Of course lay people can bless others. Because of our baptisms, we bless ourselves when we dip our finger(s) into the holy water font and pray the Sign of the Cross. Many of us say “God bless you” to each other. When my daughter was younger, I’d bless her every night, with a sign of the cross on her forehead, after bedtime prayers.
Father Saunders addresses the issues of blessing others in this article:
forums.catholic-questions.org/newreply.php?do=newreply&noquote=1&p=2419587
Some blessings can be invoked only by clergy. During mass in my parish, after the lector’s announcements and before the dismissal, the priest asks those celebrating a birthday, anniversary, or a special event in their lives to come forward. We all raise a hand toward them and bless them as the priest prays. It’s a beautiful custom.
The custom(s) you mention are not valid or legitimate, nor is the liturgy permitted to be changed by their inclusion. They have worked their way into our worship and liturgy in many parishes because of what I stated before - the ‘misplaced’ sense of kindness or of being ‘nice’. I will repeat - the recognition and congratulations being shared with those having birthdays and anniversaries and such is a nice thing to do and is not the issue.
The issue is
when and where they are done - and the liturgy is not the time or place.
As for blessings, Canon Law governs this. Can 1169 says:
Can. 1169 §1. Those marked with the episcopal character and presbyters permitted by law or legitimate grant can perform consecrations and dedications validly.
§2. Any presbyter can impart blessings except those reserved to the Roman Pontiff or bishops.
§3. A deacon can impart only those blessings expressly permitted by law.
Canon law 1168 says:
Can. 1168 The minister of sacramentals is a cleric who has been provided with the requisite power.
According to the norm of the liturgical books and to the judgment of the local ordinary lay persons who possess the appropriate qualities can also administer some sacramentals.
This means, basically, that lay people, when designated individually by a priest or the ordinary, may assist in the blessings with things like the candles on St. Blaise’s feast day and/or with the reception of ashes on Ash Wednesday.
It is not, in any sense, a mass-deputization of all the congregation, anytime they want, to raise their hands and bless anyone.
This issue also has nothing to do with blessing yourself with Holy Water. You are permitted the use of a sacramental on your person and it’s the sacramental, combined with faith that imparts grace, not your blessing.
We need to see these ‘kind things’ we do as kind only when we do them properly. When we don’t they are a violation of the liturgy of the Lord and an inserting of our agenda into what is Christ’s.
I wonder why there is such resistance to shaking someone’s hand outside of Mass and wishing them happy birthday, assuring them of our prayers, thanking them for their service,
whatever kindness we want to show. That would be charity in action.
But the insistence that we do it when we want and where we want even if it is not legitimate to do so, begs the question and betrays a lack of humble obedience. After all, what is so hard about doing what the Lord and the Church ask us to do? Is it really that difficult ? Why do we insist on having our way?