‘We’re broken.’ In the suburbs north of Los Angeles, voters feel fed up and afraid, and they are angry. They blame federal, state and local governments for the financial mess that exists today. The mood will only get worse, and perhaps the people will decide that enough is enough. The city manager of Sherman Oaks, Mark S. Tannenbaum, who also has served as Los Angeles County district attorney, has warned that the voters of Los Angeles, especially those in the Latino and Asian communities, are “very, very angry about the fiscal status of their city.”
Tannenbaum may be right. A Gallup poll conducted recently showed that while more than half of Americans approve of the way the country and its political leaders handle the economy, voters are most upset with national unemployment and the federal government’s handling of the financial crisis. And these are the issues on which voters will make the deciding vote. This is not the time to lose these people’s trust. One of the things that must happen during a recovery is to get the balance between taxes and spending right. This means that the government must first stop spending money that it does not have, and then shift spending out of nonproductive areas to invest in things like education and infrastructure.
Americans are in for an interesting ride because, for the first time in our history, we will see tax increases in many of the areas where we are spending money. Some will be real, and some will be cosmetic. Some will get their taxes raised by more than one-fourth, and some will get their taxes cut by more than half. The effect on the deficit is less clear. As it is now written, tax increases will come from only two sources: cutting taxes on some people and raising taxes on others. But because we will have been spending so much money for so long, there is a lot of slack in the tax code, and it will get stretched even more thin. A lot of money is going to get taken out of people’s pockets—including from people with low incomes who have been supporting the middle class with their paychecks—to pay for things that, for the last four years, were being supported by higher spending.
In March 2009, President Obama outlined a grand bargain to address
