That seems like a bit of an exaggeration, or a popular trope at least by people that feel put upon by their coworkers. I've never worked with another developer that couldn't code their way out of a wet paper bag. I think the the terrible state of interviews is due to people wanting to think (or wanting others to think) that what they do is more complicated than it actually is.
> I've never worked with another developer that couldn't code their way out of a wet paper bag.
I have. Not many, but during my time consulting, some of our more pathological clients would have one or two programmers who literally couldn't program.
