Yes, the funds are in competition with one another, but the solution is to lobby for more funds. I think the cancellation of the SSC was a TRAGEDY given the money already spent on it. And look how many hurdles LIGO and Gravity Probe B had to hop through.
As I said over and over again, the point of going to space isn't just the science, it's the engineering. We have to create artificial demand for new launch systems. That won't happen if everyone is designing el-cheapo robots that fit on Delta launchers.
The cold war created the artificial demand that propelled today's launch systems. Had it not been for ICBMs and the Space Race, I highly doubt there would be commercial satellite TV or communications today, because the costs and risks to develop the technology are too much for short term investor's or corporations to deal with.
But the cold war is over, and there is nothing that pushes the demand for cheap reusable and heavy lift launchers today. As a result, technology has stagnated. Likewise, in the aerospace realm, except for military apps, technology has stagnated. With airlines losing money, and the fact that Boeing and Airbus's current line up is "good enough", there is no real large push to change.
The reality is, NASA is the only consumer of these technologies. Without the government saying "we need X", there is no impetus to develop new propulsion systems or radical new designs.
We all want science to be pushed forward. But we also want engineering to go forward too. The fact is, the knowledge of cosmology benefits us, but is is the engineering and materials science from the space program that benefits us more in the short term.
It is, sadly, up to the government to create artificial demand in the beginning for these megaprojects in order to get their development started faster. Maybe it won't pan out, maybe it will (e.g. DARPA and internet), but the money spent isn't ridiculously wasted like some of the other things we spend it on (e.g. Iraq War)
What new "spinoffs" are gonna come out of rebuilding Iraq?