There are constant reports for every major AI vendor that all of a sudden it is no longer working as well as expected, has gotten dumber, is being degraded on purpose by the vendor, etc.

Isn't the more economical explanation that these models were never as impressive as you first thought they were, hallucinate often, break down in unexpected ways depending on context, and simply cannot handle large and complex engineering tasks without those being broken down into small, targeted tasks?

That's one of the possible explanations, but I think too many people are seeing the same symptoms (and some actually measured them).

An "economical explanation" is actually that Anthropic subscriptions are heavily subsidized and after a while they realized that they need to make Claude be more stingy with thinking tokens. So they modified the instructions and this is the result.