Stephen Austin thought he had hit upon a pretty good invention: the world's first permanent waterway-dredging system. It was an idea that the St. Louis engineer figured would save the federal government billions of dollars because it would make routine dredging obsolete and equipment last longer. At a time when Washington politicians were committed to reducing budget deficits, Austin assumed that he would find an eager buyer here.

But five years of trying to peddle his idea to the U.S. Army Corps of Engineers has left him broke and frustrated. He's had two cars repossessed, his phone bills run $300 a month, and he says he can't get anyone in the corps to return his calls.

"There are thousands of people out there like myself who have what they consider the better mousetrap, but can't do anything with it," Austin explained. "I've gone broke. I've gone bankrupt -- it's a sad story. "I've gone through every penny I've got . . . . I mean, I don't have anything."

Most recently, Austin contacted the Office of Management and Budget, where staff member Joyce Morrison promised to at least find someone to return his calls. But Austin's tale is a familiar one to scores of citizens who think that they have a way to save taxpayers' money -- only to encounter what to them is a nameless, faceless stone wall known only as "The Bureaucracy."

"We get a batch of letters every day from frustrated Americans who have good ideas, but no one will listen to them," said J.P. Bolduc, chief operating officer of the Grace Commission who now heads Citizens Against Waste. Bolduc said the group, an outgrowth of the commission, encourages phone calls from the public and receives about 1,000 each day, many of them serious, well-researched proposals.

"When these suggestions come in from American citizens," he said, "there is really nothing in government today that provides incentives for federal employes to pick it up and run with it. For the federal employe, it means nothing but additional aggravation and frustration, especially trying to convince superiors. And you're not going to get anything in the way of additional pay or a bonus, so your reaction to a new idea is to kill it."

Several government agencies say they are receptive to citizen-generated ideas. Also, several programs are aimed specifically at helping small businesses and individuals develop ideas.

The General Accounting Office has a 24-hour, toll-free "fraud hotline" for citizens to report waste. The hotline has received 53,000 calls over the last five years, and a GAO spokesman said that about $24 million has been saved as a result. But the GAO is better equipped to deal with reports of waste than with new ideas or inventions, although, the spokesman said, those suggestions are forwarded to the appropriate agency.

The Energy Department, for one, has an Office of Energy-Related Invention Programs that supports inventors -- such as a California engineer who recently invented a microwave pothole paver. Jack Vitullo, the office's director, said that in the program's 10 years, 195 inventors have received support, and 70 more are waiting. The catch is that the inventions must first be energy-related, and the inventors must be having financial trouble getting their inventions developed.

Vitullo said he sympathizes with the problems of people such as Austin. "We have in both government and industry the so-called 'Not Invented Here' syndrome. They figure they've got a lot of important people who are paid a lot of money to come up with things themselves."

In 1983, Congress created a Small Business Innovative Research program, requiring agencies to set aside a small percentage of their research budgets for small companies. Agencies will first publish a list of potential research subjects, then small firms get to bid on them. A winner receives $50,000 to develop his idea, and more later if the agency likes it. But in these cases, the agency and inventor work closely from the beginning on a specific project.

That still leaves many people who feel that they have no place to go.

Some have turned to the OMB because of its high profile in the budget-cutting process. As Austin said, "I finally went to OMB. If anybody can shake 'em loose, they can."

"We're kind of the place of last resort for people when they've gotten the run-around from all the other agencies," said OMB's Morrison. "You, of course, have the cranks out there, but there are people out there with good ideas."

Among those who think they have a good idea are Norman and Beverly Halem of Cocoa, Fla. The Halems patented a gadget called the "Pass Master" that disconnects a car's air conditioner when its engine is accelerated, thus saving gasoline. Since 1978, the Halems have been negotiating with the General Services Administration, trying to get Pass Masters installed on government vehicles.

Although the Environmental Protection Agency tested the Pass Master and reported that it was an effective gas-saving device, GSA wanted more tests performed. In the meantime, it began converting its fleet to smaller, more efficient four-cylinder cars, that, it says, make the Pass Master less effective than it is on larger-engine models. Also, the GSA noted, the large auto makers were already developing a similar device.

"Frankly, we're fed up," said Norman Halem, who testified in 1979 at congressional hearings on the resistance encountered by small businesses. "I'm ready to drop the whole thing . . . . How many times can we go to Washington and stand up on a soapbox? We cannot afford to advertise. We have decided that in 1985 we cannot afford to push it anymore, we're going to just let it take its course."

The Halems see theirs as a case of a small firm competing with Detroit's giant auto makers, vying for a sympathetic ear in an atmosphere of which they say, "If it wasn't invented in Detroit, forget it."

But to the Halems and Austin, the larger concern is for the future of individual creativity in America.

"The fact that we will probably end up going out of business is not the issue," said Beverly Halem. "The issue is, what is happening to the inventiveness of this country if you're always considered too small, and all ideas have to come out of IBM? We've lost what America was founded on."

Said Austin: "I don't have what they call credibility because I'm small and I'm new. The stifling of creativity is so evident."

"It's a big problem, it really is a big problem," said Bolduc. "Maybe we need a national ombudsman, or maybe we need a built-in incentive system for employes who take these ideas and run with them."