as the annual growth of nominal G.D.P. per capita and about two percentage points slower than the annual growth of private insurance premiums per beneficiary.

Speeding up the pace of the Affordable Care Act changes along with others, such as reducing subsidies for high-income beneficiaries and drug benefits and introducing small co-pays on home health-care services, would mean even larger Medicare savings.

A “s tructural reform” popular among Republican deficit hawks like Representative Paul Ryan of Wisconsin to convert Medicare to a premium-support or voucher system would be counterproductive and would drive up both spending per beneficiary and overall costs in the health care system.

The goal of a “go big” plan for deficit reduction should be to ensure the economy's long-term growth and competitiveness. Yet the debate over spending in Washington is fixated on cutting entitlement spending. Very little is heard about the need to increase federal spending in education and training, research and development and infrastructure, three areas with proven track records in rate of return, job creation, opportunity and growth.

Spending in these areas accounts for less than 10 percent of the federal budget; this share has been declining for several decades and is slated to fall to dangerous new lows as a result of the caps on nonmilitary discretionary spending already in pl ace.

A pro-growth framework for deficit reduction must reverse these trends. More government investment in the foundations of economic growth should be recognized as a core principle of deficit reduction.

Record Corporate Profits

United States corporate profits reached a record high in the third quarter of this year, even adjusted for inflation, according to a report from the Bureau of Economic Analysis.

Source: Bureau of Economic Analysis via Haver Analytics.

The increase from the second quarter was entirely a result of stronger business at home. Profits received from American-owned businesses abroad fell slightly in the third quarter, which may not be surprising given the recession in Europe and the slowdown in China.

Additionally, all of the growth in domestic corporate profits was accounted for by the financial sector.

Domestic profits of financial corporations rose $71.3 billion in the third quarter, after falling $39.7 billion in the second. Domestic profits of nonfinancial corporations, on the other hand, decreased $1 billion in the third quarter, after rising $27.8 billion in the second quarter.

Source: Bureau of Economic Analysis, via Haver Analytics.

Applying Evidence to Social Programs

In response to our recent series of posts on stagnant incomes for the middle class and poor, Jon Baron - president of the Coalition for Evidence-Based Policy, an unaligned research group in Washington - argues that better functioning government programs could help.

Despite a myriad of new government programs and spending over the last 40 years, the system has failed to improve economic and social well-being for an astonishingly large segment of the American population. There is a different way forward, focused on increasing the effectiveness of existing funds. This way forward could be an excellent fit as the administration and Congress ponder a second-term agenda for President Obama with little new money to spend.

Census Bureau data show that over the last 40 years, average yearly income of the bottom 40 percent of U.S. households â€" now at $20,221 â€" has changed little after adjusting for inflation.

Source: U.S. Census Bureau, Current Population Survey

In education, although the college graduation rate has risen, the high school graduation rate peaked around 81 percent in the early 1970s. Since then, it has been stuck between 75 and 80 percent. Department of Education data show that reading and math achievement of 17-year-olds â€" the end product of our K-12 educational system â€" has not improved over 40 years, despite a 90 percent rise in public spending per student (adjusted for inflation).

Source: U.S. Department of Education, Institute of Education Sciences, National Assessment of Educational Progress Long-Term Trend

Ending this stagnation requires a central role for government, but not through its traditional, unimaginative approach to social spending. The field of medicine shows how it could work. Medicine has seen amazing progress over the last half-century â€" for example, a 50 percent drop in the United States death rate from coronary heart disease and childhood cancers. A driver of that success can be applied to social spending, resulting in major gains in people's social and economic well-being.

That driver is scientifically rigorous evidence about “what works.”

Scientifically rigorous studies â€" particularly, the “gold standard” of randomized controlled trials â€" are a mainstay of medicine, providing conclusive evidence of effectiveness for most major medical advances in recent hi story. In social spending, by contrast, such studies have only a toehold. Where they have been used, however, they have demonstrated the same ability to produce important, credible evidence about what works â€" and illuminated a path to major progress.

A recent example is the large randomized trial of a program that provides streamlined, personal assistance, through H&R Block offices, to low- and moderate- income families in completing their children's college financial aid application. The program, costing just $90 per person, increased college attendance by a remarkable 29 percent over a four-year period, compared to a control group of families not receiving the assistance, according to a study by the economists Eric Bettinger, Bridget Terry Long, Philip Oreopoulos and Lisa Sanbonmatsu.

Another such trial has shown that so-called career academies in low-income high schools â€" providing students with a smaller, career-themed learning community of like-minded pe ers â€" raised their earnings by $2,200 per year over the eight years after high school, compared with a control group.

In medicine, a pharmaceutical drug or medical device backed by such evidence of effectiveness is put into widespread use, because the system is set up to reward strong evidence. The Food and Drug Administration specifically requires such evidence before licensing a drug or device for market. Licensing then signals to health care providers and patients that effectiveness has been established, spurring demand.

In social spending, though, scientific evidence plays little role in allocating resources. Historically, major programs like Head Start, Title I at the Department of Education and the Job Training Partnership Act have been set up as multibillion-dollar faucets, allocating streams of money to state and local agencies â€" often by formula â€" to support a diverse array of activities. Rigorous evidence has little say in which activities receive support. Thus, activities with strong evidence of large effects, like the H&R Block effort, may never get funds from these faucets and never expand.

The promising news is that in a few recent instances, Congress has enacted initiatives in which evidence of effectiveness is a main factor determining which activities get funds. An example is the federal Early Childhood Home Visiting Program, begun as a pilot under President Bush and expanded by President Obama. It underwrites efforts like the research-proven Nurse-Family Partnership, which provides nurse home visits to low-income first-time mothers. Evaluated in rigorous randomized trials, the partnership has been shown to reduce child abuse, neglect and injuries by 20 to 50 percent, and to generate sizable improvements in child cognitive and educational outcomes.

The administration and Congress could fundamentally shift the social spending landscape by incorporating such evidence-based funding criteria into billi on-dollar federal programs, rather than just a few isolated initiatives. Doing so would create a powerful new incentive for the development, rigorous evaluation and â€" if effective â€" dissemination of new program strategies and models. It would catalyze evidence-driven improvements in an otherwise moribund system.

For 40 years, America's promise of rising prosperity has eluded nearly half of the population. A second-term agenda that makes evidence the core principle in social spending â€" rather than a faucet â€" could restore the dream for millions of Americans.

With Higher Taxes Looming, Bonuses May Come Early

Some highly paid workers may be getting an extra Christmas present this year: an early bonus.

Firms in bonus-heavy industries like finance, law and consulting typically pay their annual bonuses after Jan. 1, once the firm's (and employee's) previous calendar-year performance can be fully assessed. But now, anticipating higher income tax rates in 2013, some companies have decided to distribute their bonuses by Dec. 31 instead.

At Ares Management, a financial services firm, employees have been told they will receive bonuses in mid-December instead of mid-January. A spokesman for the company declined to comment about its compensation practices.

Paying bonuses early â€" not more, not less, just early - can save high-income employees quite a bit of cash. That is because a series of tax changes scheduled to kick in at the end of the year will cause income received in 2013 to be taxed at higher rates than income received in 2012.

“It's one of the few thi ngs you can do as an employer that'll make employees happy that doesn't cost you anything,” said Alan Johnson, managing director of Johnson Associates, a compensation consulting firm.

Mr. Johnson, like other compensation and tax consultants and lawyers interviewed, said he had been receiving a lot of inquiries from firms considering accelerating their bonuses into this year.

“Right after the election, many of our clients started calling saying they were interested in doing this,” said Regina Olshan, a partner in the executive compensation group at the international law firm Skadden, Arps, Slate, Meagher & Flom. So far only a handful have actually decided to give bonuses early, she said, but others may follow suit if Congress marches toward Dec. 31 without voting to undo planned tax increases.

“I can promise you I'll have calls on Dec. 20 asking, ‘Can I accelerate everything in the next two weeks?'” she said.

Smaller, privately held firms â€" particularly private equity companies, known for their tax-planning acumen - seem to be taking the biggest interest.

Publicly held companies often have a bigger administrative and legal burden if they change their bonus calendar, especially since many of them have employees abroad under different countries' tax systems. Public companies also appear to be wary of the appearance of lowering their tax bill, even if the actions are completely legal, particularly if they received taxpayer-funded bailouts during the financial crisis.

“There's so much contemplated regulation in terms of compensation these days,” said Steven G. Eckhaus, a partner at the law firm Katten Muchin Rosenman. “You can just imagine the public reaction given the fact that bankers are still doing relatively well relative to everyone else. Most people don't have the luxury of being able to change when they get their compensation, let alone receive that kind o f bonus in the first place.”

One of the risks of paying bonuses early is that companies do not know for certain whether they will hit their annual targets, which for accounting, legal and administrative reasons are often supposed to be tied to the bonuses they pay out.

After all, in the last few weeks of the year, clients may not pay, the market may drop precipitously, or some other calamity may arise, and companies have no easy way of clawing back bonuses they have already given out.

At publicly traded companies, if performance-based bonuses are distributed and the company does not hit its targets, the company itself can face adverse tax consequences.

One solution, said Mr. Johnson, is to pay part of the annual bonus before Dec. 31, and then wait to pay the rest of it until after the new year, when the company has had a chance to go over the complete books more thoroughly.

Paying bonuses early can certainly impose administrative headaches.

Even though, for accounting reasons, companies usually know by December roughly how much money they're going to pay out over all, they usually have not yet determined how that bonus pool will be distributed. At bigger firms, the process for allocating bonuses takes about six weeks, according to James F. Reda, managing director at James F. Reda & Associates, a division of Gallagher Benefit Services.

Usually, accountants and tax lawyers advise their clients to defer as much compensation as possible until after the new year.

That's partly because there is a chance that their income will fall into a lower tax bracket the following year. Additionally, receiving income on Jan. 1 rather than Dec. 31 also means that they can hold on to their money longer before having to hand over some of it as taxes to the government. Income received on Dec. 31, 2012, is taxed by April 15, 2013; taxes on money received on Jan. 1, 2013, may not be payable in full until April 15, 2014 . The taxpayer can use that extra year to invest the money and earn a return on it.

Accountants' and lawyers' advice is different this year because tax rates are expected to rise on Jan. 1, particularly for those with higher incomes.

If tax rates for high earners return to their Clinton-era rates, as President Obama wants, the top marginal income tax rate would rise from 35 percent to 39.6 percent. That may not sound like a big jump, but when you're talking about large sums of money, the increase can be substantial.

A $1 million bonus taxed at the top marginal rate, for example, would incur an additional $46,000 in taxes ($396,000, instead of $350,000).

And that calculation factors in just one of the tax rates scheduled to rise at the end of the year. Earners in the top brackets are likely be hit with other tax increases in 2013, including the expiration of the payroll tax cut and a new Medicare surtax created by the Affordable Care Act.

Clients have been calling their tax and compensation lawyers about accelerating other forms of income, too. Ms. Olshan said she received a call from a client who expected to be fired next year and wanted to know about requesting severance early.

Compensation lawyers and consultants noted that companies have received “false alarms” about Washington's plans to raise taxes in the past, so companies may be dragging their feet about speeding up the bonus cycle this year.

“This is about the fourth time we've gone through this tax scare, where people say there's some catastrophic tax thing coming,” Mr. Johnson said. As a result, he thinks most firms will not revise their bonus calendars. “Some may regret it deeply in a few months, but I think most won't get around to it.”

Dropping the Ball on Financial Regulation

Simon Johnson is the Ronald A. Kurtz Professor of Entrepreneurship at the M.I.T. Sloan School of Management and co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”

With regard to financial reform, the outcome of the November election seems straightforward. At the presidential level, the too-big-to-fail banks bet heavily on Mitt Romney and lost; President Obama received relatively few contributions from the financial sector, in contrast to 2008. In Senate races, Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio demonstrated that it was possible to win not just without Wall Street money but against Wall Street money.

More broadly, this political shift coincides with and matches a significant change of views within the regulatory community. To pick these up, yo u need to listen carefully, but the signs are unmistakable.

The Federal Deposit Insurance Corporation is firmly in the hands of sensible people. The Federal Reserve governor Daniel Tarullo is making all the right noises, including about the need for a cap on the nondeposit liabilities of our largest banks. Even Bill Dudley, the president of the New York Fed and a former Goldman Sachs executive, now acknowledges that too-big-to-fail is still with us. If the New York Fed is getting past denial, we are making progress.

At the Treasury Department, however, the tone and the content of messages on financial reform sound increasingly discordant. Recent signals suggest that appeasing powerful players within the financial sector is still high on the agenda for Treasury Secretary Timothy Geithner.

See, for example, the recent decision to exempt foreign-exchange swaps and forwards from the rules that will apply to most other over-th e-counter derivative transactions. Read the response by Dennis Kelleher of Better Markets; he is exactly on target, as usual. I join him in recommending the reporting by Silla Brush of Bloomberg News on the issue.

The highest-profile issue remains the process to appoint a new chairman at the Securities and Exchange Commission. As anticipated in my post two weeks ago, Mary Schapiro announced on Monday that she would step down as chairwoman. Elisse Walter, already an S.E.C. commissioner, was immediately named as interim chairwoman â€" a step that many reformers saw as reasonable. This means that the president has some time to get a new chairman lined up; there is no need for a rushed decision.

The Treasury Department appears to have backed away from its earlier support for Mary Miller, and she is now reported to have withdrawn. She would have been a weak and inappropriate candidate, as I explained in my post last week.

The Treasury's new candidate is Sallie K rawcheck, a former executive in the financial services industry. The campaign to appoint Ms. Krawcheck is already in full swing, and she is currently visiting people on Capitol Hill. Ms. Krawcheck is known to be good on the need to reform money markets â€" a key issue for the S.E.C. going forward. She has also been critical of management in some of our largest banks, at least in what she says on Twitter.

This week she supported Charles Schwab's reform proposal for money market funds. It's surprising that a potential nominee for such a prominent policy position is allowed to tweet. But perhaps it is also helpful, as we know very little about what she would do as S.E.C. chairwoman.

Ms. Krawcheck, who held senior positions at Bank of America and Citigroup, is on the advisory board of Gold Bullion International â€" a company that makes it easy for investors to own gold and other precious metals. Perhaps her experience and current position mean she has a healthy skep ticism about the debt and equity currently on offer from very large banks.

But does she really understand how our financial system became so dangerous and what it would take to better protect investors? Ms. Krawcheck would be placed in charge of our principal markets regulator and made responsible for setting its agenda and answering to Congress. Yet she has never been a regulator or prosecutor; she has never sought to craft rules or dealt with Congress. What about her purely industry-based background suggests that she would be capable of marshaling the S.E.C.'s formidable staff to follow through on her tweets?

More broadly, what is Ms. Krawcheck's view on the reform agenda put forward in early October by Mr. Tarullo? Aside from her tweets and short comments, I have not seen any clear statement on policy priorities from her. Nor does her track record suggest which way she would go.

And whom would she hire as head of enforcement? The S.E.C. needs to get its game back. This organization is a distinguished safeguard of public interest that has fallen on hard times â€" mostly through deregulation, underfunding, industry capture and a revolving door. Continuing the turnaround begun under Ms. Schapiro will require expert skills and a strong vision. No one can be above the law â€" including the country's most powerful and best connected executives.

There is a huge political risk in this appointment. In terms of high-profile positions dealing with financial regulatory issues, the head of the S.E.C. ranks behind only the Fed chairman and the Treasury secretary.

Does President Obama want to make the same mistake at the S.E.C. that President George W. Bush made at the Federal Emergency Management Agency before Hurricane Katrina? Do his advisers want to wake up every morning worrying if an S.E.C. scandal or breakdown in competence or inappropriate wording will become what the second Obama term is remembered for?

Anyone g enuinely seeking to protect the president should want the strongest possible candidate â€" on his or her merits â€" for this position.

Ms. Schapiro helped stabilize the situation, but a great deal of work remains. Ms. Krawcheck's nomination would mostly be a way to make prominent people in the financial sector happy. Perhaps she would surprise them â€" and us â€" with real reform. But why play such games?

Some distinguished Americans are available to take the job of leading the S.E.C. I've written before about Neil Barofsky, Dennis Kelleher and Gary Gensler, the chairman of the Commodity Futures Trading Commission. I also heartily recommend Harvey J. Goldschmid, a former S.E.C. commissioner with an outstanding résumé on many fronts. (Disclosure: Mr. Goldschmid and I both serve in unpaid positions on the systemic risk council, founded by Sheila Bair.)

Ms. Bair would also be outstanding at the S.E.C. â€" although the country would be well served if she wer e to become our next Treasury secretary.

For a president serious about financial reform â€" including responsible policy and effective enforcement â€" the choice is simple. Nominate Ms. Bair as Treasury secretary and Mr. Barofsky, Mr. Goldschmid, Mr. Gensler or Mr. Kelleher as head of the S.E.C.

We need to restore confidence in all dimensions of our public markets. Financial markets are far too important to be left to the financiers.

The Growing Burden of Payroll Taxes

Owen Zidar, a doctoral student in economics at the University of California, Berkeley, was previously a staff economist at the Council of Economic Advisers and, in 2008-9, an analyst at Bain Capital Ventures.

Payroll taxes and corporate income taxes accounted for an equal share of federal tax revenue in 1969. By 2009, payroll taxes generated more than six times as much revenue. We've become reliant on payroll taxes, and a goal of a tax overhaul should be to reform and reduce them, permanently.

First, some background. The share of federal tax revenues coming from payroll taxes has doubled since the 1970s, to ab out two-fifths of revenue. The payroll tax, underwriting social insurance programs, nearly surpassed the individual income tax as the single largest source of federal tax revenue in 2009.

Source: Office of Management and Budget Historical Table 2.2

Since payroll taxes finance Social Security and part of Medicare, cost growth in these programs pressures policy makers to raise those taxes. In particular, pressure from the Social Security disability insurance program and Medicare Part A has been intensifying.

The number of disability recipients has increased nearly sixfold since 1970. Disability outlays exceeded revenues by roughly $34 billion in 2011. And costs are likel y to continue growing because shrinking labor market opportunities for noncollege-educated workers are likely to continue well past this recession. The Congressional Budget Office's long-run projections for the program support this conclusion.

Pressure on the payroll tax from Medicare Part A is even worse. Health cost growth has steadily outpaced inflation, and the pattern shows no sign of abating. Fundamental economic forces â€" such as Baumol's cost disease, which describes the phenomenon of rising costs in industries less conducive to automation â€" will most likely continue to increase health care costs steadily.

The primary argument for severing the link between these growing programs and the payroll taxes is that the tax is regressive: It uses a flat rate on income up to $110,100, does not apply to most income above that threshold and does not apply to nonlabor income, like capital gains. Because of this relatively regressive nature, payroll tax cuts tend t o be a more effective stimulus than typical income tax cuts â€" and thus are a more effective way for Washington to respond to recessions.

Despite these features, AARP and other groups often resist payroll tax cuts out of a fear that the cuts will undermine the future of the safety net (even though the cuts are fully paid for out of general revenue). Permanently breaking the link between payroll taxes and both disability and Medicare would allow the tax code to become more progressive â€" and do more to offset inequality â€" without creating political problems when the business cycle calls for fiscal stimulus.

Obviously, the government would need other revenue if it severed the link between payroll taxes and the safety-net programs. One option would be to limit tax breaks, as Congress and the Obama administration have recently discussed. Others include phasing in a carbon tax, raising top marginal rates slightly or overhauling the tax code to use a progressive co nsumption tax that encourages saving.

The country is almost certain to face higher costs for health care and for an aging work force whose skills are being outpaced by technology. But there is no reason those costs must be borne by a regressive tax vulnerable to recurring struggles over economic policy.

A Time for More Nations

Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

Catalonia, which includes Barcelona, has long been a part of Spain, but its peaceful residents increasingly talk about being an independent country again. In elections over the weekend, where independence was one of the most discussed campaign issues, a majority of offices were won by parties that support more Catalan independence, in one form or another.

An independent Catalonia would reinforce a worldwide trend. The world's economics and demography are changing, and economic theory predicts that national borders will change with them (see “The Size of Nations,” by Alberto Alesina and Enrico Spolaore or “A Theory of the Size and Shape o f Nations,” by David Friedman in The Journal of Political Economy ).

The number of countries has grown since World War II, especially since 1990. The Soviet Union broke into multiple nations. Czechoslovakia split into the Czech Republic and Slovakia; Yugoslavia dissolved.

In most cases, many citizens of the parts wanted independence from the larger whole. The large countries were often divided by language or ethnicity and were often held together by nondemocratic leadership. The new independent countries emerged as democracy took hold, or shortly after.

In a few instances, countries combined. East Germany and West Germany unified. North and South Vietnam became one when North Vietnam won the Vietnam War. North Yemen and South Yemen were unified. As their names suggest, they have some common language, culture and history, more so than many former Soviet republics did.

Catalonia has its own language, Catalan, and a long history. Under Franco, Spain suppressed many Catalan institutions. And labor was mobile in Spain during the Franco regime, with many Spanish-speakers moving to Catalonia, Spain's most prosperous region. The prevalence of Spanish in Catalonia, as well as the heavy hand of Franco, may have undercut an independence movement. But Franco's death in 1975 and the emergence of democracy in Spain did not foster an independent Catalonia.

New generations have been learning Catalan, however, and that may be tipping the balance toward independence.

Catalonia objects to the amount of taxes it pays Spain's central government, compared with the benefits it receives. One potential step would be to address that situation without full independence, by having Spain's central government “charge” Catalonia less for being part of Spain by providing tax breaks or more public services.

As governments and redistribution grow, richer regions find taxes to be increasingly burdenso me. With the cold war over, ethnically unique regions no longer perceive the same national security benefits of being part of a larger nation.

Catalonia's situation is worth watching, as it may hold lessons for Libya, Iraq and even the United States, where regions sometimes diverge in terms of culture, language and preferences for governing. A small nation can be established peacefully and may prove to have long-term benefits.

Student Loan Debt Rising, and Often Not Being Paid Back

Americans have been getting better at paying off their debt in the last year, with a glaring exception: student loans.

Total consumer debt fell again in the third quarter, according to the Federal Reserve Bank of New York's Quarterly Report on Household Debt and Credit. This figure has been falling for four years. As consumer debt has been falling, so have consumers' delinquency rates. As of Sept. 30, 8.9 percent of outstanding household debt was in some stage of delinquency, with 6.6 percent at least 90 days late.

Bucking this trend is student loans. Student loan debt has been growing every quarter since at least 2003, the earliest data included in the report. And delinquency rates look worse than previously believed.

Outstanding student loan balances totaled $956 billion as of the end of September, rising $42 billion from the previous quarter. About half of that increase is actually newly issued debt, and the other half comes from defaulted student loans that have been newly updated on credit reports this quarter.

The New York Fed calculates that 11 percent of student loans are now at least 90 days delinquent, with this rate now officially passing the “serious delinquency” rate for credit card debt for the first time.

That milestone may be misleading, though. The report says in a footnote that “these delinquency rates for student loans are likely to understate actual delinquency rates because almost half of these loans are currently in deferment or in grace periods and therefore temporarily not in the repayment cycle,” adding, “This implies that among loans in the repayment cycle delinquency rates are roughly twice as high.”

It' s worth mentioning, by the way, that student loan debt cannot be discharged in bankruptcy, while most other forms of debt can. One reason consumers have managed to shed so much debt is that lenders ended up writing off quite a bit after the financial crisis.

Despite Fiscal Shadow, Consumer Confidence Rises

Despite stagnant incomes and the threat of fiscal contraction scheduled for the end of the year, consumer confidence rose again in November, reaching its highest level since February 2008.

Source: The Conference Board, via Haver Analytics. Numbers are seasonally adjusted.

Consumer confidence has been rising for the last three months, and the latest pickup was driven by more buoyant expectations for the economy, as opposed to consumers' assessment of current conditions. In fact, for the last four years, consumers have been consistently more positive about the future of the economy than its present, which is the reverse of their attitudes for most of the expansion that preceded the financial crisis.

Consumers over 55 have shown an especially sharp gain in confidence in the last few months, although consumers of all ages are still less positive about the economy than they were before the recession began.

Source: The Conference Board, via Haver Analytics. Numbers are seasonally adjusted.

It's not clear why confidence is picking up in the face of scheduled tax increases and sharp cuts to federal spending, which could choke off all sorts of other economic activity. Perhaps Americans have faith that Congress will reach an agreement and avert a sharp fiscal tightening.

A firming job market and stronger home prices may also be encouraging more optimism about the economy.

As the Case-Shiller house price index showed Tuesday morning, prices have been rising on a year-over-year basis for four straight months. The gains are broad-based, too. Of the 20 cities whose housing prices are tracked each month, only two, Chicago and New York, fell on a year-over-year basis.

Businesses have appeared more shaken by the threat of the so-called “fiscal cliff.”

October orders for durable goods, also reported Tuesday, came in essentially flat. Declines in the transportation sector - motor vehicles, civilian aircraft and defense aircraft orders all fell - wiped out modest gains in other sectors. Shipments of manufactured durable goods fell in October.

Orders of capital goods excluding defense and aircraft (so-called “core” capital goods) rose by 1.7 percent, which was a relief after a slide this summer but still relatively anemic.

In addition to the threat of fiscal contraction, “downgraded earnings projections due in part to weaker overseas growth and recession in Europe offer businesses little incentive to expand capacity,” Paul Edelstein, the director of financial economics at IHS Global Insight, wrote in a note to clients.

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Tax Cuts, Tax Rates and Tax Shares

Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform â€" Why We Need It and What It Will Take.”

Last week, the Internal Revenue Service posted the latest individual income tax data for tax year 2010. Supporting the Republican worldview, the data show that the share of total income taxes paid by the rich increased; supporting the Democratic worldview, they show that the wealthy's share of total income increased more, leading to a decline in their average tax rate. Sorting through these competing facts is a bit like determining whether the glass is half-empty or half-full, but I'm going to try.

I will start with the top 1 percent of income taxpayers, who are unambiguously rich by any definition of the term. In 2010, this group included all tax filers with adjusted gross incomes above $369,691. Remember that A.G.I. excludes many forms of income, including benefits such as employer-provided health insurance, unrealized capital gains and interest on tax-exempt municipal bonds.

Internal Revenue Service

Conservatives like to contend that the increasing share of federal income taxes borne by the wealthy shows that they are carrying the rest of us on their backs, so to speak. Indeed, the percentage of all income taxes paid by the top 1 percent has risen to 37.4 percent from 33.2 percent in 2001. This necessarily means that the share of the bottom 99 percent has fallen.

The following table shows that in fact the share of total income taxes borne by those with lower incomes has indeed fallen. For example, the bottom 90 percent of tax filers now pay 29.4 percent of all income taxes, compared with 36.3 percent in 2001.
 

Internal Revenue Service

Liberals note that a key reason for this is that the incomes of most people outside the rich have stagnated or fallen. In 2001, it required an income of $23,187 in 1990 dollars to be in the top 50 percent of tax filers; in 2010, that income figure had fallen to $20,586. Concomitantly, the share of total income accruing to the bottom 50 percent fell to 11.7 percent in 2010 from 14.4 percent in 200 1.

Another key reason for the declining share of income taxes paid by the nonwealthy is that Republican tax policy since the 1970s has consciously aimed at reducing their tax burden.

The following chart from the conservative Tax Foundation illustrates how Republican-sponsored increases in the personal exemption and creation of the earned-income tax credit and child credit completely eliminates the income tax liability for a family of four with $45,000 of income.

Tax Foundation

The declining share of income taxes paid by the nonwealthy was at the root of Mitt Romney's charge that 47 percent of Americans are dependent on government. After the election, he attributed his loss to “gifts” that certain co nstituencies, “especially the African-American community, the Hispanic community and young people,” receive courtesy of taxpayers.

Needless to say, there are many problems with this grossly simplistic view of who gets government benefits and who pays for them.

It's undoubtedly the case that a great many of the elderly still think of themselves as taxpayers even though they may not have actually paid any income taxes in years. Nor do they view themselves as receiving gifts in the form of Social Security and Medicare benefits. They believe they paid for these benefits from taxes during their working lives and would resent being characterized as moochers.

Another problem is that when Republicans talk about the rising share of income taxes paid by the wealthy, I think they are implicitly assuming that the government is still paying for all its spending with taxes. But it's not; the federal government has run deficits since fiscal year 2002, to a large exten t because of tax cuts. According to the Congressional Budget Office, lower revenues have been responsible for about half the increase in the national debt since 2001, about half of which resulted from legislated tax cuts and half from slower-than-expected growth.

Congressional Budget Office

Across-the-board tax cuts financed with deficits will necessarily raise the share of taxes paid by those with upper incomes. Consider this example. The government raises $10 in taxes and it is divided among three taxpayers. Ms. Poor pays $1 (10 percent), Ms. Middle pays $3 (30 percent), and Ms. Rich pays $6 (60 percent). Now the government gives everyone a $1 tax cut and its revenues fall to $7. Ms. Poo r now pays nothing, Ms. Middle pays about the same percentage (29 percent), but Ms. Rich now pays 71 percent. Everyone received a tax cut, but the tax shares are now skewed much more toward the wealthy.

In a general sense, this is what has happened to the income tax and illustrates why it is possible for effective tax rates on everyone to fall and at the same time raise the share of taxes paid by the wealthy.

Household Income Stagnates, Again

Inflation-adjusted median annual household income was more or less flat in October, stuck at $51,378.

That figure comes from Sentier Research's analysis of the government's Current Population Survey data, which is charted below. Gray areas indicate periods of official recession (which economists define as when the economy is actively shrinking, as opposed to growing).

Source: Sentier Research. Gray areas indicate period of economic contraction.

Annual median household income has been circling around the $51,000 mark for about two years, even though the recession officially ended more than three years ago. In fact, October's media n household income measure was 4.7 percent lower than its counterpart of $53,937 in June 2009, the official end of the Great Recession. Labor market measures usually trail other economic indicators (like manufacturing orders or some other categories of business spending), but measures of the job market and workers' incomes have been particularly atrocious in this recovery.

As you can see in the chart, incomes were relatively stagnant during the last expansion, too, indicating that flat living standards may have deeper causes than just the most recent business cycle.

Awaiting Hints on the Fiscal Chill

Tuesday will bring two reports that may indicate how much of an effect the uncertainty over taxes and budget cuts is having on economic behavior.

Awaiting Hints on the Fiscal Chill

Summary for graphic goes here

Outlook Grim As India Prepares to Face England

Amit Dave/ReutersIndian batsmen Sachin Tendulkar, right, and Virender Sehwag, during a practice session in Ahmedabad, Gujarat, on Tuesday. The first test match between India and England starts Thursday in Ahmedabad.

As India prepares to take on England in what promises to be an exciting series of four tests at home starting Thursday, its frontline batsmen's brittle batting and lackluster form is a cause for concern, particularly after the retirement of Rahul Dravid and V.V.S. Laxman in quick succession this year.

The triumvirate of Sachin Tendulkar, Virender Sehwag and Gautam Gambhir, who are the mainstay of India's batting, have not done anything extraordinary, individually as well as collectively, for well over a year now, not even against the lowly New Zealand team in the recent two tests at Hyderabad and Bangalore.

For all his genius and experience, Tendulkar's inability to hold the innings together after Sehwag and Gambhir repeatedly failed to give good starts in all the four tests in England last year, and during another four on the subsequent tour of Australia in the 2011-12 season, was one of the main reasons why the Indian batting repeatedly failed. Consequently India suffered one humiliating defeat after another in all eight tests.

The truth is that Tendulkar, who has been playing international cricket since 1989, is more of a liability than an asset to the Indian team in the twilight of his otherwise phenomenal career. It was pathe tic, torturous even, to see this iconic batsman struggle for survival at the wicket, leave alone scoring runs, against the Kiwis. All he managed to score was 19, 17 and 27 runs in three outings. Worse still, he was clean-bowled on all the three occasions.

Gambhir recently boasted in an interview to the Press Trust of India that he and Sehwag are still the “world's best” opening pair. That may be, but their individual and combined contributions for well over a year now leave a lot to be desired.

An impressive start by openers usually has a positive bearing on the other batsmen who follow, but Sehwag and Gambhir have not had a good opening in recent times, and it has had a negative effect on India's middle-order, especially when Tendulkar is also no longer prolific.

“I don't expect any miracle from Tendulkar against England,” Kiran More, the former India wicketkeeper, said in an interview with India Ink. “He is a great batsman and he doesn't need to prove anything to anybody. It was just that he had one poor series against New Zealand. But you can't write him off. Not yet. He was pretty consistent in England and Australia. He may not have scored prodigiously by his own high standard, but he was always there with useful contributions when the chips were down.”

Is it time the Indian selectors replaced either Sehwag or Gambhir, or both? More does not think so. “This is a very crucial series, and India needs the experience of Sehwag and Gambhir,” he said. “No doubt they aren't in good form and are unable to give good starts to the Indian team for a bit too long now. But this isn't time to experiment.”

But if Sehwag and Gambhir fail against England, he said, the selectors should start looking for younger replacements. “You need to look at the future and build the Indian team accordingly,” he said. “And there are plenty of good young opening batsmen in domestic cricket. Some of them can be tried. Shikhar Dhawan may be given a chance. Murali Vijay, who is in good nick lately, can be given another opportunity to prove his worth again.”

The one experienced man who has been noticeably consistent with the bat is India's mercurial cricketer and captain, Mahendra Singh Dhoni, who made handsome contributions against New Zealand batting down the order, scoring 73, 62 and 48 not out. But then Dhoni is not a specialist batsman. He is principally a wicketkeeper, who has a definite role to play with the bat.

At a time when the experienced batsmen have individually and collectively let India down more often than not, it is the youngsters like Virat Kohli and Cheteshwar Pujara who have batted like seasoned campaigners. When the big guns failed to fire in Australia, it was Kohli who often tried his best to stem the rot, scoring India's only test hundred on the difficult tour â€" 116 in the first innings at Adelaide.

But he had probably saved his best for the tria ngular CB Series, between Australia, India and Sri Lanka.

In the all-important match against Sri Lanka at Bellerive Oval in Hobart, when India appeared to be inviting yet another humiliation chasing an improbable target of 321, Kohli had an astonishing innings of 133 (86 balls, 16 fours, 2 sixes) not out. Not only did India romp home but achieved the target with a good 13.2 overs to spare.

Kohli continued his good run with the bat against New Zealand and scored 58, 103 and 51 not out in the two tests. Pujara, who missed the tours of England and Australia because of injury, celebrated his return to test cricket with scores of 159, 9 and 48.

Though their performances were especially noteworthy because Tendulkar, Sehwag and Gambhir failed to make major contributions, Kohli and Pujara will be truly tested against England who, unlike New Zealand, is no pushover.

England is one of the world's toughest and top-ranked test teams, with some of the world's fine st fast bowlers in James Anderson, Stuart Broad and Tim Brensan, and a champion off-spinner in Graeme Swann. The Indian team won't be able to rely too much on the home-field advantage.

 

Leaked Report on Sri Lanka Critical of U.N.

“Sri Lanka's Killing Fields,” a documentary broadcast by Britain's Channel 4 News in 2011.

An internal review of how the United Nations handled the bloody final months of Sri Lanka's civil war in 2009, when as many as 40,000 civilians were killed, has concluded that the response was “a grave failure of the U.N.,” according to a leaked draft of the report.

The investigative panel, led by Charles Petrie, a former United Nations official, criticized what it called “a sustained and institutionalized reluctance” by staff members in Sri Lanka at the time “to stand up for the rights of the people they were mandated to assist.” In blunt language, the report's executive summary states that “many senior U.N. staff simply did not perceive the prevention of killing of civilians as their responsibility.”

The report, copies of which were given to the BBC and The New York Times, also found fault with the way the crisis was dealt with by senior United Nations officials in New York. “Decision-making across the U.N. was dominated by a culture of trade-offs â€" from the ground to U.N. headquarters,” the draft report states. Officials chose “not to speak up” about “broken commitments and violations of international law” by both the Sri Lankan government and Tamil Tiger rebels because that “was seen as the only way to increase U.N. humanitarian access” to victims of the conflict.

The report does note that “the last phase of the conflict in Sri Lanka presented a major challenge” to the international body.

The U.N. struggled to exert influence on the Government which, with the effective acquiescence of a post-9/11 world order, was determined to defeat militarily an or ganization designated as terrorist. Some have argued that many deaths could have been averted had the Security Council and the Secretariat, backed by the U.N. country team, spoken out loudly early on, notably by publicizing the casualty numbers. Others say that the question is less whether the U.N. should assume responsibility for the tragedy, but more whether it did everything it could to assist the victims.

The internal review panel was established by Ban Ki-moon, the United Nations secretary general. A spokesman for Mr. Ban refused to comment on the leaked draft on Tuesday, but told reporters that the secretary general planned to meet Mr. Petrie on Wednesday morning and that the final version of the report would be made public soon.

Lyse Doucet, the chief international correspondent for BBC News who obtained the leaked draft, reported on Tuesday that United Nations sources said that the “brief executive summary, which sets out the panel's conclu sions in stark terms, has been removed,” from the final report.

With China and India Ravenous for Energy, Coal's Future Seems Assured

Gilles Sabrie for The New York Times

Coal piles behind a yurt in Gobi, Mongolia. Coal remains a critical component of the world's energy supply, despite its bad image.

RICHMOND, Va. - Last summer, nearly half of India's sweltering population suddenly found the electricity shut off. Air-conditioners whirred to a stop. Refrigerators ceased cooling. The culprits were outmoded power generation stations and a creaky electricity transmission grid.

But another problem stood out. India relies on coal for 55 percent of its electric power and struggles to keep enough on hand.

Coal remains a critical component of the world's energy supply despite its bad image. In China, demand for coal in 2010 resulted in a traffic jam 75 miles long caused by more than 10,000 trucks carrying supplies from Inner Mongolia. India is increasing coal imports.

So is Europe, as it takes advantage of lower coal prices in the United States. Higher-priced natural gas on the Continent is creating demand for more coal imports from the United States, where coal is taking a drubbing from less expensive natural gas.

Coal may seem an odd contender in a world where promising renewable energy sources like solar, wind and hydroelectric power are attracting attention. Anathema to environmentalists because it creates so much pollution, coal still has the undeniable advantages of being widely available and easy to ship and burn.

The biggest attraction, however, is low cost. By many estimates, including that of Li Junfeng, longtime director general of the National Development and Reform Commission of China, burning coal still costs about one-third as much as using renewable energy like wind or solar.

Coal is not subject to the vagaries of windless or sunless days, and can easily meet base-load demands of electricity consumers without interruption. So can nuclear power, but the nuclear industry is still reeling from the March 2011 disaster at the Fukushima Daiichi power plant in Japan. Countries like Germany have turned away from nuclear reactors.

Global demand for coal is expected to grow to 8.9 billion tons by 2016 from 7.9 billion tons this year, with the bulk of new demand - about 700 million tons - coming from China, according to a Peabody Energy study. China is expected to add 240 gigawatts, the equivalent of adding about 160 new coal-fired plants to the 620 operating now, within four years. During that period, India will add an additional 70 gigawatts through more than 46 plants.

“If you poke your head outside of the U.S., coal-fired plants are being built left and right,” said William L. Burns, an energy analyst with Johnson Rice in New Orleans. “Coal is still the cheapest fuel source.”

Besides strong demand for thermal coal, which is burned in power plants, use of metallurgical coal or coking coal, used in blast furnaces, is also expected to more than double in China, to about 1.7 billion metric tons by 2016, as the country's steel mills churn out more steel for automobiles, skyscrapers and export goods, the Peabody study says.

Coking coal will be increasingly in demand in other steel centers like Brazil and India, pushing coal companies to scrounge for new reserves in places like Botswana, Mongolia and Mozambique.

In all, coal use is expected to increase 50 percent by 2035, said Milton Catelin, chief executive of the World Coal Association in London.

“Last year, coal represented 30 percent of world energy, and that's the highest share it has had since 1969,” he said.

Within a year or two, coal will surpass oil as the planet's primary fuel, Mr. Catelin predicted.

For now, coal seems to be sidestepping a serious potential impediment to its use: international accords restricting greenhouse gas emissions. So far, such agreements to prevent climate change have been ineffective.

China plans to put carbon emission reducing equipment on new plants. But China and other big coal producers still have a long way to go in matters like mine safety. On average, about 2,500 Chinese coal miners die in accidents every year.

On Aug. 29, for instance, a blast at the Xiaojiawan mine in Sichuan Province killed more than 40 miners. Officials blamed lax safety and overcrowding in the shafts.

Industry officials insist that safety will improve as large Chinese coal companies like the Shenhua Group buy out smaller mines, and new technologies develop that can detect dangerous methane gas and automatically shut down mines.

Nowhere are the controversies surrounding coal more pronounced than in the United States. Coal became an important issue in the presidential campaign, with the Republican nominee, Mitt Romney, accusing President Barack Obama of being anti-coal.

The American coal industry says Mr. Obama is waging a “war on coal” in response to his proposed regulation of air pollution and surface mining in mountain areas.

This article has been revised to reflect the following correction:

Correction: November 12, 2012

An earlier version of this article included an incorrect middle initial for the author. The initial (which he does not use in his byline) is A, not G.

A version of this special report appeared in print on November 13, 2012, on page B6 of the New York edition with the headline: With China and India Ravenous for Energy, Coal's Future Seems Assured.

From Tamil Nadu, Another Viral Hit Is Born

“Nenjukulle,” a Tamil song composed by the Oscar-winning musician A.R. Rahman, seems poised to be this season's breakout social media hit, days after it was first broadcast on Nov. 3 during “Unplugged,” a program on MTV India.

Sung by 24-year-old Shakthisree Gopalan, the mellifluous song features in the Tamil film “Kadal,” which is directed and produced by Mani Ratnam and is slated for a December release.

The lyrics were penned by the Tamil poet and lyricist Vairamuthu. The opening lines of the song roughly translate to:

In my heart
I've tied you

In my heart
I've tied you
I don't know in which direction my day rose?

You gave me a sweet glance
And this heart of mine became a mirror glazed by water

A five-minute video posted on the MTV India Web site, featuring Ms. Gopa lan and Mr. Rahman, accompanied by an orchestra, was viewed over 139,000 times by Monday evening and received 44,000 likes on Facebook.

Ms. Gopalan, a relative newcomer, has also co-sung the title song of the Bollywood film “Jab Tak Hai Jaan,” starring Shah Rukh Khan, which comes out Tuesday.

The fast-growing popularity of “Nenjukulle” is reminiscent of the success of “Why This Kolaveri Di” last year, a Tamil song interlaced with bits of English, which ultimately became an international sensation. Whether an all-Tamil song can create the same magic remains to be seen.

Happy Diwali!

Rajesh Kumar Singh/Associated PressDiwali, the Hindu festival of lights, is a public holiday in the country. 

Image of the Day: Nov.12

Manish Swarup/Associated PressAfghanistan President Hamid Karzai met with Congress Party President Sonia Gandhi during his visit to New Delhi. 

Fireworks Safety Tips for Diwali

Piyal Adhikary/European Pressphoto AgencyA you boy packing sparklers at a factory in Saradapalli village, north of Kolkata, in West Bengal.

Diwali, the Hindu festival of lights, is also celebrated with plenty of sound - in the form of fireworks. The noise tends to divide people into two groups: those who say they can't stand them, and those who can't imagine Diwali without them.

For the latter group, here's some tips based on advice from The National Council on Fireworks Safety and the U.S. Consumer Product Safety Commission, two consumer groups based in Washington, D.C., and India's Insurance Regulatory and D evelopment Authority:

Always keep a bucket of water handy.

Never allow young children to ignite or play with fireworks. Even sparklers are dangerous, as they can reach temperatures of 2,000 degrees Fahrenheit (1,093 Celsius), hot enough to melt some metals.

Don't relight a “dud” firework. Soak it in your bucket of water instead.

Have a “designated shooter,” someone who is not drinking alcohol at all.

The “shooter” should wear safety glasses, and the audience should stay a safe distance away.

Never light more than one firework at a time.

Never point fireworks at another person.

Never place any part of your body directly over a fireworks device when lighting the fuse.

Back up to a safe distance immediately after lighting fireworks.

Never take unnecessary risks while lighting fireworks â€" don't show off.

Don't wear loose, long or dangly clothing, and avoid wearing silk or nylon, both of which are highly flammable.

And, of course, only light fireworks outside.

The promotion of safety tips by consumer groups and fireworks manufacturers' associations in the United States, like the American Pyrotechnics Association, appears to have paid off: America's consumption of fireworks grew almost tenfold between 1976 and 2007, to 265.5 million pounds. But injuries, as measured per 100,000 pounds of consumption, have decreased by 90 percent, the American Pyrotechnics group reports.

In 2011, nearly 10,000 people in the United States were injured by fireworks, the U.S. Consumer Safety Product Commission reported, and four were killed. While figures on the consumption of fireworks in India aren't readily available, the production and use of fireworks have become so dangerous that various charities encourage people to boycott them altogether. Dozens were killed this fall at an explosion at a firework factory in Tamil Nadu alone.

Fireworks Safety Tips for Diwali

Piyal Adhikary/European Pressphoto AgencyA you boy packing sparklers at a factory in Saradapalli village, north of Kolkata, in West Bengal.

Diwali, the Hindu festival of lights, is also celebrated with plenty of sound - in the form of fireworks. The noise tends to divide people into two groups: those who say they can't stand them, and those who can't imagine Diwali without them.

For the latter group, here's some tips based on advice from The National Council on Fireworks Safety and the U.S. Consumer Product Safety Commission, two consumer groups based in Washington, D.C., and India's Insurance Regulatory and D evelopment Authority:

Always keep a bucket of water handy.

Never allow young children to ignite or play with fireworks. Even sparklers are dangerous, as they can reach temperatures of 2,000 degrees Fahrenheit (1,093 Celsius), hot enough to melt some metals.

Don't relight a “dud” firework. Soak it in your bucket of water instead.

Have a “designated shooter,” someone who is not drinking alcohol at all.

The “shooter” should wear safety glasses, and the audience should stay a safe distance away.

Never light more than one firework at a time.

Never point fireworks at another person.

Never place any part of your body directly over a fireworks device when lighting the fuse.

Back up to a safe distance immediately after lighting fireworks.

Never take unnecessary risks while lighting fireworks â€" don't show off.

Don't wear loose, long or dangly clothing, and avoid wearing silk or nylon, both of which are highly flammable.

And, of course, only light fireworks outside.

The promotion of safety tips by consumer groups and fireworks manufacturers' associations in the United States, like the American Pyrotechnics Association, appears to have paid off: America's consumption of fireworks grew almost tenfold between 1976 and 2007, to 265.5 million pounds. But injuries, as measured per 100,000 pounds of consumption, have decreased by 90 percent, the American Pyrotechnics group reports.

In 2011, nearly 10,000 people in the United States were injured by fireworks, the U.S. Consumer Safety Product Commission reported, and four were killed. While figures on the consumption of fireworks in India aren't readily available, the production and use of fireworks have become so dangerous that various charities encourage people to boycott them altogether. Dozens were killed this fall at an explosion at a firework factory in Tamil Nadu alone.

From India, a \'Lad Mag\' That\'s the Opposite of Macho

MAVAIndia Web siteThe cover of the Diwali edition of Purush Spandana, a Marathi language magazine.

This Diwali, while boys set off firecrackers and aunties light diyas and lanterns, Harish Sadani, looking rumpled as would any editor/publisher nearing a deadline, finally finds himself able to breathe. That's because Mr. Sadani, who runs a nongovernmental organization in Mumbai known as MAVA (Men Against Violence & Abuse), has just printed off the final pages of Purush Spandana, an annual magazine, or ank, printed especially for Diwali.

The Maharashtrian tradition of giving anks at Diwali, a major gift-giving holiday, goes back just over a century. But of the estimated 400 anks printed each fall, only Purush Spandana, which translates roughly to “Male Vibrations,” speaks directly to men, although not through scantily clad cover models, a distinction that sets it apart from other anks in the shop.

The goal of the periodical, a collection of articles, short stories and poems penned in Marathi by Indian authors from around the state, is to get people to think.“We wanted to create a safe, nonthreatening space to address issues of masculinity in a contemporary context,” said Mr. Sadani. “Now readers can read a story about a man who has overcome patriarchy in his own life, and ask himself, ‘If he can question his outlook, why not me?' ”

About 35 to 40 percent of Purush Spandana will be purchased by women, who hope that by casually leaving a copy around the house, their husbands, fathers-in-law or sons may give it a glance. (This year's 96-page edition will be available for 90 rupees ($1.65) in Maharashtrian bookstores through December.)

Now in its 17th year, the magazine will explore in its latest edition the concept of family, as well as male-female relationships, a theme intended to encourage readers to “move past the stereotypical thing, beyond blood, kinship and wealth,” as Mr. Sadani puts it, and “to consider family in a new way.” Inside, an engineer writes of finding a brotherly connection with a fellow orphan and outcast, who later turns out to be a gigolo. Another man describes his role as one half of a DINK, or “Double Income No Kids” family, an increasingly common family unit in 21st century India.

Courtesy of Men Against Violence and AbuseHarish Sadani, the editor of Purush Spandana, a Marathi language magazine, holding the latest edition, published for Diwali.

An elderly woman, unwanted by her father, recalls being rescued as an infant by her grandfather; now with two grown sons living in the United States, she compares the relationships with all the different men in her life. In Mumbai's red-light district, a journalist recalls a lonely child playing with a one-rupee coin while his mother entertains clients upstairs; a different writer reports on the ambiguity of familial relationships in India's transgender community, outcasts typically dismissed from the accepted family system.

“Family is a relationship, but doesn't have to take place in the traditional sense,” said Ravindra Rukmini Pandharinath, co-editor of Purush Spandana, explaining that this year's theme was about finding ways to humanize the family system, making space for groups like sex workers and prostitutes that are usually excluded. “Everyone needs some sort of emotional support,” he said. “Can't family from different castes come together? Can't family go beyond property?”

Past issues have explored the intricacies of friendship and caste; last year's ank examined sexuality, with the image of a half-male, half-female deity dancing on the cover â€" “like a yin and yang, since everyone shares masculine and feminine traits,” explained Mr. Sadani.

That same year, female writers were invited to contribute for the first time. “Sexuality being a core topic that touches everyone, it was important to see what women think,” Mr. Sadani recalled, noting that the female authors, who come from a diversity of professional fields and backgrounds, as do the male contributors, have added a valuable perspective over the past two years.

Next year's theme is up in the air, but Mr. Sadani said he hoped to explore religion and governance in future issues, specifically the restrictions they impose on women.

This year's issue has achieved another critical checkpoint, as it is the first year Mr. Sadani has been able to cover production costs and pay all the writers without dipping into his own pockets, thanks to the support of high-profile advertisers like GSK, the Aditya Birla Group, HDFC, Tata, IDBI and Bank of Baroda. Mr. Sadani spends six months every year on the magazine, editing, pitching advertisers and printing around 1,500 copies for distribution. From 1996-2006, the magazine was co-produced in partnership with Purush Uvach, or “Men Speak,” a Pune-based men's group that helped shoulder the brunt of production.

In 2007, MAVA and Purush Uvach also published selected excerpts of Purush Spandana into an English book, a collection titled “Breaking the Moulds.” Three years later, the pair brought out a second collection in Marathi, called “Prasha Purushbhanache,” which translates roughly to “Issues of Male Consciousness.”

Meanwhile, the ank earns steady praise from local literary bodies, usually winning one or two awards each year for content, editing or the uniqueness of the concept itself, all while building on the state's long legacy of progressive literature and social reform. This year, Mr. Sadani said he hoped Purush Spandana might also win an award for its cover, a freehand drawing of an unconventional family (in this case, baby birds in a nest) against a much larger world, where family comes and goes but always comes home, inspired by the bright colors of the rainbow, the symbol of gay pride.

“Maharashtra has a long history of social reformers and leaders who have fought for women's equality,” said Mr. Pandharinath. “Not because they were looking at women as objects of sympathy, but because they called it a human rights issue,” he said, referring to well-known Maharashtrian reformers like Jyotiba Phule, a pioneer for women's education who opened India's first school for girls in 1848, and B.R. Ambedkar, who fought for women's right to vote.

Thus, MAVA may be India's first official “men's group,” but it's also just the latest band of Maharashtrian men who have fought, alongside women, for gender equality, chipping away at the vast patriarchy that affects every member of Indian society.

“Emancipation isn't just a women's issue,” said Mr. Pandharinath. Patriarchy also oppresses men by making them unable to discuss their feelings without feeling unmanly or weak, he said.

“Women are very open and can discuss these matters, but men don't have the vocabulary,” he said. “They just don't know how to talk about these issues. This is about giving men a voice, helping them to speak. We wanted to create a space for men to talk in an open manner.”

Newswallah: Long Reads Edition

ReutersA magazine stand on a railway platform in Mumbai.

A bearded, grinning Rahul Gandhi, the heir apparent of the ruling party in India, graces the latest cover of The Week. The cabinet reshuffle may not have worked according to his plan, the magazine tells us, but he has a blueprint for 2014.

The story says that Mr. Gandhi, who is the general secretary of the governing Indian National Congress, has the responsibility of setting the tone and pace for the party's “battle moves” for the general elections scheduled for 2014 but which may take place earlier.

The article delves into a visit by Mr. Gandhi to Prime Mini ster Manmohan Singh's house on Oct. 17.

The meeting on October 17 highlighted Rahul's footprint on key issues in both the government and the party. The meeting put the final touches, said a party leader, on launching the first stage of an ambitious GenNext plan. A plan that would “significantly recharge the inner dynamics of the government and the party in the 18-month run-up to the next general elections.”

The more crucial Stage II would be rolled out either in early November or just after Diwali, and officially anoint Rahul as working president or secretary-general. It would give him complete power on all important appointments and decision-making, powers equalled only by the Congress chief.

Tehelka magazine makes a case for why the chief minister of Gujarat, Narendra Modi, is facing his toughest election battle yet. The story, entitled “The Iron Man begins to rust,” says that many communities aren't likely to vote for him .

Here's an interesting anecdote the magazine shares about Mr. Modi's address to a meeting of senior party members:

Seated in the first few rows was an MP (member of Parliament) from the state known for his opposition to Modi. As the chief minister rose to speak, the MP whispered to the person next to him that Modi would cry while delivering his speech. The news spread across the room, whisper to whisper. Some laughed it off; others waited, curious to know if the prediction would come true.

Modi did not disappoint; he recollected a quote of Swami Vivekananda and a tear dropped from his right eye. As if on cue, the cameras zoomed in on him as he wiped his eye with a linen kerchief. The stunned neighbour turned searchingly towards the MP. The latter laughed. “In Gujarat,” he said, “our seniors, including the likes of Ashok Bhatt, have resorted to the same tactic when they seemed to have been losing ground among their own men.”

The magazine notes that although opinion polls predict a win for Mr. Modi, some factors in Gujarat point to “the unpredictable nature of politics” and concludes that a different picture may emerge.

Open magazine has the Bollywood beat covered with a story (only in print for now) on a reported rift between Shah Rukh Khan and Ajay Devgn. The two actors who work in the Hindi film industry, also known as Bollywood, are starring in movies slated to be released on the Hindu festival of Diwali, which is Tuesday.

“Both stars have gone on record saying they have no mutual enmity and this is just a fight between two production houses,” the magazine says. “But theories abound of the two middle-aged stars preferring to kiss a frog than shake hands with each other.”

A legal tussle between the producers of the two films has ensued and the magazine asks “Is there a bigger, personal war being fought here?”

Stirring the Pot and Striking Fear in India

NEW DELHI

Arvind Kejriwal, center, has become an unlikely bomb thrower in Indian politics.

HUNDREDS of reporters stood waiting, everyone expecting a helping of scandal, and Arvind Kejriwal did not disappoint. He pushed past the television cameras, smiling slyly in his white Gandhian cap, and took a seat on the podium. The crowd pressed forward, drawn by the question now shaking India's political establishment: Who will Arvind go after next?

Slight and bespectacled, with a neatly trimmed mustache, Mr. Kejriwal, 44, could be mistaken for a bookkeeper, rather than what he has become - the unlikely bomb thrower of Indian politics. His recent appearance was one of his staged media spectacles, in which he has produced documents and leveled corruption charges at some of India's most powerful political figures. Corruption, he argues, corrodes all the political parties in a fundamentally compromised system.

His solution? The formation of a new political party, in time for national elections in 2014.

“We hope that the people of this country will be able to do something in 2014,” Mr. Kejriwal said.

That Mr. Kejriwal is now one of India's most powerful figures represents a strikingly swift turnaround. Only months ago, conventional wisdom held that he was finished politically. He had been the mastermind of the huge anticorruption movement that last year shook the country - but had then seemed to miscalculate.

First, the movement fizzled. Then, earlier this year, his alliance shattered with Anna Hazare, the hunger striker and symbol of the movement: Mr. Hazare unexpectedly balked over plans to form a political party.

Politicos snickered that Mr. Kejriwal's party, without Mr. Hazare, would be dead before it was born. Mr. Kejriwal, the backstage manager, would now be the public face, which raised a question: Would ordinary Indians rally behind a party whose public draw was a wiry, intense former tax examiner? That remains to be seen, but no one is snickering at Mr. Kejriwal any longer.

Instead, he is feared. He has accused Robert Vadra, the son-in-law of Sonia Gandhi, the country's most powerful politician, of reaping millions in improper real estate deals. He has delved into the business dealings of Nitin Gadkari, leader of the main opposition party. He has alleged improprieties in a charity for the handicapped run by the family of Salman Khurshid, the country's new foreign minister - prompting a barely veiled threat from Mr. Khurshid.

In some instances, he is merely resurrecting and amplifying existing accusations. Yet, through it all, Mr. Kejriwal has steadily pushed his simple, if radical, message: India's democracy, the largest in the world, does not merely need reform. India needs a revolution.

IT is Sunday night, three days after Mr. Kejriwal's news conference on Oct. 25. His target that day was Reliance Industries Ltd., India's most powerful corporation, which he accused of exerting political influence to bilk billions of dollars on natural gas contracts. (On Friday, Mr. Kejriwal held another news conference, this time accusing Mukesh Ambani, the owner of Reliance, and others of illegally stashing money overseas.)

Reliance has denied the charges - as have all of his targets - but Mr. Kejriwal seemed pleased. The establishment has been rattled.

Now Mr. Kejriwal sat inside a cramped conference room of his headquarters, in a small house at the edge of the capital, beside a dingy slum. He was engaged in a ritual of Indian politics: the public audience. One man had traveled hundreds of miles to pledge his support. Another unexpectedly started singing a tribute song. A father and mother presented their 10-year-old son as a future foot soldier in Mr. Kejriwal's efforts.

“After seeing you,” the boy's mother said, “I have the courage that now we can raise our voices.”

Mr. Kejriwal grew up in the city of Hisar, in the northern state of Haryana, the son of an engineer. Like many ambitious Indians, his parents wanted him to become a doctor or an engineer, and the young Mr. Kejriwal studied obsessively to gain entrance to India's most prestigious engineering school. After graduation, he worked for three years as a mechanical engineer before testing into India's elite civil service as a tax examiner.

It would change his life. He met his wife, another tax examiner, but also found himself confronted with rampant bribe-taking. “There was corruption at every stage,” Mr. Kejriwal recalled.

Hari Kumar contributed reporting from New Delhi.

A version of this article appeared in print on November 10, 2012, on page A6 of the New York edition with the headline: Stirring the Pot and Striking Fear in India.