Today, we have a government that distributes free money to people by spending money taken from other people -- social security moves income from the working class to the elderly, medicare moves income to the impoverished. These systems move money from haves to have nots, but money isn't the best thing to move because it's too indirect, too flexible, too fluid. The owner of money can buy food to feed their children or toys to feed their appetite for entertainment. Money can be used to acquire many of Manfred Max-Neef's fundamental human needs.
That's a problem when you have a society built on capitalism where the reward is supposed to be attained by hard work and ingenuity. Welfare, social security checks, tax credits, bailouts, and minimum wage laws all share one thing in common: the creation of a moral hazard by taking money from one group and giving it to another. The moral hazard, of course, is reduced motivation to perform work, be creative, etc., and to instead become dependent on the money from the government.
We see this parasitic behavior in established corporations and in multiple generation welfare recipients. We see it when the government allows itself to take advances from pension accounts or other "lock boxes".
Ok, but that's not your question, you asked, "How is the government producing these necessities and distributing them?"
Well, let's split your question up into three parts:
1. What is the government doing today?
2. How can the government, which produces nothing except laws enforced by violence, acquire these necessities?
3. How can these items be distributed equitably?
Today our governments are wasting mind-blowing quantities of money on social programs and bailouts which transfer raw money to new owners and in the process create moral hazards which are assuaged by continuing transfers of money. The government, today, attempts to satisfy the needs of the impoverished and unemployed through programs like Section 8 rent-controlled housing, unemployment insurance, food stamps, and I'm sure something exists for clothing.
Now, I suppose that if the Economist sat down and figured out how much money we've seized and reallocated it would be more than enough to buy each citizen a ration of N calories per day per year, for their lifetime. Now, that statement is true for some N (0 is a solution). Similar statements exist for clothing: N issues of outfits of some standard quality per person per year, as well as for shelter: N months of rent at some standardized housing quality.
If we can define national minimum standard values for Nfood (e.g. 2000 calories per day), Nclothing (e.g. 3 outfits per year), and Nshelter (e.g. 12 months of 400sqft per person) and allow these values to scale by Real GDP/person so that improvements in the economy lift everyone's living standard and contraction reduce standards, then the government can simply pass laws enabling citizens to claim these perks from authorized vendors.
These vendors must be compensated for providing these goods, so let's let them participate in a dutch auction for each geographic statistical area. Competition among vendors drives down prices for the government who then pays winners with money reallocated from existing social and corporate welfare programs. A standardized dutch auction process and participation requirements would need to be implemented and audited to protect against quality shortcuts, graft, and corruption.
To recap: (1) the government is already spending all of the money necessary to do this, poorly; (2) the government can pass laws allowing citizens to claim their rations of food, shelter, and clothing from authorized vendors who themselves participate in an audited dutch auction (instead of no-bid contracts and similar corruption).
The last part, equitable distribution, that is the hard part. Encouraging the states to pass uniform laws isn't hard -- just attach money as a carrot and use the 14th amendment as a stick. Obtaining the resources isn't hard -- we're already spending them.
Equitable distribution is hard because you need to decide "who gets" and "have they been given enough".
In my opinion, the only defensible answer to the first decision is everyone gets access to the current rations of food, shelter, and clothing. There are two groups of people in the first decision: those paying into the system and those not paying into the system due to calamity. Clearly, the system should payout to the needy. But deciding who is needy is hard and fraught with potential corruption and complexity. So just simplify and allow everyone a claim. The truly non-needy will simply forgo their claim.
Up to this point, the changes necessary are straightforward and workable within our current legislative environment. However, our answer to the second decision will require a significant change in the national mood. Specially, we will need to track how much each person has received to reduce the impact of the inevitable criminal element that shows up whenever price controls are implemented -- and let's be clear, goods sold to the government for free distribution to the people are a form of price control (hence the strict limits on what is given out: only food, clothing, and shelter, only at known grades, only at fixed quantities, and only to authorized people).
There are 3 possibilities:
a) We trust everyone not to double-spend their claims. Let's all laugh for a moment.
b) We implement a national centralized bio-metric database to track claims. It will likely be derided as Mark of the Beast stuff.
c) We implement a national distributed crypto-currency for claim spends using wallets distributed by the social security administration on a per-SSN basis. Foodcoin. HN revolts.
If our society can solve the last part, the rest sort of falls into place. By providing for the bare necessities freely, we create a system with far fewer moral hazards and without undermining capitalism in the other areas of our economy. Our population can choose to live with the bare necessities, or choose to attain higher rewards via capitalism. We already have the resources, we're just not allocating them appropriately for a society with high levels of unemployment.
This is getting pretty long but one last point -- cultures with food safety and more education have lower birth rates. Lower birth rates are desirable as unbounded growth would quickly undermine my proposal, so clearly we would also want to provide minimum claims to education. Given that the future is a computational knowledge economy where continuous learning is as critical as regular access to food, it makes sense to offer continuing education in grants of Neducation, but I'm not sure how to standardize quality.
I'm happy to hear your thoughts on these ideas, or suggestions to improve them.