What should the Barneys shopper have done with $2,500?
Welfare mom spends $2,500 on a handbag at Barneys.
In the absences of needs-tested government benefits programs, I’d say she should save the money if she doesn’t need to buy anything right now (and she certainly doesn’t need to buy a $2,500 handbag).
But it’s possible that saving the money would be the wrong real-world choice because she might lose access to Medicaid, AFDC, financial aid for her college program, and whatever other benefits depend on a person having close to zero savings.
I am opposed to wealth-based tests for need. (1) They are the easiest to lie about anyway so they disproportionately punish the honest; and (2) they discourage frugal behavior, and that’s the opposite of what we should be discouraging.
Everyone should get the same government benefits without regard to “need.” This would better reward frugality and work.