I personally, have no issues with reputable breeders. Someone earlier stated (forgot who) that reputable breeders do genetic testing, don't overbreed, vaccinate, etc. - which is true. One problem is that the average person has no idea where or how to look for a reputable breeder
My issue with breeding is more along the lines of "show dogs". It seems that the breed standards that are winning at dog shows promote health issues. Breeding pugs to make their noses shorter (which causes breathing problems), breeding larger and larger GSDs with the slung back hips, breeding Poms with smaller legs, all contribute to that breeds genetic health issues.
I wish the breed standards were more about health and temperament and less about "looks" IMHO. While reputable breeders really do try to prevent health problems in their lines, I do feel that the breed standards promote the health issues that are prevalent in certain breeds. If breed standards changed in a way that were more about health (e.g. longer noses in some breeds, slightly larger toy breeds, slightly smaller giant breeds) then I would feel more comfortable with breeding in general.
BTW - there have been numerous studies about health issues in shelter/rescue dogs versus private breeder dogs - it is about the same.
I think that as far as the USDA is concerned, the primary focus is the protection of people from animal borne illnesses (e.g. mad cow, salmonella, etc). As long as the puppymills can prove that they do not have any illnesses that can be transmitted to humans, they are doing what is legally required. Remember that dogs and cats are considered livestock, so these breeding facilities only have to conform to those rules and regulations. If you have ever seen a egg farm, you would never eat eggs again - the way these chickens are housed is even more horrific than puppymills. Also, it is a business that puts money into the economy - that is all that our state and federal governments really care about.
These are just my opinions and I do not mean to offend anyone who does breed and show animals.