In those days, interest rates were sky high and rising and the nation had suffered a series of energy shocks that in inflation-adjusted dollars made today's gas prices look cheap.
In domestic politics, Americans still had not completely recovered from the impeachment and subsequent resignation of President Richard Nixon.
Abroad, our prestige had hit a new low after President Carter allowed the Iranian hostage crisis to consume the attention of his administration.
And then there was the Cold War, and considerable doubt about whether America could win it.
But along came Reagan, the California politician whom the liberal left considered, at best, a B-grade movie actor and, at worst, a complete idiot. All Reagan did, however, was turn the situation around.
He revived the economy by cutting income taxes and removing government regulations from business. The result was a burst of creativity and growth that still propels the economy today.
He restored the nation's standing abroad by rebuilding a U.S. military still devastated by the Vietnam War. He stood up to the Soviet Union both militarily and morally, accurately labeling the tyranny that had half of Europe under its thumb as an "evil empire."
In retrospect, it is obvious that the "malaise" that President Carter saw in the American spirit was really a failure of will in the country's leadership. Under Reagan's leadership, the "evil empire" collapsed and the economy took off like a rocket.
It's debatable whether the threat faced by President George W. Bush is more or less serious than that faced by Reagan. Fighting terrorism is a different ballgame than fighting the Soviet Union.
But we find one great similarity between our current president and the late Ronald Reagan: Their faith in the goodness of America and their belief that this country plays a special role as a beacon of freedom in the world.
We see parallels between those who criticized Reagan for his strong anti-communist stand and those who have criticized Bush for trying to bring democracy to the Middle East. Those who saw democracy and communism as morally equivalent in the 1980s do not differ that much from those who compare the mishaps of our liberation of Iraq to the tyranny of Saddam Hussein.
Fundamentally, Bush has echoed Reagan's belief in the goodness of people and their yearning for freedom and prosperity. Had Reagan been able to advise Bush on the situation in Iraq, we are certain that he would have agreed with Bush's belief that given the chance, the people of Iraq will choose to live free. He also would agree with Bush that America has an obligation to help them escape from tyranny and establish a democratic government.
Bush has often been called the heir to the Reagan legacy. Certainly, he shares Reagan's strength and courage. He lacks, however, the communication skills that Reagan had honed over a lifetime of acting and public speaking. If Bush is to someday be seen as one of the "big" presidents, he must do a better of job communicating his vision for America and the world.
It's not enough just to have a vision. As President Reagan proved, a great leader must enlist the support of the American people and world leaders by effectively communicating that vision.