Your labelling is a sad event, and it hurts my heart to hear stories like that. Lowered expectations make for lower performance, but it takes a good teacher to make the material work for each child. Many are slothful. I was in education (CAtholic and Public) for many years, and saw the decline of the education system as years passed--why? When the Federal Government became involved, then labels had to be used for funding and testing...
No Child Left Behind assumes all children are equally capable and equally motivated, and that not true. I worked in low-income areas. Many of these parents received all of their childrens meals, clothes, and daycare from the school systems. The parents don't parent. One of our tests was to hand a preschooler a book to see if they knew how to hold it and turn pages. So many had never seen a book. Several didn't know their name. Parents relegate all of their responsibilities to the government and then the kids are like animals.
I see some homeschoolers who do a great job, and sadly, a small percentage who do not. Most fall down in math and science. Or inject the child back into public school in high school, which is a culture shock.