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That isn't entirely true. If I am given a grant for school I am only allowed to use that money for school-related expensives. I can't go out and buy a pair of $500 shoes. There is no reason that welfare money shouldn't have the same type of restrictions placed upon it. Again, the point of welfare is temporary help, not permanent entitlement. It should be made hard to receive, inconvenient, and limited.
You may change how the money is handed out, yes. Perhaps that is the better avenue to explore. However, as it stands that is not the system we operate under. Under that system, there are consequences to having it built the way it is. One consequence is it does then become possible for people to sell their stamps or whatever for cash in order to feed a drug addiction. But the government is still restricted in how it can act against the individual; that too is a consequence of our system. It is restricted from performing unreasonable searches.