I feel like we have this thread all the time, and I would like to offer my perspective as an amateur animator:
Animating is boring, unrewarding and basically all around sucks dick.
I think animation dwindled in quality because there was simply no demand for high quality animation that could ever meet the magnitude of the exorbitant cost of high quality animation, both in terms of money and time.
The number of us out here in the world who like looking at things that are well-animated enough to see the craft's death as sorrowful are not that many. Most consumers of animated media don't care. The underlying science and genius of a 10 second sequence that took three weeks just to plan is lost on most people.
So, if you want an answer for why western animation has lagged behind Japanese animation and shit like that: no one wants that fucking shit over here. Not enough to speak with their collective wallets.