We all know the expression "slice of the cake". In conventional economic thought the total economy is the whole cake. By giving more of the cake (a bigger slice) to some, the slices enjoyed by the rest become smaller.
The issue is how society shares the cake - should everyone have a same size slice, or some through inheritance, effort, risk or talent enjoy a larger share - how much inequality is acceptable?
Simplistic options to improve the lot of the disadvantaged are just that - simplistic. The cake (economy) needs to be made larger. Short term largely illusory propositions may include:
- print money and give to the poorer - the main impact is inflation. It does nothing directly to make the "cake" larger although it may stimulate some economic growth if the poorer are better fed, watered, educated etc and able to work more productively.
- taxing the wealthier to give to the poorer - generally inflation neutral but it will change behaviours. The wealthier may become less inclined to invest, work and find ways to avoid/evade tax. The poorer benefit as above.
- government borrowing spent on the poorer - ultimately needs to be repaid. Eventually the credit rating of governments falls, interest rates increase, and further borrowing stalls.
Some would see hauling the disadvantaged out of poverty a moral imperative to be pursued at irrespective of the consequences.
IMHO policies which create a larger "cake" are more sustainable in the long term. Those policies which by happy coincidence of benefit the poorer and enlarge the cake should be given priority.
All the above is, of course, very simplistic. Were tax, wealth distribution, etc easy to engineer we would all inhabit a comfortable well fed and fulfilled utopia. Reality is that policy consequences are difficult to model before implementation and the outcomes uncertain.