This is true - in certain contexts. There is no significant commercial market for military aircraft, so there is no harm to commercial markets in the government picking a winner. In this case, however, the government is acting as a customer in a commercial marketplace, and using commercial criteria for its selections. The products available have already passed a number of market tests in order to make it into the market in the first place. This differs from the situation where the government determines in advance who the commercial players will be, effectively overriding market selection forces.
History suggests that the opposite is more likely.
And yet, it is not unreasonable for the government to provide incentives for the space transportation industry. These are legitimate interests of the U.S. Government. If incentives could be developed which would apply broadly to the commercial space transportation industry and encourage competition and innovation, it might be appropriate for the government to put those incentives in place. One possibility would be tax incentives, such as a tax credit for investment in commercial space transportation systems or a tax holiday for new industries developed in space. Tax incentive mechanisms have the advantage of leaving the decision making and the risk taking in the private sector, while encouraging investment across the industry.