Agreed with you

At least in theory, drug testing disincentives people on welfare to consume drugs, which should in theory be good. And yes, puts a break on some people who probably do not deserve welfare as much as others do. (Hard to prove, to be sincere - but an easy theory to follow)

[I do not necessarily see it unfair that they are tested, in the same sense that employees of any company can get tested. In a company you might have the argument, depending on your job, than a moderate amount of consumption of some substance does not distract you and even help you {Dr. House is famously addicted to Vicodin but argues that Vicodin helps him make his job instead of making his pain incapacitating}. But welfare is pretty much working on not working, with society as employer, so this argument would not apply.]

Agreed also that this will create more bureaucracy on an already very bloated system.

And agreed that there is, ultimately, no good reason for drug bans. I am sure drug bans themselves are part of the reason why many people are on welfare - how many of them have had legal issues related to drugs that make them unemployable later - even if they never became (or become) addicted in a debilitating way? After all, a reason why a counter-supply strategy on drugs fails is because being a drug dealer is a surprisingly low qualifications, low skill, yet physically easy, job. Literally anyone can be a dealer. So it's pretty much impossible to end drug traffic by jailing dealers. There's always more prospective dealers waiting for the post.

Which is probably my answer: It's probably a good idea from the viewpoint of welfare policy; but probably a bad idea from the viewpoint of drug policy.

And btw, that I am an anarchist doesn't mean I cannot compare X, Y and Z options that exist or are proposed in the real world with real governments and see which is superior and how and why - even if they are not ideal.

:)