Modem is not just that 1200baud thing sitting on the desk. "Modem" emcompasses the entire wide spectrum of modulator-demodulators that were necessary every time you put a digital signal onto an analog line that travelled long distance . . . that includes cable modems even today! "Modem" was the beginning of the physical implementation of distributing information across thousands of miles onto entirely disparate computers, input and display devices. That all happened in the 1920's, a few decades after the long distance telephone cable industry was born. Keep in mind, the first transatlantic cable was laid with private funding, so were numerous of its competitors shortly afterwards. Obviously, even before all that, the idea of information exchange across globe took place long before physical implementation was possible. When Internet as we know it today was split from DARPANET, it had only a few hundred hosts, almost all in the universities and research labs in the US, nowhere near the billions of hosts spread across the globe like the internet today. DOD was only a buyer of the technology as it grew. Your argument that the internet would not be born if not for government is a little like saying the computer industry would never have had the funds to evolve beyond the punch-card stage if not for the Nazis buying a ton of those machines to run their concentration camps.
The super-computing example you cited shows the folly of government sponsorship. In case it's not obvious, the private sector Intel and AMD processors running in large arrays have vanquished the various government "super chip" projects for over a decade now. Even the Japanese finally gave up their "super chip" projects.
Peer-review is not substitute for real market competition. Otherwise, why don't we just have peer-reviewed price-setting for every industry? The research into "how many angels can dance on the tip of a pin" was the result of peer-review; so was global-cooling distopia in the 1970's, and the global-warming distopia in the more recent past. Hysterical predictions geared towards media attention in order to get government funding is exactly what we will get if peer-review substitute real market competition. The pay-off matrix for a researcher-government official pair spending someone else' money is very different from that of a hard-nosed investor allocating his own money.
Public funding for childhood disability at the expense of fruit flies is exactly the sort of thing public funding for research would lead to. How else do you explain more funding for aids than for cancer and heart disease combined? When each of the latter kills an order of magnitude morepeople every year than the former? How else do you explain the moonshot (killing astronauts for both the US and the SU in the process of the rush) and followed by four decades of essentially nothing? How else do you explain the nonsense collider at CERN that cost tens of billions of dollars and only ran for a few hours before breaking down? If you want public funding, you are guaranteed to have wrong priorities and waste. . . because the clowns spending someone else' money pilfered at gun point have to cater to the lowest denominator emotional issues. It's marketting not science. All the talks about "a wise dictator" or "sage king" are just silly talk.
BTW, building a rocket that can go to the moon if it doesn't blow up on launch or on the way is considerably less complicated than building an automated production line that turns out reliable hybrid cars profitably. The Russians, and soon the Chinese and Indians, can all do the former, but not the latter.
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