Sam, what I don’t understand about your proposal is, well, how it would actually work. The devil is always in the details in these things. When you say:

It would be private industry and individual citizens who could book whatever missions they wanted.

…what does that mean? What price will they get the service at? Who is purchasing from the launch providers?

My idea would be to have the government purchase some fixed (and large) quantity of various goods and space services (e.g., tickets to LEO, pounds to LEO, maybe even tickets and pounds to the lunar surface), use whatever there was a government need for, and auction the rest back on the market. If the market price turns out to be higher than the price paid by the government, then the program costs nothing at all (other than the cost of the services that the government needs). If it’s a lot more, presumably the providers would stop selling to the government (assuming they were allowed to opt out) and sell directly to the market. If the differential was low, then we’d have a subsidy, in which the cost of the program would be the difference in price between market and government cost of the service.

But in order to make this fly, the country (and its government) would have to decide that having large amounts of activities in space at reduced unit costs were sufficiently important to justify what would be considered a large expenditure in the context of current space activity (essentially doubling the NASA budget under your proposal, but I think you could do a lot of damage to the problem for a few billion a year). There’s been little sign of that so far.