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Heat olive oil in a large, wide pan over medium heat. Add onion, carrot, celery and garlic and sauté slowly until onion has fully softened, about 8-10 minutes.
Add ground beef and sausage and brown over medium-high heat, breaking up meat as it cooks.
Stir in tomato paste, Italian seasoning, salt and pepper. Cook for 1-2 minutes, until tomato paste has roasted and smells flavorful (do not burn!).
Pour in red wine, scraping any browned bits off the bottom of the pan. Simmer until wine has reduced by ⅓ (do not simmer any longer, or wine may become too acidic).
Stir in crushed tomatoes and balsamic vinegar, add bay leaves. Bring to a boil once, then reduce heat to a simmer and cover with a lid.
Simmer sauce covered for 1-2 hours, then remove lid and simmer for 15 more minutes, until rich and thick. Season with sugar, salt and pepper to taste. Discard bay leaves before serving.