Worth clarifying a couple things:
1) Academia comes in many forms. Many in medical schools are 100% soft money. Joint appointments between psychology and medicine are becoming increasingly common and often offer a percentage hard money (e.g. 50%) with the remainder soft. Independent institutions (e.g. research institutes, freestanding cancer centers) also often operate that way. These represent a sizable portion of academic psychologists and a very sizable portion of overall psychology research output. A search committee can say "grants don't matter" all they want, but it means nothing. Folks will be gone or no longer conducting research inside 2-3 years.
2) Hires (and especially promotion/tenure) typically requires sign-off from admin at multiple levels (e.g. department, college, university). At least that is how its worked at every institution I've been a part of, even in traditional psychology departments. They don't often overrule the department....but departments don't often put forward people without funding or substantive publication records.
There isn't going to be an easy solution here. Everything is intertwined (rising costs of college education, increased competition for federal funding, administrative "bloat" and regulatory requirements). This even crosses departments since there is often shared infrastructure between them. Make a change that impacts medical schools? Any psych department faculty doing fMRI is likely to be affected since
very few psych departments have their own scanners. Same goes for clinical trials (auditing, compliance, data security, etc. is often housed within medicine...even if its a behavioral study). I agree the system is broken. I think a lot of the directions we are pushing are extremely naive and short-sighted solutions to much bigger issues. I think many are likely to make the problem worse rather than better. I think what we need is some change agents/early adopters in government and academia, but no one seems willing to take the risk on any meaningful reform (this is true about far more than just academia). Instead its just "Let's have investigators fill out 50 additional redundant forms wherein they pinky swear they will do the best science and totally won't have their secretaries fill out the forms for them, then set up a pay structure so their salaries are directly linked to the size of the p-values they obtain."
I could go on about this for a while
I'm trying to get funding to directly examine/tackle some of these system issues. We'll see what happens.