I was originally also appalled by the idea of private companies taking over American space exploration.
But then I woke up and realized America gave up on space a long time ago - we've been merely doing the bare minimum necessary to keep the original projects and commitments operating efficiently, and doing a little bit of new science work.
And this is not NASA's fault - with what little the government had set aside from them, they had little room to really do much else. Due to funding issues, even getting the James Webb Space Telescope to the point it is now was probably insanely difficult. When working with severe budget limitations, you can't really go crazy with hiring and seeding different avenues of research and development or, in this case, engineering difficulties. More money and more smart people tends to solve the engineering issues, right?

But seriously, it does usually work that way - at least in cases where it is honestly achievable. Smaller teams and budget constraints tend to make little issues explode into project-ending issues.
That said, it has generally been the case of dwindling support for NASA from the government. NASA had plenty of hopes and dreams, with great ideas and have invested a fair bit into seeding various R&D projects for different propulsion technologies and other projects. But, when handed very little, there is little you can really do - when most of that must be used to support what you already have.
Both the American population in general, and Government in particular, have lost the curiosity and the desire to reach out further in space. "Too many problems here, why spend on things that don't matter?" is the ignorant but common point.
Handing it over the private industries is going to be the best decision we ever made in regards to space. After a little bit of time, thanks to income from contractual obligations, they should eventually be able to spend a good deal on R&D for new hopes and dreams. More importantly, like all space travel and exploration, they'll eventually stumble on a problem, and the solution ends up having a positive impact on far more industries than those directly reaching for space. Which trickles down to us as both consumers and citizens.
Even more importantly, they are going to be driven by the lust for profit. This is one of those industries where it should most certainly end up rewarding us. Especially if other companies can get themselves off the ground too. If they are competing for tourist dollars, they'll spend more on either existing or new ideas. At this point in the game, any additional spending on space technology will be a win for all. Even if this just ends up, 50 years down the road, with a massive space station outpost/hotel/colony, that will be a major win for the species. The new technologies and improved solutions to current engineering problems will trickle down to so many things it's ridiculous to even imagine the final scope.
And then there's the potential for completely accidental discoveries in the chase for something unrelated. Many advancements in technology and science have come about in that way, and it stands to reason more should follow.
Sure, this decision could backfire to the extreme, but it could also boost humanity's technology, science, and space dreams to levels we can only dream of at this point in time; more importantly, there's a strong chance private industry will accomplish this task for us far, far sooner than state-funded programs ever could.
And NASA won't be irrelevant, not at all. That government money should continue to find itself funding various avenues of R&D, and coupled with larger organizations driven for the space tourist dollar, this could definitely work out quite well. And with NASA focusing on the more sciencey-stuff, like looking deeper into space, sending probes/rovers out further, and even looking deeper into what it's our own neighborhood, a lot of knowledge stands to be gained - stumbling on something random could produce revolutionary results too. We can't ever know until we've tried, and it's very, very important we try. If we don't continue to invest in and advance our scientific and technological prowess, NOW, then our progress curve will forever slow down. And we have no idea how long until our very survival is going to depend on what we know or what we can do - it's guaranteed to happen at some point, and unlike in Hollywood, our species can't rely on being a reactionary species when faced with certain doom - we have to be proactive, considering we've only got this one rock to call home. Sure, the most absolute, certain destruction of Earth won't occur for another 4 billion years or so, but there are too many things that can happen between now and then - many that we couldn't handle even in our dreams at this point.