Government is not great at picking up or creating ideas. Academia has to lead in that and then show government why it would be best for the nation to fund those. The government is good at long term funding for ideas that may not be the best for private sector right away but it should not be creating ideas themselves otherwise you would get things like Lysenkoism.
Who do you think sits on these grant review boards? It isn’t bureaucrats. These people are scientists in the field too.
Allow me to disagree while I look back at the last 80 years of US government-funded research.
The government isn’t “picking” the research topics. It’s the scientists in places like the NSF that are. No system is perfect but some system is better than nothing, which is where we are going.