One of the basic lessons that they teach in places like business schools and need to spend a lot of time hammering into your head... because it feels so unnatural... is the sunk costs fallacy. Emotionally, we hate throwing out something we spent good money on. But sunk costs are gone forever, the only thing that matters are the costs in front of you.
This means that Hollywood films are completed but then sent the the vault because the cost of releasing a film outweighs the potential money they would make. The military has purchased planes that became obsolete by the time that they were delivered and used them as targets in nuclear testing. And profitable divisions of profitable corporations are sold off. It sucks, but it's better in the long run.
If you look at the span of time after the first Apollo landings and the space shuttle, you see the seeds of where we are today being planted. The space shuttle was an impressive engineering feat, providing valuable test data about what works and what doesn't work. But even before the space shuttle had made it's first flight, a lot of the problems with it were apparent and the report in the wake of the Challenger disaster added support.
I think about it this way. If NASA had canceled the shuttle program altogether at some point in the eighties... and I recognize that this is all an analysis in hindsight and that it was *different* to have been there in the moment... we'd have either spent the added money to not make the same mistakes twice with a Shuttle II, or we'd go back to capsules on an expendable booster. I've been slowly exploring the NASA Tech Report server and there's some interesting papers there from the eighties and nineties about a Shuttle II. One day, I'll organize them into a proper write-up because it's actually quite fascinating. It's not that we didn't have solutions for the problem with the shuttle. It's just that nobody wanted to give the space program a few years off... nor did they want to fund the development of a replacement while also paying for everything else.
Now, in 2010, we're about at the same point with Constellation where the shuttle was when the wheels started to come off. Back then, the shuttle was getting heavier as all aerospace projects do. SRB thrust termination turned out to be beyond what the structure could handle. It was not allowed to have a smaller cargo bay or lighter cargo capacity, even though that might have allowed for more safety features and made it more reliable.
The way I see things, cold-equations, is that the Russian Soyuz TMA weighs 7220 kg, carries three people up and down, and has a fairly long history of being reasonably reliable and resilient. There is more than enough payload weight to fit an American capsule built in the same vein as the Soyuz on both EELV booster families (Delta IV, Atlas V) and SpaceX's Falcon 9. There are some changes that would need to be made, largely in terms of changing the launch trajectory such that abort options are preserved and beefing up the structure and adding backup systems so that the rocket will stay together until the capsule's escape rockets have taken them a safe distance away. NASA studies have shown that there's no red flags preventing an appropriately sized capsule from working on the EELV designs.
Furthermore, NASA has been spending around 4 billion dollars each year on shuttle upkeep and getting between three and seven flights each year, whereas the EELV boosters cost under $200 million per launch.
Thus, Obama's new direction for the space program is that, instead of throwing money at a Constellation program, he canceled the whole program, in favor of forcing NASA to buy space transportation services on the open market. And, in the height of irony, this means that we've got a Democrat arguing for less government interference and more free market and a bunch of Republicans arguing for bigger government.
What this will mean for the future depends on what happens in the coming year. See, the headline coming out of this is "Obama cancels moon program" even though he's actually given NASA a substantial budget increase compared to other discretionary budget items. Clearly he's not controlling the message. Much of this depends on what the end budget will actually contain after everybody is finished fighting. ATK, who makes the SRBs that powered the shuttle and would be powering both Ares rockets, is the least likely to be able to bid for transportation services, so they are lobbying hard. This is either going to come out as a brilliant move of the same league as Kennedy or as a disaster that ruined the space program.
But, I do know that at one point the US government had their own air-mail system and they eventually transferred that to the airlines. It's been long time for NASA to give up the easy stuff and concentrate on the hard stuff... and the Ares I booster and Orion capsule were not what NASA needed to work on.
I think my biggest critique is that Obama should have said "Oh, NASA is directed to go to the moon, mars, and the asteroids once technology is commercially available to make it possible within NASA's budget." Even though it's just an unfunded platitude.