Ok xanax, this is utter crap. I will proceed to tear your stupid arguments apart, one at a time.
The government has many important functions, but funding non-competitive graduate students is not one of them. If you can't get funding from the school, aren't in the 10% that gets awards, and can't get funding from any other source, then you should be able to grasp the message: No one thinks that you are worthy of grad school, and they're all probably right.
This provides American jobs? Nonsense. This creates no jobs, it merely funds graduate students, the 10% of whom are worthy are helping to keep us scientifically competitive internationally. Any others who are funded are a waste of our money. On the other hand, this "expensive machinery", like the F-22, provides over 30,000 manufacturing jobs to blue collar workers, who are suffering most in the downturn, as well as providing upgrades to our Air Force, which hasn't seen a new fighter in decades. It also provides employment for the pilots, the maintenance crews, and the people who make replacement parts.
And considering that they've already spent or pledged to spend more money this year in the stimulus, bailouts, budget, etc., than they have spent in our entire history, I doubt that they plan on subsidizing your failures in grad school.