Szasz’s book was correct and influential on some things, mostly of the abstract variety, but the closing of the mental institutions was also due to other factors, mainly the state budgets. Also, with the new achievements in medication, it became feasible to treat people on an outpatient basis.
It is only with the ridiculous new bail laws that the problems have become acute. Even that was partly to save money, but it was also a legislative change now widely felt to be in favor of the criminal and against the general interest of the public.
That something is "feasible" does not make it wise, and it ESPECIALLY does not create self-executing systems.