When it all goes bankrupt, they can pay off the bonds for x¢ in the dollar and own SpaceX.
Perhaps if the gov could organize a little better, they'd make sure SpaceX owed lots of taxes and put themselves in front of the queue for ownership and screw other creditors (especially foreign).
Edit: looks like the US military doesn't spend that much on SpaceX: https://londoneconomics.co.uk/blog/publication/crouching-riv...
Or they could just go with the competition. If it came down to propping up something, I don’t see much difference between propping up ULA, Blue Origin or SpaceX. In the current environment who gets propped up probably depends on who scratches Donalds back.
For example, I think the car market had become pretty stagnant with traditional car makers, and most electric cars they attempted to make sucked. Tesla making good desirable electric cars really pushed EV's into becoming more popular and having a better charging network. I think it would have taken much longer for EV's to start growing in popularity if someone wasn't willing to take a risk.
Are they going to be too early to the market for this kind of tech? Maybe. Is it going to end up being a waste of money? Yeah it totally could be. But at the end of the day I do like to see some risks being taken like this and it sucks seeing constant negativity whenever companies try something new.