Grad schools do admit far more students than they should. It's not always for monetary reasons, though. In my field (molecular biology/genetics), the norm at all schools is to provide you with a tuition waiver and a stipend for living expenses (~20,000 a year or so, depending on location), so they're not getting any cash from me. They did, however, get a lot of cheap labor.
I viewed my Ph.D. work less as "school" and more as an apprenticeship. I worked with a mentor who got a lot of almost-free work out of me that benefited him and the university. I learned a lot, and I'm now (almost) qualified to do such a job myself for real. The problem is that each mentor has dozens of apprentices over his or her lifetime, but the total number of "mentor" jobs is stable. So most grad students find that their apprenticeship wasn't that useful.
Since you're not considering science, the funding issues will be different. Still, the full-time Ph.D. students in liberal arts that I know aren't spending much on their education. They're usually supported by teaching assistantships, research assistantships, or fellowships. Others have outside jobs, often related to their field, especially toward the end of their studies. It makes sense--you can't rack up hundreds of thousands of dollars in debt over six+ years when your target job is one that pays poorly.
The training in how to think and write that I got in grad school will likely be very useful to me in law school and beyond. My Ph.D. as a credential will be very useful to me if I go into patent law (which is one thing I'm considering), but not really if I go into another field.
A side note: in grad school, you completely lose perspective about what a "good" salary is. It's been really funny for me to read the prelaw board discussions between people worried about whether they're going to start out making $80,000 instead of $120,000 if they go to the wrong law school. And if you go into public interest, you might make $30,000! Oh, the horror! In academic science, after SIX years of school, most people get a job making $30,000. In your dream job, after a postdoc, you might make $45-60,000, and you would have to go to whatever school in the country happened to have an opening. On the plus side, it does make you appreciate any amount of money, however meager.