I think she is on the right track, but the actual programs producing "merit goods" that she proposes are rather timid, and some of them even producing private profiteering instead of intended "merit goods" (e.g. section 8 housing that benefits mainly the slumlords with guaranteed income, while the recipients are left with substandard living conditions; or college expense assistance which encourages credentialing behavior on the part of educational institutions and reduced the chance of decent employment for anyone but the alumni of top universities).
I would propose a more maximalist program - large scale public works to build new housing, infrastructure, transit systems, cultural centers, etc. whose added benefit is generating employment and raising wages for everyone; vocational education system providing training for skilled jobs in those public works programs; a national public education system (instead of the hodge podge of locally under-funded schools), civilian international assistance program providing civilian goods for developing countries and employment opportunity at home; public research programs targeting areas of maximum social benefits (instead of profitability); social assistance programs targeting all all age and income groups - from child care centers to senior centers, to crisis intervention, family counseling, mental health counseling, cultural enrichment etc. for working age adults, etc. The benefits of such maximalist programs is not just wealth distribution, but also generation of new wealth and occupational skill building, not to mention the fact that they can be truly sold to the public as an "investment in America" rather than yet another handout to the most desperate.
I think that the important condition of a successful implementation of the "merit goods" programs is that such programs provide universal benefits to everyone, not just the most marginalized groups (cf. social security). In other words, benefits for everyone instead of a dole to the "less fortunate." This will ascertain a broad support of such programs, instead of fueling more divisions.
Wojtek