In the earliest days of private air travel, one of the biggest and most reliable customers was the government - the US Postal Service. The government can create an initial market that allows private companies to be created and innovate to become cheaper and more reliable; that innovation creates makes the platform reliable and affordable, which encourages private market demand.
That's not to say that I support this decision. As stated by some other posters here, private (or publicly traded) companies aren't interested in the sort of exploration for exploration's sake that the government can do - they only "explore" if there is a known profit to be made. The problem with space exploration is that despite any evidence of great things sent back by robotic probes, there aren't really any clear avenues for profit in deep space missions. That doesn't mean that the opportunities aren't there, it just means that we don't know about them - the government can help us find them, and along the way the government can share what it learned with the nascent commercial spaceflight industry - to the benefit of all.
Or we can scrap it and hope for the best. America has already lost in the commercial satellite launch business; now we're on track to lose the rest - then what? We are one of two nations on this planet that have both the means and experience to create a great human spaceflight program. Are we going to throw that away?