Why contractors?

This has been a burning question I've had for a long time: excluding outsourcing, why hire contractors?

Every benefit I've ever seen of contractors doesn't make sense.

1. Don't have to pay benefits. Well, no, you're paying their benefits, it's just built-in to price. People need health insurance, retirements, etc. That need doesn't go away with a 1099. So, any contractor with a brain would simply add the cost of their benefits onto the price you ultimately pay. Suppose a contractor pays $15/hour for their health insurance. That's simply going to be added to the hourly rate they charge.
2. Can fire them easily. Every state except Montana is a right-to-work state. You can fire anyone for no reason. Just do that.
3. Needing specialized skills for the project duration only. Okay, but what about after the project ends? Someone will have to maintain the project? The contractor has an incentive to simply complete the project quickly, why on Earth would they build it in a way that is maintainable? That's outside the SOW. I've never seen a project that once complete is never touched again.
4. Don't have to pay taxes. Okay, so payroll tax is saved, but once again that expense doesn't vanish. They're going to add that (or add more if they pay different taxes) to the final cost of services rendered.
5. Not enough work to justify 40 hours/week. This is the only one that makes sense, but there's still plenty of people with specialized skill-sets that are seeking part-time employment.

I have to be incorrect about this, but I can't think of why. Surely there's no way that companies/the government are being taken for fools to the tune of billions of dollars every year.