I get the sense everybody knew this was a bad idea, but did it anyway. Gotta love the government.
Not so much a bad idea as ahead of its time - the technology just wasn't ready yet. I was only a teenager when NASA abandoned the fully reusable 'two stage' shuttle concept - but even then I knew that basically meant throwing out the baby with the bathwater.
NASA has long been accused of being more interested in "sexy" than in functionality, and the shuttle was "sexy". There have long been advocates of "Big Dumb Rockets" - simple, (relatively) cheap, not man rated so reliability was not as critical. One proposal was for a Saturn 1B sized rocket based around a
single F-1 engine, million plus pound launch weight that could put the same payload as the shuttle into orbit but for much lower cost (there was even talk of recovery and reuse of the F-1 engines but I don't know how viable it was). But that NASA wasn't interested because such a rocket was boring and the shuttle was sexy
Although to be fair, boring doesn't get as much funding as sexy
My personal vision has long been for a two stage shuttle - horizontal takeoff, the first stage being air breathing using hydrocarbon liquid fuel and some combination of turbojets/ramjets/scramjets, and a pure rocket H2/O2 orbiter. Of course it would cost a large fortune to develop, but per launch costs would basically be fuel and maintenance. Sadly it won't happen in my lifetime. Neither the money or the technology are there to make something like that viable.
It still seriously ticks me off that all that engineering that went into the Saturn V was lost - I still consider the Saturn V/Apollo (along with the associated moon landings) to be the greatest technological achievement of the 20th century and we literally threw that away.