Sorry, we've been pretty busy at work so I don't have the time during the day to write out a long answer resplindent with pithy comments.
I think, and this is just my personal opinion, that this is the natural evolution of a modern technology. Going back to WWII when the military/government was developing jet aircraft or microwaves...after those techs were developed the the point where it was no longer worth keeping it a secret, private industry was let into the mix to make a buck off of it. Today we have airlines that charge you 25 bucks to pack a bag and 60 second popcorn.
That last technological leap was carried out because of a military necessity. We had to lest those filthy huns rape Lady Liberty. But we, the people did not really see any of those benefits (aside from the smacking our boys gave them in Berlin and Hiroshima!) until they were released after the war.
There's only so much government can do. There are several reasons. The main reason is - in theory - they're using the taxpayer's money to do whatever so they have to spend it responsibly. While we may all laugh at this it means they can't really take too many risks in the likely case that the "next big thing" that costs "hundreds of millions of dollars" turns out to be a "flop". Then Joe Sixpack will bitch and moan on how the government wasted his money for nuthin'. To say nothing of the outcry the government will have showered upon it if some people die in the process. Then the hearings and investegations all while Project X is shut down and we ended up wasting the money anyway because it's not worth the risk.
Private industry isn't tethered down by this. While they do - in theory - care about their workers and don't want to waste their entire budget on something that won't work...that's the nature of the beast. Not everything will work. Look at all the hundreds of experimental aircraft that didn't make the cut. Did that stop Rockwell or Northrop or Grumman or Northrop Grumman from going back to the drawing board and taking a go at the next bid? No. They were in it for the money and today we have the B2 and the Nimitz Class aircraft carrier because companies competing for something makes a better thing for less money.
Now, let's look at NASA over the past 50 years. We peaked 40 years ago. Apollo stagnated, the government lost intrest and we got stuck with the shuttle a decade later. The shuttle is a perfect example of what happens when the government designs something. They wanted something cheap so the taxpayer wouldn't bitch. The DoD wanted something big so they could use it to launch stuff, so we were given an expensive thing that wouldn't work if it froze. The inspiration was gone. It took the powers that be 25 years before they realized that the system was broken so they designed another broken system and didn't pay for it. There you have Constellation. Okudagrams aside, it's full of suck. Why the hell would you send two rockets do to the job of one?
Why? Because no one else can.
So now NASA is going to invest billions of dollars into companies so they can come up with better ways to do it themselves. The Kennedy Space Center is going to modernized to handled the increased load of these new spacefaring races.
Would I like to have seen NASA back on the moon in 10 years? Yeah. But it wasn't going to happen. It didn't matter how many billions of dollars we were going to throw at it. Ares was destined to be as easy to maintain as the shuttle (which we were promised each orbiter would fly about once a month for only a decade). And there's no real drive to do anything better? You customers aren't going anywhere. You're always going to have money and who cares of you're up to your eyeballs in debt.
A private company can't operate that way and will be forced to do it better.
Besides...if you look at Sci-Fi...private industry was supposed to be involved in space travel years ago. Pan-Am Space Clipper anyone? If we can get an entire industry set up I think that will be a laudable achievement.