coming up -- the taxes we pay, are they fair and effective? >> it's a matter of sharing the burdens of a free society and a good society. that's, morally speaking, what taxes are about. and micro-lending. it was designed to help the poor start their own businesses and become self-sufficient. but, in india, something has gone wrong.

welcome. i'm bob abernethy. it's good to have you with us. as anti-government protests continue to build in egypt and other parts of the muslim world, more than 2,000 arab scholars and activists issued an urgent appeal for human rights and democracy. the group's statement said any political reforms must include respect for freedom, including the freedom of religion. and they urged more dialogue between islamists and secularists. the diverse coalition included prominent activists from more th 20 nations. >> meanwhile, a report released this week by the pew forum on religion and public life says the number of muslims in the world will rise at a faster rate than other groups over the next 20 years. the muslim population worldwide is expected to reach 2.2 billion

in 2030, up from 1.6 billion today. in the u.s., the number of muslims is expected to double in the next 20 years to more than 6 million. other findings -- pakistan will replace indonesia as home tthe world's largest sli opulation. and in some european countries, including france and belgium, the muslim population will surpass 10%. >> president obama explicitly singled out u.s. muslims in his state of the union address tuesday, saying they are part of the american family. throughout his speech, the president called for a new era of cooperation. several times, he noted the nation's religious diversity. >> we believe that in a country where every race and faith and poinof vw can be found, we are still bound together as one people that we share common hopes and a common creed. >> our managing editor kim lawton has been following

religious reaction to the president's address. kim? >> i actually moderated a conversation for our website with religious people giving their reactions to the address. i've heard from and talked to many others, and a lot of their reaction did split in predictable partisan lines. those who support the president were more positive, those who don't, weren't. that was predictable. but onthinthat struck me w among conservatives and libels i heard disappointment that there wasn't more attention on the poor. the president never actually said the poor but when he was talking about all of the budget problems and possible cuts, he did mention he didn't want to do that on the backs of the most vulnerable in the nation. but this is an area that a lot of faith-based groups are concerned about when we're talking about making big cuts and dealing with that. how is that going to affect the poor and marginalized? and so those are going to be some big battles coming. >> the least of these. >> exactly. >> and what about the language? >> well, i heard some disappointment from many fronts.

again both liberals and conservatives, that the president didn't use more moral language, spiritual and moral terms, even when he was talking about some of the problems facing the nation, he didn't say it's the right thing to do to balance the budget or to be accountable or responsible for your money. he didn't talk about that when he was talking about clean energy. he didn't say caring for the environment, which is language a lot of faith groups like to hear. some people say, well, this is is a state the union addre, it's a gislative package and hat'not the ple fotha kind of los angeles. certainly the president used a lot of theological language in his tucson speech, but for many faith people they like to hear that kind of language in every speech, and they did find that missing. >> and beyond language, important as that is, is a kind of point of view. yes, we need a lot more attention to math and science, but no less attention to poetry

and preaching and art. all of the arts, and all of the hugh humanities part of it. >> well, a lot of faith communities do talk about some of those intangible things, what makes america great, is it just economy or military? is there something else? something deeper? something that more perhaps reflects the soul of the nation. and i do think that, for a lot of faith-based groups, they think that those kinds of things should be included in a state of the union. >> more than what just can be measured. kim lawton, many thanks. >> again, you can watch kim's discussion of the speech with a panel of religious analysts on our website. >> during the state of the union message, the president also called on congress to simplify the nation's tax system and, as he put it, "get rid of the loopholes. level the playing field." in theory at least, everyone wants a tax code that is fair and that raises needed funds effectively. but designing tax reform also invites a collision between the

different values in society. what's fair to some is unfair to others. and some of the tax reforms that are being proposed hit very ose home. tim brien has our special report. >> reporter: there are some things the government must do, and the first reason for taxes is to pay for them. beyond that, there is wide debate over how taxes can be efficient and fair, and what kind of society they should promote. >> people on the left think that the tax code is not nearly redistributive enough, that the rich are really getting away with murder. people on the right think that it's not the job of government to be redistributing income and that the tax code we havis too progressive. >> reporter: greg mankiw was chairman of the council of economic advisers in the second bush administration. >> it's a difference of values, of what you think government should be in coming to any sort of tax reform, those different values are going to collide, and there's no easy way to sort of reconcile these very different philosophical positions about what the scope

of government should be. >> how should income and wealth and opportunities and the good things in life be distributed? >> reporter: the collision of the competing views of the role of government is the gift for a very popular course at harvard taught by michael sandel, a professor and political philosopher. >> the main purpose of a tax system is to raise revenue for the common good, for the public good. that's its purpose. but it has to do so in a way that is fair, that involves shared sacrifice, because really it's a matter of sharing the burdens of a free society and a good society. that's, morally speaking, what taxes are about. so unless a tax system meets the test of fairness, none of its other advantages really matter. >> for peter wehner, a former deputy assistant to president george w. bush, the issue is freedom. >> this country was founded on liberty. it wasn't founded on income

equality. and there is a certain view, which i subscribe to, which says that people ought to be able to keep much or most of what they earn, and to have the government in the business of taking it and deciding how it, the government, will spend it rather than youas an individual, i think is flawed, and i think it's contrary to much of the american tradition, and i happen not to think that's consistent with ethical or moral or religious traditions as well. >> but according to michael sandel, fairness-"sharing the burdens of a free and good society"-may compel a significant redistribution of wealth. >> some people do work harder than others, but what's reflected in the vast income inequalities that wve seen in ecenyears isot hd wok primarily. school teachers work hard, bus

drivers work hard, kindergarten teachers, day care workers, they work hard. do they work less hard than hedge fund managers and wall street bankers, who reap hundreds and thousands of times of what they do in the market economy? most of the wage differences, most of the income differences, have very little to do with differences in effort. most of them have tdo with supply and demand, and with the qualities that our society happens to value, and a lot of this is no doing of the people who are lucky enough to have those talents and those abilities to wind up on top. and if that's true, then it seems to me there is an obligation for those who are affluent, those who succeed under this system, to share their bounty with those, who

through no fault of their own, are less well off. >reporter:? alabama, which has its share of "less well-off," families falling below the poverty level still pay income taxes and a hefty 9% tax on groceries, while many wealthy property owners pay next to nothing in property taxes. schools suffer, and some families find it even harder, because of taxes, to even put food on the table. the alabama legislature is composed almost entirely of christi christians. but to one critic the state's tax policy stand christian values on their head. >> the moral principles of judeo-christian ethics demand that our taxes raise a level of revenue embracing the reasonable opportunity of all and that the burden be allocated in a moderately progressive way. >> reporter: susan hamil is seminary trained, a united methodist, a tax attorney, and a law professor at the university of alabama, and she's made a name for herself crusading for tax

reform in alabama based on judeo christian ethics, the bible. >> the bible, first and foremost, absolutely forbids oppression, this is where i got started with this in alabama, forbids oppression. what is oppression? oppression is taking a person who's already down, who is struggling, who is vulnerable and making their situation worse, actively doing so. >> reporter: the idea that those who write our tax laws should be in any way guided by religious beliefs has been greeted with a degree of skepticism by some leading economists, like greg mankiw. >> i don't think one can go straight from any sort of religious view to what an optimal tax system looks le, but in terms of fairness and what's the role for government, sure, i think all of our values come into play. >> reporter: there's no debate, tax law should be fair. but how in a pluralistic society such as ours, do we even define the word "fair"?

and assuming we can define it, how far should the government go using tax dollars to promote fairness? >> the aim of tax policy is to generate economic growth. a rising tide lifts all boats. i don't think that, as a gener propition, using tax policy to create fairness or equality works. to take money from the rich, money that they have earned because they have worked hard, is not by itself just, and again, if you take money from the rich beyond a certain point you're going to create disincentives for wealth creators, and that's going to have a huge effect on the poor as well. >> reporter: one remedy, championed by steve forbes in his run for the presidency in 1996 is a flat tax, 17% across the board, scrapping the current, complicated and loophole-laden irs code. the flat tax may have

antecedents in the religious tradition of tithing, where each person gives the same percentage regardless of income. >> well, i think a flat tax would for sure be more efficient, and i think the strongest argument in favor of a flat tax is the efficiency. >> reporter: many economists, like harvard's greg mankiw, say government should rely less on taxing income and more on a value-added tax on consumer goods, a form of flat tax found in much of europe. >> a consumption tax rather income tax. it does not tax savings. if i earn money, put in the bank and don't spend it, it doesn't get taxed until i take and out it spend it on whatever i buy. consumption is better basis for taxation than income, consumptions enjoying, and saving is a part of economic growth. if we exempt saving until later consumed it's going to promote economic growth. i think there's strong case to be made for using consumption as the basis of taxation.

>> if, however, sacrifices are to be shared equally, some adjustment would have to be made for those who have little money at all and are hard pressed to cover even the most basic necessities. our tax code may be the best measure of what kind of a people we are and what kind of a country we have created. the late american philosopher john rawls defined a just society as one you would want to live in, even if you did not know what your place in it would be, whether you'd be rich or poor, male or female, or what your race or i.q. would be. in his course at harvard, professor sandel also questions whether a country committed to equal opportunity should allow the wealthy to pass on their vast fortunes to their children and grandchildren. >> if we believe that everyone should have an equal chance to work hard and aspire and succeed, then it's very difficult to justify that children of wealthy parents

should have a huge advantage even before they start. the estate tax, quite apart from raising revenue, is a way a society says we want to give everyone equal opportunity as far as we can, and we don't want to give a huge advantage to people, to let them start way before everyone else simply because they had the good luck, or the good judgment, to be born to affluent parents. >> if your parents, upon dying, want to give their children the money rather an gng to the vernment, that's a perfectly reasonable thing to do. is it fair to the children who by birth might get that money that it's taken from them and given to the government? i don't think that there is an ethical or moral imperative to do that. >> reporter: even if political philosophers and economists could agree on the fairest and most efficient method of

taxation, that surely doesn't mean it will ever happen because of the power of special interests, such as homeowners. >> so why should the tax code subdizeome ownersp, which is eventually at the expense of renters? on the other hand, trying to get rid of that is very hard, because homeowners think they've become entitled to it, so there's no question that that's going to be a hard one to get rid of, but it's also the right thing to do. it's easy for me to talk about tax reform. i have tenure. the typical congressman has to get re-elected every two years, and that makes their set of constraints much more troublesome and difficult to navigate than mine. >> reporter: what the tax debate makes clear is just how divide the country is over how to define the role of government and the values it should promote. >> for "religion and ethics newsweekly," i'm tim o'brien in washington. we have a report now on the troubles of microlending in india, the combination of

lending and philanthropy that came to be seen as a way out of extreme poverty in the whole underdeveloped world. not-for-profit groups would make small loans to the very poor to help them buy a sewing machine or an animal and take a first ep out of destitution. thfather of microldingon the nobel peace prize in 2006. but, recently, in india, big, for-profit companies moved in to the microlending business, interest rates went up and in many cases the result was india's equivalent of the u.s. housing bubble. fred de sam lazaro reports. >> reporter: microlending began in the nonprofit world as a means to help poor people start enterprises that would make them self-sufficient. >> we were from the world of development, and we spent a frustrating number of years trying to get small amounts of credit for poor people. then there's a limit to how much you can do as a nonprofit, and

then eventually we restructured as for-profit. >> reporter: in less than a decade, microlending grew into a $7 billion industry. one company, sks microfinance, raised $350 million in an initial public stock offering. salesmen from various new companies fanned out into rural areas like this village in the southern state of andhra pradesh, offering money to people, no questions asked. >> translator: they came to us continuously for ten days and offered loans. they said we will give you loans and you can pay them back in easy installments. it's not a hard thing. >> reporter: no sooner had one company's agents left than another's would arrive. the goal, critics of these companies say, was to increase the volume of loans so as to attract or impress the big investors, even though many borrowers earned barely two dollars a day as agriculture laborers. almost all of these women say they were coaxed into several high-interest loans ranging from

$500 to $1,000. >> translator: i have lopes from three different companies, about $700 in all. i use the money from one to pay off the others, and i'll continue to do that until i can't anymore, and then i'll stop making the payments. >> reporter: that won't be easy, say others who have fallen behind. pula polepakka, a mother of two small children, says even though she and her husband had four loans, they stayed current for three years. but they missed three weekly installments after her husband, a house pnter, took ill. "the collection boys," as she calls them, began to hound them. >> translator: we left for another village where we have relatives, but the collection boys tracked us down in that village, and we were humiliated. he didn't say anything about committing suicide. he just went far away and took his life. >> her husband's suicide late in 2009, and those of several dozen other borrowers, gained the attention of media, politicians,

and government regulators like subramanyam reddy. >> some dait had to burst. the bubble had to burst. >> reporter: last october, an ordinance written by reddy was approved by the state's legislature. it mandats credit checks, monthly instead of weekly installments, and it outlawed unfair collection practices that reddy says also jack up administrative costs and interest rates to usurious levels. he says those rates are never fully disclosed to unsuspecting, often barely literate clients. >> if you really calculate, it omes to about 35%, about -- the perntage of interest. so there has to be a lot of disclosure, that's the first fundamental thing. they employ a number of unlawful elements to do their recovery. >> reporter: intimidation. >> >> intimidation. >> as the ordinance from the government would propose. >> reporter: meanwhile, opposition political leaders upped the ante. they urged borrowers to stop making payments on their loans altogether.

repayment rates previously above 90% plunged, and banks stopped lending to microfinance institutions. t industry's vijay mahajan says these delopments have paralyzed siness and imperiled a critical soce of credit for the poor. >> instead of going after a few incidents where, you know, extreme overlending had been done, or going after one or two institutions which had systematically engaged in such practices, the entire sector was converted into a demon. >> mahajan defends several practices singled out for criticism, like weekly collections. laborers get paid weekly, he says. as for interest rates, he says microlenders themselves borrow from banks at 12% to 13% intest and incur high costs going door-to-door to collect payments. however, critics say these commercial microloan companies cared more about the profit of their investors than the welfare of their clients. ela bhatt, who runs the much

smaller nonprofit sewa bank, says people at the very margins of the economy need much more than credit, because many of their most basic needs are not met. >> there are so many gaps, so many leaks in the life of the poor, and for them livelihood is very essential. unless we have something really concrete to improve the livelihood conditions so that they have more income, all these have to be done, otherwise only microcredit is just flimsy. >> reporter: in other words, she says loans should be used to finance productive activities that generate new income. in andhra pradesh the government says two-thirds of the loans were used for everyday households needs. bhatt and many development exrts say commercialization has distorted the central mission of microlending. but basix's mahajan says there's simply not enough money in the nonprofit or charity world.

>> the capital investment that's required to meet all the, you know, unmet needs of poor people in this country and the world, for all kinds of things, it runs into trillions of dollars and you need, therefore, mainstream capital to actually underpin any attempts at addressing this in a business-like way. >> mahajan agrees microlenrs will have to tu to leing strictly for income-generating activities. for now, banks have slowly resumed lending to the companies, and both he and regulator subramanyam reddy say it's critical that borrowers now resume paying back their loans, though reddy says they'll have to be rescheduled with lower payments and longer payback periods. so you would like for people in distress to have loan modification, not loan forgiveness, basically? >> absolutely, absolutely. clearly, many of the loans ar unsustainable, but yes, i mean, no loan forgiveness.

>> reporter: there's broad consensus that microfinance can be an effective tool to bring hundreds of millions of poor people into the global economy as participants in one of the world's fastest growing economies. but the more immediate task is to clean up the microfinance industry that's been spawned in india, one that right now looks very much like the american sub- prime mess. for "religion and ethics newsweekly," this is fred de sam lazaro in hyderabad, india. in washington, d.c., tens of thousands of abortion opponents gathered for the annual march for life, marking the 38th anniversary of roe v wade. several lawmakers, including house majority leader eric cantor, addressed the protestors, who then marched to the supreme court to voice their opposition to legal abortion. in bangladesh, tens of thousands of muslims prayed for peace and a renewal of islam at the annual world congregation of muslims, one of the world's

largest islamic gatherings. and in china and taiwan, prayers for good fortune in the coming year. the chinese new year is on february 3rd. this will be the year of the rabbit, traditionally thought to be a year of calm. that's our program for now. i'm bob abernethy. we have much more on our website, including lots of religious analysis of the president's state of the union address. you can comment on all of our stories and share them. audio and video podcasts are also available. you can follow us on febook and twier, find us on youtube and wat us ytim anyere on smartphones and iphones with our mobile web app. join us at pbs.org. as we leave you, scenes from a memorial service held at auschwitz in poland for the united nation's international holocaust remembrance day on thursday.

community development, and education. additional funding by mutual of america, dining customized individual and group retirement products. that's why we're your retirement company and the corporation for public bradcasting.