Here in Germany I happen to share a few tram stops with a group of clearly challenged people who apparently have a commute overlapping with mine. They never bother anyone. Because someone is taking care of them (I can only assume, the group travels unaccompanied, my guess is that it's a bunch of co-workers from some form of sheltered workshop), giving them enough support to live a life they can manage that is neither behind bars nor being left to their own insufficient devices. Thrown out into "full difficulty mode" life I'm sure many of them would end up as annoying outcasts harassing random strangers in a futile attempt to get a trace of human interaction.

Would I like to ride a tram with only smart and beautiful people? Sure I would, but I could not enjoy it knowing about the implications.

Being exposed to a sample of society is actually one of the things I like most about public transport. But it's only a positive if the sample is at least somewhat representative and not a self-selected showcase of the down and out. Classic chicken/egg. Where I live, subway and tram are fine whereas urban buses sharing the same general are and ticket are borderline depressing (suburban buses are somewhat ok, rural buses are completely devoid of driving age population).

No this isn’t it. Deinstitutionalisation is a worldwide trend. It’s the lack of mental healthcare itself that is the problem.

There isn’t a good reason why it should be this way in a wealthy country. It amounts to saying ‘Let the people that need the most help wither and die.’