Ted, Please address the one factor you failed to mention: the rise of tuition since 1990--at a rate that far exceeds inflation--relative to expected return.
The crucial question is whether enough prospective students will decide it is worth it pay $150,000 to $200,000--plus opportunity cost--for a law degree even though (based on BLS projections) perhaps a third will not practice law. (It was a lot cheaper in 1990 to go to law school and end up doing something else.) Furthermore, about half of the graduates overall who do obtain lawyer jobs will land in the first mound of the bi-modal distribution of salaries--where pay has lagged in real terms. At law schools lower in the hierarchy, a substantial majority of the grads who get lawyer jobs (the winners) will land in this category. Compared to 1990, graduates today who end up in the first mound pay much more and get less for it.
Law schools are selling a product, and our continued viability depends upon whether enough people want to purchase it at the price we are selling. (What you say about professor pay, while important to us, is not relevant to this question.)
The "crunch" I am warning about will come from a continued decline in the number of applicants--bodies to fill seats. That decline (since 2004) is real--and the google trend line points toward further declines. Any law professor who doubts this should have a conversation with their admissions office. Competition for students, who bid up scholarships with much more information these days (see Law School Numbers), is fierce, and the most reluctant ones will be those who must pay full price. Many students get a price reduction through this process, but there are financial limits to this: law schools need a substantial number of students to pay a lot.
The sky will not fall on all of legal academia--so if that is your argument you are correct. My view is that a significant number of schools will be under severe financial pressure in coming years for three reasons (given the difficulty we have of trimming expenses): fewer students will want to attend, scholarship offers will rise, and the number of transfers out will go up (at lower schools), draining revenue from the back end.
I may be wrong about the future, of course, but I hope law faculties begin to discuss these issues.
Thanks for your comments on my post.