> A government-funded institution has no one with a stake in its long-term success. Its only goal is preserving itself and capturing more resources from the government.
Why would you say that? By that logic a charitable institution has no one with a stake in it's long-term success. It's only goal is preserving itself and capturing more resources from donors. There's nothing about governments which makes them inherently incapable of hiring motivated staff.
In my experience, government workers, be they school teachers, nurses, librarians, or community workers are often some of most highly motivated workers I have met.
> it's not clear if "welfare" can expand beyond that.
It is clear if you believe that such funding is available from philanthropic sources. It's just a question of who we wish to give control of those resources to.
