I have an agreement and a disagreement with your take:
* I agree that reducing salaries for academics will only make the currently misplaced incentives worse. It will deprive society from the valuable research that more competent and talented folks would have done. In my mind, the key point in all these budgetary conversations is the ballooning bureaucratic/administrative layer that is eating up more and more of the budget and making it harder for universities, as collectives of teachers and researchers, to adapt to the evolving priorities of the real world.
* I disagree that there should be less researchers. Fewer academics, maybe, but we definitely need more people who can make a lifestyle out of entirely or partially doing research. My admittedly anecdotal impression is that for every "not exactly scientifically smart" person who secures tenure, there are a handful of would-have-been-great researchers who just get fed up and leave academia despite having the passion, competence, and the willingness to even make a few sacrifices.
IMHO we have cornered ourselves into a false dichotomy (broad strokes here, there are exceptions of course): either (a) you are an academic, you have to pull 60 hr weeks to do any meaningful research, and you have to deal the ossified structural issues of academia, or (b) you are out in the wild, make a lot more money, but you spend your 40 hr weeks towards maximizing short-term profits of your employer. I would think were there a viable alternative to this dichotomy that many passionate and competent people would happily make some reasonable sacrifices (in pay, work hours) to engage meaningfully in much-needed research.