Interesting replies across the board! On one hand, I agree with what a lot of people are saying - that “folk music” has merely permutated according to the way that it’s been doing for a long time. When we think of Woody singing about workers, it’s the 1930 equivalent to a bunch of MFA students singing a punny anti-Bush song. I’m not sure that proves anything other than that modern folk really, really sucks. 
Part of my complaint is that I feel that there are a lot of legitimate artists working in what I define as the capital-F Folk tradition - that is, writing songs from a ground-level or even outsider social perspective, then recording and presenting/communicating/releasing those songs in an equally non-slick, non-corporate, non-mainstream america manner - that are excluded from the “Folk Genre” scene and fans that tends to pack out Falcon Ridge Folk Festival, and so on.
John Darnielle (who has recorded as “The Mountain Goats” for about 20 years now), is probably the most truly Folk artist in America, a true “voice of the people” songwriter in the tradition of Dylan and Guthrie. The guy’s body of work is simply unparalleled, but I’d be willing to bet that most Dar/Nields fans have never heard of the guy because he’s not a part of their “folk music” genre. I could go on all day - Calvin Johnson, Phil Elverum (who records as “Mount Eerie”), Adrian Orange (who often records as “Thanksgiving”), Karl Blau (truly a Moondog-level eccentric for our time), Mirah Yom Tov Zeitlyn, etc. - and that’s only dealing with one tiny Pac Northwest crew! - before you even get into the Devendras, Kimya Dawsons, Joanna Newsoms, Espers, Marissa Nadlers, Handsome Family, etc. etc. etc. etc. etc. ad infinitum. - all artists who are truly living and creating in the American Folk tradition.
This highlights the real problem with “modern folk” - it’s a genre rather than a medium. “Folk fans” don’t actually want legitimate folk music created by people living and working in the American Folk Tradition, they want “folk music,” a Starbucks and NPR-approved subgenre of Adult Contemporary Pop Music created by people like Dar Williams and the Nields. They should just call it something else.