The Great Shell Game

One of the mechanisms by which the political/ruling class endeavors to keep the poor down is by means of deception. In fact, ultimately, deception is the main weapon they have. As many have pointed out in the past, if the working class (and that includes most of the middle class in America, btw) decided to throw off the government, there really would be no way to stop them.

Which brings us back to deception as the main tool of the State.
One of the primary functions of welfare, in my opinion, is to make the State look more necessary than it is. This is agreed on by lots of libertarians in their own ways.
A more subtle idea is that welfare is also used as a prop to explain poverty away. If you ask most "fiscal conservatives" why there are still so many poor people in this society, the answer you'll usually receive (assuming that they aren't racists) is some form of "well, they don't have an incentive to work and develop themselves because of welfare". Now this may have some basis in fact, but I think a look at the third world can be instructive here.
Why is the third world poor? The aid we send them, it's well known, rarely gets to them, and it's usually in the form of grain or milk to aid utterly starving people.
Lack of skill is not an acceptable answer either. The thing that people don't grok on that score is the law of comparative advantage. They could easily produce something more efficiently than we could do it for ourselves. In fact, there would be no sweatshops there if that wasn't the case (And why aren't there more sweatshops here then? See below).
The third world is poor because their governments are preying on them. I happen to agree with Mises that the main way to eliminate poverty is to increase capital invested per head. To do that requires that capital be allowed to move freely and grow without threat of predation. Most "poor countries" are rather egregious about letting crime, both public and "private" but tacitly sanctioned, eat away capital and destabilize markets.
The poor in the western world are poor, because whatever "free" market may exist for people above a certain threshold, the poor live in an extremely regulated, proportionally over taxed (especially considering inflation) environment. There is no free market for poor people, because all the transaction costs that seem minor or are even invisible to someone who has a certain level of access to capital already, are immense to them.
Joe Office Guy lives in an increasingly bureaucratic, but predominantly free market society.
Joe Janitor lives in Zimbabwe.

Welfare provides a dodge, an excuse for the poverty of the poor. It creates antipathy and disrespect for them. "I managed to get a job and make a living, why can't he? Damn bum, taking my tax money."
If the low-end spheres of our society were utterly de-regulated and inflation ended, whether or not welfare was eliminated, you'd see a renaissance, an explosion of productive power that would look like a second industrial revolution and poverty would really be wiped out in our country.
But of course that would rip the lid off a large part of the Government Shell Game, and would reduce profits for the people at the top of our economy (by diluting capital and shifting the labor market in favor of laborers), which is why it hasn't happened, and ultimately, why there is still poverty.