THE NATION this past week got a brief glimpse of a government with its "non-essential" services shut down. It was a perfect occasion for yahoos to cheer and ask, "Who needs that sorry collection of overpaid, underworked bureaucrats, anyway?"

Alas, the sad truth is that we not only need a U.S. government, but one in far better shape than the one we have. In fact, the federal government today is "broke" in more ways than one: It badly needs fixing simply to carry out the law of the land. Indeed, during his eight years, President Reagan, aided and abetted by Congress, created a hollow (too few staff overall), inept (too few competent, experienced staff) government -- precisely the federal structure capable of producing the HUD and S & L scandals.

Far more important than these highly visible scandals, however, are the less dramatic everyday efforts of badly understaffed federal departments that are charged with responsibility for the safety of the food we eat, the medicine we take and the air we breathe. Such once outstanding agencies as the Food and Drug Administration and the Social Security Administration have been buffeted by a combination of personnel cutback, increased demands for services and losses of top staff and specialists.

The FDA, which touches the lives of nearly all Americans, is estimated to be involved with products that account for 25 cents of every dollar spent by consumers. During the Reagan years, though, the number of food and drug inspections declined from 33,000 to slighly under 20,000 -- a drop of nearly 40 percent. Overall, FDA personnel fell by 9 percent in a period in which the AIDS epidemic, unknown in 1980, and a dozen new laws greatly expanded FDA's staff requirements. The law mandates FDA to review new drug applications within six months; today, the average review takes 31 months.

FDA has trouble filling both top management and specialist positions in part because federal salaries are not competitive, because FDA facilities are overcrowded and dilapidated and because equipment is not state-of-the-art. (Four of the FDA's nine laboratories were rated "unacceptable" by current standards. In some cases, high temperatures and humidity would shut off sensitive scientific equipment and ruin efforts to test food products.)

During the last six years, 36 of 64 top career management positions were vacant in periods ranging from four months to over five years. FDA is a "high-tech" agency needing competent biomedical engineers, microbiologists, medical officers, pharmacologist and mathematical statisticians. But FDA could offer a PhD biostatistician only $27,000 compared to an average starting salary for a university assistant professor of $40,000. Dr. Samuel Thier, president of the prestigious Institutes of Medicine, calls FDA "a demoralized group, being asked to do too much with too few resources."

Despite significant increases in demand for its services, Social Security Administration staff declined from 80,000 to 63,000 (over 20 percent) in the Reagan era. SSA was forced to assign untrained, inexperienced persons to handle telephone calls during busy periods. An internal study found that staff answering inquiries about Social Security benefits produced a wrong answer 40 percent of the time; incorrect responses rose to 80 percent for SSA's Supplementary Security Income (SSI) program. Other studies showed that tens of thousands of poor aged, blind and disabled persons were mistakenly deprived of their SSI payments because of staff shortages. Similar understaffing and ineptness is found in most other nondefense agencies. Between 1982 and 1988, the federal social program agencies suffered the following personnel reductions: Labor (16 percent), HUD (17 percent), Health and Human Services (23 percent), and Education (32 percent). Even worse were the declines in the quality of the federal work force.

Reagan claimed that federal employees were overpaid and underworked, but in fact little over a million civil servants are responsible for all other federal efforts apart from the Defense Department (including the uniformed services) and the Post Office, which together have 4 million workers. Despite ever rising demands, the U.S. government has one-sixth less civilian federal staff per 100,000 persons in the population than in 1968. By contrast, state and local government employment since 1968 has increased by two-thirds.

The cost of hollow, obsolete government has been high. The Internal Revenue Service technology has been described by former IRS commissioner Lawrence Gibbs as "Ice Age." IRS tax audits have dropped to less than 1 percent annually. No one knows how much in legitimate taxes IRS misses, but delinquent taxes have risen from $18 billion in 1981 to $60 billion -- an increase of over 300 percent.

An independent audit performed in 1988 by the accounting firm Price Waterhouse for the General Accounting Office found that HUD's Federal Housing Administration had suffered a record loss of $4.2 billion. Comptroller General Charles Bowsher noted that the audit offered considerable evidence that FHA did not properly oversee private lenders. One reason is that HUD cut more than 4,000 persons from its payrolls, many of whom were people in the field who monitored HUD (FHA) projects.

In 1982 the Garn-St. Germain Depository Institutions Decontrol Act allowed S & Ls to invest deposits much more broadly than the traditional loans for housing. As Paul Zane Pilzer observed in "Other's People's Money: The Inside Story of the S & L Mess," "What virtually guaranteed that the Garn-St. Germain Act would lead to disorder was that Congress and the Reagan administration neglected to accompany it with any sort of increase in government supervision. Indeed, oversight actually declined."

The losses from a hollow government go far beyond the financial. The war on drugs is impeded because FDA does not properly regulate methadone maintenance treatment programs. An internal Coast Guard study recently reported that a severe shortage of trained Coast Guard inspectors made the inspection of oil tankers "barely adequate." But the 1989 Alaska oil spill and numerous lesser spills surely indicate that inspections are grossly inadequate.

Since 1978, the number of Department of Agriculture inspectors in slaughter plants has fallen from 8,400 to 7,100. Fish consumption has risen from 12.8 pounds per person in 1980 to 15 pounds in 1988, and contamination of public waters has brought increased gastrointestinal illness and hepatitis. Yet the federal government has no mandatory fish inspection. President Bush has gone out of his way to praise career civil servants who had been the target of attack in the Reagan era. But the bureaucracy remains trapped like so much else in the pinch of deficits and an America that suddenly sees itself as poor. Claims that the government that governs least governs best, or that the unregulated free market alone can do the job of protecting the welfare of citizens fit well with America's longstanding mistrust of government. But they do not accord with current reality. Federal, state and local governments in a modern society provide services ranging from law and justice to educating our children to managing the overall economy. Continuing "government on the cheap" is a formula for disaster. If the federal government stays "broke," its efforts will keep going wrong.

In the case of financial institutions, for example, restoring competence demands an increase in funds to pay higher salaries to compete with private industry for well-trained, experienced persons. Not doing so is to risk billions in losses to save a few million in salaries. That is the ultimate message of the S&L experience.

Those on the political right and left can legitimately disagree on particular policies or on the federal government's role. But the administration, Congress and the public must recognize this hard organizational imperative: If the federal government's capacity is not restored, Reagan's legacy of an inept federal government will haunt America for generations.

Walter Williams, a professor in the Graduate School of Public Affairs at the University of Washington, is the author of "Mismanaging America: The Rise of the Anti-Analytic Presidency," published next month by the University Press of Kansas.