It would be shrinking the government by a HUGE measure to replace the massive welfare and prison programs with an IUD/Norplant handout program. Nearly every one of those unwanted welfare-and-prison class babies that gets born ends up costing the welfare state hundreds of thousands of dollars over its lifetime.
So, what you really want is a eugenics program.
How Sangeresque of you.
One problem, GS, is that these women want to have babies. Not just for the welfare money, but they want something to love (and something that will love them), a status symbol, whatever. As a rule, they eventually lose interest in their little human pets, though.
IUD's allow fertilization to take place thus fostering abortion and murder. If you check the FR, there are a few threads about how Norplant causes an increase in STD's and AIDS since the women don't use barrier methods of birth control and abstinence. So, there is no easy answer.