[maxpupmax]

For issue (1), the articles I've seen suggest that the vast majority of people just don't do this. Certainly some do, but I don't see why a couple bad actors invalidate a scheme which can work for most of the population.

I don't have an authoritative source on the above claims, but here's a 538 article which talks about the issue a bit. https://fivethirtyeight.com/features/most-welfare-dollars-do...

"[reduction in cash assistance] has happened despite a burgeoning economics literature suggesting that direct cash transfers are in many cases the most efficient tool to fight poverty."

Issue (2) seems less cut-and-dry to me.

[remarkEon]

My point is not meant to imply that bad actors invalidate the scheme, but that it seems likely that a political regime wishing to maintain (or gain) power could capitalize on our empathy for marginalized groups, adding complexity and building quite the leviathan.