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Are Voters Cynical on Taxes, or More Grown Up Than Our Leaders?

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There were moments during the presidential campaign when the whole election seemed like a fight to the death over which candidate would cut taxes more. Will it be tax cuts for 95 percent of Americans or tax cuts for everyone? Most politicians think the American public is like Pavlov's dog on this issue -- a mention of tax cuts and they figure voters will start salivating.

Yet based on exit polls, nearly half of voters said they expected their taxes to go up regardless of which candidate won. Not only were they not anticipating a tax cut; just the opposite -- they were assuming an even bigger tax bite. Maybe the exit poll result is just voter cynicism spilling out. After all, complaints that politicians break campaign promises are nearly universal. Americans have plenty of examples of politicians who stretch the truth to get elected and then seem to do whatever they want after the election is over.

But consider this: an Associated Press/GfK poll taken right after the election found cutting taxes at the very bottom of the priority list for President-elect Obama. So maybe the results suggest something else. Maybe at least half of American voters are beginning to be more realistic about what it will take to tackle the country's budget problems and gargantuan $10 trillion debt. Perhaps some are starting to accept the idea that at some point taxes simply have to be on the table if the country is ever going to see its way out of the fiscal mess it's in. Amazingly, that's a perspective we see a lot in focus groups and community discussions on the country's budget problems.

Over the last few years, we've been involved with a research and public education effort called Facing Up to the Nation's Finances. As part of the work, we've observed groups of typical citizens from all walks of life and across the country talking about the country's budget problems. A fair number start off knowing that the country has been bleeding red ink for years. Most know that Social Security is not financially sustainable as currently fashioned. They may not have all the numbers at their fingertips, but the general drift has not escaped them.

There is a learning curve for nearly everybody. Many American have no idea how long the country has been running deficits (31 out of the last 35 years). Most have no idea how much the debt is costing us in interest or how truly huge our long-term obligations are. Not too many people, even those who follow the news regularly, can really grasp what a $10 trillion debt with no end in sight means to the country's future. Most know Social Security has problems; very few understand that Medicare is much, much worse off.

It's very common for people to propose cutting relatively small, but unpopular programs (to them at least) as the way out. Even so, it doesn't take long looking at a pie chart of government spending to get the realism flowing (where is Ross Perot when we need him?). Once people see how little money would actually be saved by eliminating foreign aid, welfare, the space program, the Arts Endowment, agricultural subsidies and of course the infamous earmarks, they begin moving beyond the easy answers. Add them all up -- eliminate all of them totally -- and you've cut less than five percent of government spending. It's a bit of a shock for many Americans, but most absorb the fact and begin to wrestle with its implications.

Some voters fool around for a while with the old Washington formula, "don't tax you, don't tax me; tax that fellow behind the tree." But fairly quickly, most of the group will come to the idea that it's going to take both spending cuts and tax increases to get the country's budget problems solved. Most also quickly come to the conclusion that everyone will have to compromise.

In some ways, it's astonishing. Here you have typical Americans, nearly all of whom make a lot less money than members of Congress, DC lobbyists and the denizens of think tanks. Yet, they acknowledge that they will probably have to pay higher taxes themselves to get the government's budget under control. They don't necessarily like it or want it, but they think it's better that just piling up the debt on their children and grandchildren.

This is all the more astonishing given the distinctly mixed messages the public is getting right now. This year's deficit is past $400 billion dollars, and next year's may well be a truly staggering $1 trillion. Most political leaders and economists are calling for more spending and tax cuts, not less, in a desperate attempt to stave off a global recession. Generally, we agree, and besides, it's not humanly possible to balance the budget next year -- at least in any way that's vaguely humane.

But crazy as it seems, the need for deficits in the short term doesn't make the long-term problem go away. Our leaders need to find a way of being $1 trillion in the hole next year and still making a case for fiscal responsibility over the long haul. They need to make the case for more spending and tax cuts now while still preparing people for spending cuts and tax increases later on, because there's no way of dealing with our long-term problems without them.

That's a tough maneuver, maybe one of the toughest you could ask a politician to pull off. On the other hand, faced with major budget shortfalls, New York City Mayor Mike Bloomberg and California Gov. Arnold Schwartzenegger have both proposed a mix of spending cuts and tax hikes. As far as we know, neither is considered political deadmeat. They may not get the changes they are asking for, but neither of them seems to be afraid to ask for higher taxes when the situation demands it.

So the question that occurs to us is this: When will the country's leaders and opinion-spouters begin to catch up with what roughly half of Americans already seem to know? When will they start getting down to the brass tacks -- you give a little, I'll give a little--to fashion a federal budget that makes sense? Or, can we expect the country's leaders to just keep on pushing a line that in their own souls even they know can't work?

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