There's nothing like a good war to boost Americans' confidence in the ability of their government to do things right. But the effect doesn't last forever.
The Revolutionary War instilled confidence that the thirteen states could work together in a common purpose. During the war they crafted the Articles of Confederation to bind them together. After the war they confirmed the consolidation in the Constitution of 1787.
During the Civil War, Americans granted government extraordinary powers to defeat the southern insurrection, as well as to foster the creation of a national economy. The spillover of the victory included the three Reconstruction amendments, which cemented the dominance of the federal government over the states.
World War II picked up where the New Deal had left off, extending the reach of the federal government into areas of American life previously preserved to the private sector. The economy was effectively nationalized for the duration of the war. The confidence Americans derived from the victory of their democratically elected government over fascism carried forward into support for the publicly funded interstate highway system in the 1950s and the Great Society reforms of the 1960s.
But the effect was wearing off by the 1970s. The Great Society didn't turn out to be as great as its promoters promised. In the jibe of his critics, Lyndon Johnson and the Democrats declared war on poverty, and poverty won. Maybe government didn't deserve the confidence Americans had accorded it.
The war in Vietnam didn't help. By the 1970s, victory seemed a vain hope. America would be lucky to get out with a bloody stalemate.
Then came Watergate. The arrest in June 1972 of intruders at the offices of the Democratic National Committee at the Watergate complex in Washington suggested something was amiss in American politics. As the full story came to light of the operations by the Nixon administration against the Democrats, and of the obstruction by the Nixon White House of the Watergate investigation, the willingness of Americans to believe that their government could be relied on to do the right thing strained and snapped. Nixon's resignation ahead of impeachment and his subsequent pardon by Gerald Ford completed the conversion of many Americans from confidence to cynicism regarding their government.
The country has never recovered from this betrayal of trust. The revelations of the Watergate probes prompted investigation into other government activities. Congressional committees discovered that the American government had conspired in the overthrow of unfriendly regimes in foreign countries. American operatives had tried to assassinate foreign leaders. From respecting and admiring their government, Americans increasingly came to distrust and despise it.
Politicians picked up on the change of sentiment. Ronald Reagan in his first inaugural address pronounced government to be not the solution to America's problems, but the problem itself. Congressional Republicans led by Newt Gingrich declared war on government waste and inefficiency, which translated in practice into a war on government per se. Republican candidates for office were compelled to pledge not to raise taxes, the sooner to “starve the beast"—said monster being government.
By no means was Watergate the sole cause of all this. Large movements in history don't spring from single events. But it was the proximate trigger of much of what followed. Watergate was, in fact, much like the piece of hydraulic infrastructure for which it was named, a control point for the flow of water—in this case a rising tide of unhappiness with government that hasn't ebbed even yet.