That's a fairly standard reply but ultimately isn't really backed up with any substance.
I would strongly refute the notion that university is integral in the production of the economy's future skilled workers. In reality, the majority of students at university are studying subjects of which have extremely little or no real world application, and even many of the disciplines that do have a direct industrial use of their skills produce far more graduates than industry can absorb. It's funny, but many of the economies that are less dependent on financial services that we're trying to copy don't follow our model of sending kids to university almost by default. If we're actually serious about making technology and manufacturing a more dominant part of our economy we're really going to have to focus on apprenticeships and on the job learning. Sending large numbers to university directly contradicts this as work based learning gets seen as the lesser option, for people of lesser ability. We can pretend this isn't true, but with the way that university is put on the pedestal (see: your post) it is.
I'm not sure where the notion that we'll no longer have the "best" in the positions you mention if we don't have large amounts of graduates comes from either. Who will we have in these positions instead? Are people without degrees all of equal ability, with degrees being the only separator? Will the "best" be stuck stacking shelves without a degree?
Whilst education is noble, I'm not sure if it should be subsidised by the taxpayer unless the taxpayer is going to receive a direct benefit from it. I could just as well argue that it we should also fund half the population to practice for and play their favourite sport full time for a few years. Not sure why that's any less worthy than paying people to study their favourite subject for a few years. Universities don't have a monopoly on learning, knowledge and education.