What happened in the 1970s and 1980s that fundamentally altered most americans' expectations of the federal government?

In the 1970s (having begun already in the 1960s), the experience of the Vietnam War caused Americans trust in the federal government to erode.  Also in the 1970s, the Watergate scandal eroded Americans' trust in the government even further.  In 1964, according to Pew Research Center data, those who said you could trust the federal government was at 77%.  By 1974, that figure had dropped to 36%.

Then, in the 1980s, the conservative movement led by President Ronald Reagan trumpeted the idea that we needed to approach issues in our country less through government and more through the private sector.  In his inaugural address in 1981, Reagan said, "Government is not the solution to our problem; government is the problem."  This was a change in people's expectations of the government, as compared to previous decades and administrations.