Redistribution to the Poor
The co-existence of a high degree of inequality within a democratic political regime leads to the adoption of public policy directed toward the redistribution of income and poverty reduction. In a democracy, it is natural for the political class to meet the demands of the poor in exchange for a large number of votes. Redistributive policies are made by means of public expenditures for programs directed toward the poor, as well as economic regulation. Even while successful in reducing inequality and poverty, these policies can harm economic growth. They cause the increase of government expense, driving other facts that undermine economic growth: increased tax burden, reduction of public savings, increase in interest rates, and cuts to public investment in infrastructure.