So the issue lies in the quality of the new loot being created?
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Slightly. It also lies in the quality of the original loot, it was too well done. In order for new loot to be viable, you have to basically just constantly one-up the previous tier. Example: Gjallarhorn. The sheer damage it does compared to EVERY other heavy is silly. It shouldn't have been introduced in Tier 1 of exotics, it should have been brought in after 2 or 3 expansions. In order to make something more effective, you'd have to make a new launcher that is even more beastly (which is really hard) or let it die off and become obsolete due to how low its ATTACK stat is compared to others (which takes 2 whole tiers to do).