That's the problem, isn't it?

Roads, service stations, parking lots all exist prior to new cars.

But a private company wanting to sell a manned spacecraft rocket would need to deal with a spaceport authority, rules about where to land, litigations and insurance premiums. Also, the spacecraft builder would need to deal with the rocket builder, the spacesuit manufacturer, the training facilities.....Some would come from foreign lands, some would not yet be privatized...
And to make sure everything would work fine, the private company would be very conservative...that is no very exciting spaceflights, but much of the same as the last 50 years....

However, a big agency which gets money from taxpayers (same for ESA here), would indeed be a jobs program but the money would not get lost as it circulates within the country's economy.

We are in january 2007 and SpaceX has not proved yet it can launch a rocket...Yet it is one of those involved in COTS.