When the Obama administration cancelled the Constellation program (with its ambitious Ares rockets which were designed reach Mars, unlike SLS), they intended to invest money instead in private companies. However, apparently a few members of the US Congress got worried that valuable "space knowledge" from the Space Shuttle / Constellation companies would get lost, so they funded SLS, and scaled down private space investments for several years. That's as much as I recall from US politics on that topic.

Of course in retrospect it would have been better to just contract private rocket companies, as intended by the Obama administration, even had SpaceX not existed. The loss of Ares rocket knowledge with its cost plus contracts and countless subcontractors wouldn't have been so bad. At the cost of the SLS program probably multiple private companies could have developed heavy launch rockets. But at the time it was apparently much less obvious how cost inefficient the NASA developed rockets really were. Now NASA funds SpaceX for part of Artemis 3, but that's only a small fraction of the money that is still poured into SLS.

> US Congress got worried that valuable "space knowledge"

That is just an excuse. They cared about investment in their states, nothing else.