If we're going down that path, why not just print out the relevant bits of paper for anyone that asks? For a small fee of course. We can end the race to the bottom and go straight to the finish line.
That was largely employers responding to previous rounds of dumbing down. If they couldn't fill positions with college graduates then they wouldn't be requiring them.
No, this was caused by employers abdicating their responsibility to actually interview and/or train people and instead taking "college graduate" as a proxy (mostly for "willing to sit in a seat and swallow bullshit").
Of course, once they made "college degree" a proxy, everybody on the production side responded correctly and reduced into to its core essence as you said: "pay for this piece of paper and who cares about quality since an interview won't test me anyway".
If it actually mattered, the most rational action is for employers to either 1) interview people without college degrees or 2) train people without college degrees. The fact that neither of these is occurring tells me that the employers aren't really that bothered by the current situation.
Students and colleges are responding rationally to what the employers are demanding.