Games as a whole aren't going to step backwards in time just to make money.
Oh I think you would find many people who would argue they have done exactly that in many regards. Graphics aren't everything.
That said, I agree some game properties are better with larger budgets but the dev budgets themselves aren't really what people are criticizing. It's the tertiary stuff like marketing buys that are starting to dwarf actual dev costs that is alarming.
You also can't look at consoles and say that those games aren't making any money, when it's the primary source of income for the console makers. The hardware is sold at a loss, they're making money hand over fist on the games themselves, and often on new franchises.
I'm not sure the console model is sustainable going forward. Both Microsoft and Sony actually lost money on their console efforts until about a year ago. The only company to really "make money hand over fist" was Nintendo who sold their console at a profit.