You're thinking of Larry, the shoe-shine guy: http://articles.sfgate.com/2009-06-04/news/17208451_1_larry-...
The local media indeed jumped on it, and raised a stink.
I have a friend who spent 4 days in jail because he was caught near a bar without a drivers license. He didn't have ID, couldn't prove who he was and got locked up. They didn't let him make a phone call, and he stayed there until they decided he'd "learned his lesson". This one was sometimes homeless, but not a drunk or drug user. Just lost his ID.
It's called "Monotributo", if you speak Spanish look it up.
(*I believe the same works in Argentina)
Wait... what? To me, that just sounds evil. Why shouldn't I be able to walk around without any form of identification?
I genuinely want to know - is it really mandatory to have some form of identification on you at all times? Sometimes I just don't - should I worry?
However, that does not mean the police won't put you in jail for not having ID, though they have to let you out eventually. This has happened to me.
At this point in the discussion someone cites the Hiibel decision: http://en.wikipedia.org/wiki/Hiibel_v._Sixth_Judicial_Distri...
That decision is that states with stop and identify laws, can require someone to identify themself when there is "reasonable suspicion" a crime has occured, which is also knowns as a Terry stop. The decision does not say you have to have government ID in those states. It says you have to identify yourself. It is sufficient to state your name and birth date for these purposes.
Again, that doesn't mean police will follow the law. Most of them don't.