I used to live and work on Capitol Hill in DC. Every morning, I'd walk from my apartment behind the Supreme Court building, to a bagel shop on Pennsylvania Avenue, where there were always dozens of homeless people, sleeping on the Metro grates, or pandhandling for change. I often ran into my coworkers at the bagel shop, where we'd chip in, and buy a bag of plain bagels, to give to one of the homeless guys as we walked to our office. In all the time I lived on the Hill, I never gave a homeless person money, but I gave them food regularly.
I don't think giving someone who is down and out money is a bad thing, but I think what these folks need is services. Mental health care, rehab, programs to help them get their lives back on track, temporary housing or assistance with permanent housing, job training. Basically, whatever hand they need to get back on their feet.