This is absolutely the case. It isn't that we have a generation of dummies, per se. But a disproportionate number of smart and athletic kids have greater opportunities than the rest. We get some really great kids who want to serve their country. But we turn down a lot more fat slobs and dummies who don't have anywhere else to go. Most of the best and brightest don't feel the need to give up part of their youth in service to their country.
I work with college kids. In recent years, many have looked at the military for either extra income/benefits/additional skills for LE career. Most either want part-time like NG or ROTC, but stay full-time as students. A small percentage want to do the military as a full-time career, though many aren't sure if they will put in a full twenty. Most of all of this service is due to how costly it is to go to college anymore. A few who went full-time wanted to get away from the Midwest/home and travel for a bit as well, and they figured the military was a good way to do that I guess.