I hate feeling I have to walk by a person pandhandling and not respond at all - it makes me feel like a bad person. I had been told not to make eye contact unless you're going to give money, but I've recently changed my strategy and started smiling before giving my standard, "no, sorry" to the request for cash. Recently I flashed a smile as I strode by a man on the sidewalk. He smiled back and said, "God bless you for that smile." It felt like we connected, which is what people are generally going for when they give money (unless it's just to avoid feeling guilty).

Yvain's take on all this: http://squid314.livejournal.com/340483.html