Yes it was the iPhone 4 and it was $649, or $968 in today's money for 16gb of storage.
That mean's today's cheapest iPhone is 40% cheaper than this base model you're referring to, as well as being tons better. If you don't think 40% is a hefty price drop then idk what to tell you.
That's for the 16gb by the way, the next year's 64gb would've constituted a 53% price drop today.
And that's still for a wildly different phone. You're getting way, way more value today. Longevity alone is easily twice as long, meaning the cost-per-use or cost-per-year can be halved, leading to >75% price drops.
The idea Apple should be going even beyond that to make low-end new phones for a company that positions itself at the top of the market, is just silly. Apple has a long line of phones available for purchase on the secondary market, refurbished market, old-model market, is known to replace batteries 7 years after discontinuing the sale, and can be replaced with non-official batteries as well.
Like you could literally buy an iPhone 12 on the secondary market for $50 and do a $39 battery replacement, or buy it fully refurbished for $150. You can buy a million android phones at any spec level. The idea that Apple should compete at this budget with its own old phones and android phones is a bad idea and the idea Apple entry level phones aren't much cheaper, have more longevity and have wildly better specs than before, is empirically not true.
Is it technically possible for Apple to create a $400 phone that's still much better than the original iPhone? Obviously I agree with you that it is. Does it make sense for Apple to do it? Obviously not.
In this thread you'll have people saying 60 hertz is ridiculous in 2026 on an iPhone 17, and people saying they're completely fine with iPhone 12 specs in 2026 and wanting to get more discounts for fewer specs (ignoring the fact you can indeed simply buy that iPhone 12). The remaining market is so slim it's not worth getting into, but you can't please everyone with a lineup of 5 phones.