People are worse at mental arithmetic than they were in the recent past, so it's not clear that they aren't "dumber" in the sense people meant at the time.

And did our thinking about the importance of being good at arithmetic change in response? I think so.

We also used to be much better remembering things, when we relied on oral histories, our memory skills have degraded quite a bit. And there's a quote from Socrates criticizing how writing is a crutch that degrades our skill (https://www.perseus.tufts.edu/hopper/text?doc=Perseus:text:1... , the last bit). Over time, we've just moved to valuing other things more.

Well, with anything, practice is key. When I was in school, I was in a math competition where you had to do everything in your head. There was no scratch paper, you could not modify your answer once written, and erasing was obviously not allowed either. I wasn't the greatest at it, but I didn't suck at it either. That was decades ago, and I no longer do math in my head that way. What I used to do in seconds for a result now takes a couple of seconds to think about what needs to be done and then the time to come up with the result.