Imagine a sandbox, a very large sandbox. Now imagine a large number of persons playing in the sandbox building sand castles of various shapes and sizes and qualities. Now imagine that the owners of the sandbox have some sort of magical system that has rules that allow each builder to be rewarded for the quality of his building so that he receives cash based somewhat loosely on favorable votes cast by a subset of the population of builders. Finally, imagine that there is a flag system somewhat like the voting system that can be used only to indicate that some sort of infraction of the sandbox's rules of conduct are evident in a building which results in a reduction of the amount of cash previously voted to be given to its builder.
If you did a good job of imagining then you have a reasonable analog of steemit.
Now imagine that there was one builder and a building he built that many of his fellow builders voted for, resulting in the builder having much cash owed to him. This building did not violate any rules of the sandbox, and no rules were violated during the building of the building. This made the builder very happy. His peers appreciated the quality of his work.
It would seem that everything was working the way it should in this sandbox civilization.
Now you need to be told that the power of each person's vote (either to pay a builder or to flag his building as being in violation) depends upon how much cash the person has earned or paid into the system: the more money the more powerful the vote.
Now imagine that a very rich person in the community, an old timer with a sense of ownership and concern for the community, decided to flag the building, Not because it violated any rules of the community, but because he did not like the building -- it was repetitous of other earlier buildings -- and he said as much in a comment when he flagged it.
This had the effect of overriding almost all of the favorable votes the builder had received so that instead of $thousands he was now to get $hundreds -- a big let down.
In subsequent continuations of conversations about this some said that the flagger did a good thing, even though he used the flag for a purpose it was not intended for. Others had the temerity to point out that the flags were not intended for that.
My view is that the flagging was wrong. First because it was an improper use of the flag; there is No downvote capability, but that is what it was used for. And second because to prevent what happened the builder would have had to examine each and every building in the community, past and present to adjust his building accordingly to prevent being similar to previous buildings.
A new person coming into this community cannot and should not be expected to know what has already been said or done. Furthermore he should be allowed to say whatever he wants to, as long as it doesn't violate the rules of the community. And if the unwashed voters choose to vote him into a massive payday the rich old-timers ought to let it happen, not misapply their vast influence to destroy a person's achievement.
In case you think this is all vapor, know that 
In the context of the sandbox, this is like some huge gorilla walking around and defecating on whatever he doesen't like. If he does it occasionally he might get by with it. If he does it often the sandbox will become a stinking mess and many that used to build there will go elsewhere, rightfully so.
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The foregoing describes my view of the problem. The following is my suggested solution.
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Implement a real downvote mechanism.
Restrict downvotes to one per day per person.
Make each downvote count the same as every other, and cause a downvote to reduce the expected gain of the downvoted person by 1% of its highest value.
Charge the maker of invalid flags the larger of 10% of his steem power or 90% of the amount the person flagged lost.
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Think about it. Do you want to live in a sandbox full of feces? If not, what is your solution?
Is steemit still the wonderful place we were told it was before we came here?