They begin to believe they are wonderful, not because of who they are, but simply because they exist. They are unmotivated to work hard. Anything that is overdone loses its effectiveness. Finally, rather in improving self-esteem, this sort of treatment actually decreases it. They begin to believe that they must be praised for stupid things because they aren't really any good at hard things.
Expectations are clearly low.
You don't set low expectations for those who are capable. I once had a high school teacher who gave me my first D in English. I was shocked. I had always gotten A's for my writing. Every teacher praised my work, read it to the class, predicted a great writing career for me.