Another major part of the problem is that we no longer institutionalize most of the mentally ill (also a phenomenon starting around 1960-70). Many of them become homeless, and a few commit crimes.
America has never had a working mental health infrastructure; we stopped institutionalizing people because American mental institutions in the 40s were about the most horrible things you can imagine:
I think the history of our neglect as a society of the mentally ill has little to tell us about crime and a lot to tell us about the homeless underclass in America.
To digress: I just visited DC again a couple weeks ago. You go in a public bathroom right outside the Washington Monument and there are big signs next to the sinks that say "NO BATHING". I felt ashamed.
I think the history of our neglect as a society of the mentally ill has little to tell us about crime
That makes sense if you look at one as related directly to the other or vice versa (aka mostly not), but if you look at both as symptoms of a bigger issue then it becomes readily apparent that they are highly related: Americans don't want to deal with 'undesirables'. Lock em up or make them homeless, whatever, just as long as we don't have to deal with them.
It doesn't bother you to be a citizen of a country that has allowed so many people to lose their homes that bathing in a public restroom is now a nuisance frequent enough to warrant official signage?
Wait - a "major problem" is that a "few commit crimes"?
I think the real issue is that the US has some socio-economic issues that we've as yet let unresolved: drugs (as mentioned), policing strategy, judicial/legislative strategy, welfare, education, etc. I don't think institutionalization is a major contributor.