ABSTRACT
A basic illustrative problem is how to deal with deficits. One effective approach is to expand the total resources. The traditional solution to the deficit has been to reduce spending, increase taxes, or both. Conservatives like to talk about reducing spending on the HEW categories of health, education and welfare, and increasing consumption taxes such as a value-added tax or a national sales tax. The compromise can do better if it taxes the rich and the poor, but does not do so in such a way as to add up to as much tax as the liberal alternative alone or the conservative alternative alone. That is a win–win outcome in which both conservatives and liberals can rejoice. A super-optimum solution (SOS) wants to decrease taxes on both the rich and the poor, especially by way of tax breaks that will stimulate increased productivity.
