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The shuttle was supposed to be just a small part of a massive and ambitious program that included:
1. A reusable low-cost earth-LEO transport system (the "space truck")
2. An orbital station for staging and refueling
3. An interplanetary nuclear-propelled (think NERVA) vehicle fleet
4. A moon base
5. A Mars colony, and beyond
The idea was that the low-cost shuttle would ferry people and cargo to the orbital station. From there, the nuclear vehicles (which would never have landed again on earth) would transport the people/cargo to their ultimate destination. Those destinations initially included a fully-fledged moon base and a rudimentary automated station on Mars.
This was 1971. Congress were sick of space by now, and such a massively ambitious and expensive program just didn't jive with the public mood at the time. The moon base was the first to go, and the semi-occupied Mars colony was downgraded to a simple Apollo-style Mars landing. But this, too, was too much, and the program was further gutted to only the low-orbit station, with a reduced size and purpose. With no massive space station as a staging ground and no Mars/moon destination to go to, the interplanetary spaceship fleet became redundant, and was dropped as well.
What remained was the truncated space station plan which would eventually become Skylab (and then, with Soviet experience with modular stations, the ISS), and the space shuttle program, which was now more or less useless.
The shuttle program was further sabotaged by Cold War politics. Instead of going with one of the simpler, smaller and more ballistic designs, NASA was forced to choose a large and aerodynamic design out of fear that the shuttle could be captured by the Soviets in the case of an emergency re-entry. This plane-like design has proven to be overly complicated and expensive. The space shuttle program is rightfully seen as a failure.
