Michael O'Hare weighs in today on the value of public funding for the arts, and although I think we're still talking past each other to some extent, he concludes with a passage that I thoroughly endorse:
Probably the most costly program of government support for the arts, and in my view the most important and the one whose ongoing collapse is the most pernicious, is arts education in the schools. Parental introduction to the arts is the largest correlate of lifetime consumption, but government obviously isn’t in that business. Engagement in school is next. Hands-on and historical education in the arts — both are important — is critical to lifetime access to the cultural patrimony of a country or the whole world, and it’s another real market failure, information asymmetry.
People who can enjoy different, challenging experiences that make them smarter instead of dumber and alert instead of bored, have better lives than people who don’t. But the arts require some investment (though they tend to be beneficially addictive if you just step on the escalator) and pay off richly for accumulated experience. “I’m glad I don’t like opera, because if I did, I’d listen to it, and I hate the stuff!” is the suboptimal stable state a society can help its citizens get out of, and school is the place where it can happen.
I don't know how deeply arts education has been slashed in our public schools, but anecdotal evidence suggests it's been slashed pretty deeply on the twin altars of budget cuts and high-stakes testing. This is, I think, a tremendous loss for society, and it's a loss regardless of whether government agencies should overtly subsidize any particular medium or form of art in the adult sphere. If kids don't learn to appreciate art, then art will inevitably decline, and that makes us all poorer. After all, who wants to live in a world without art?