Why does the government still fund SLS while SpaceX is cheaper and has the same capabilities if not better?

The answer is: to avoid a complete space shutdown like occurred from 2003 - 2006.

After the Columbia shuttle disaster, the space shuttle program was suspended from Feb 1 2003 to July 4 2006. By having its only means of getting a man to space suspended, the USA had to rely on other countries. And dependence on other countries is one of those things America hates more than anything. But with multiple options, even if one is ground space is still accessible.

SLS is expensive, but space is expensive.

The shuttle was costing $450M per launch.

SLS is set to cost from $500M per launch.

With the costs comparable, remember that that the shuttle had a 27.5t payload, SLS' payload is 70t.

The answer is that SLS's prime purpose isn't a launch system, it's a jobs project. NASA was required to use 45 year old engine technology to ensure that jobs and contracts were funneled to Old Space contractors. There is no way a clean sheet NASA design for a large launch system to support manned deep space missions cost effectively would ever:

• Re-use RS-25 engines costing over $100M each (vs. Merlin engines at less than $500k each or other available engines at less than $20M each)

• Use $100M+ solid rocket boosters, let alone ones made in Utah by the 4th rated SRB contractor in NASA's initial bids.

• Use hydrogen as the first stage fuel, which requires heavier, more complex cryogenic tanks (which is why the SLS is so late) and while offering high ISP doesn't produce enough thrust (which is why the SLS requires SRBs).

• Build a system so complex with cadence so poor it's limited to being able to launch twice a year, which not only limits mission capabilities, but makes it much harder for NASA to use in-space refueling or assembly to dramatically reduce mission costs and increase mission capabilities even further.

The simple answer is the the head of the Senate oversight committee for space exploration is a Senator from Alabama who ensures that every budget for NASA is written very specifically to only be fulfillable by using Alabama based contractors. That Senator has never prioritized actual manned space exploration, as far as he's concerned the project is already a success and will continue to be one as long as NASA keeps funneling $2B+ a year to his constituent contractors, even if it never flies at all.

All the answers are right in their own way. One thing that is not addressed:

The Falcon Heavy is not even remotly on par with the SLS in terms of rocket diameter and payload mass.

According to Wikipedia (Falcon Heavy, SLS) the Falcon Heavy can launch 63 tonnes to LEO while SLS can deliver a whopping 95 tonnes in the Block 1 configuration which (if everthing is going according to the plans) will be raised to 130 tonnes in the Block 2 configuration

The diameter of the second stage of the falcon heavy is 3.6m with the payload fairing measuring 5.2m. The SLS has a 5m diameter second stage which will be replaced by a 8.4m one in the Block 2 configuration. I haven't found any data on fairing sizes in the SLS. This NASA fact sheet does not provide any numbers.

Of course the higher payload and diameter are bought with a lot of money. So the cost in $/kg delivered to orbit are significantly lower with the Falcon Heavy.

But for large payloads you need a large launch system.

You could of course argue that you could just launch two Falcons with lower costs than one SLS launch. Which will maybe be done in the future. But I'm not aware of a single project that will be done or is planned that uses in-orbit assembly.

So for now this will not happen. (Maybe I missed something, in this case just correct me)

Part of it is leveling employment. The government is fond of large projects that require multi-year ramp-up and ramp-down and massive up/down swings in employment need.

Suppose in 2019 you're hiring every rocket scientist in town for project X. 2023, you lay them all off because the project is done. Then project Y arrives, a modification on an existing system, and it has military urgency.

Only you go to get your rocket scientists back who really know that system, and they're gone. They didn't wait around for you to hire them back. Some went to be data scientists for Amazon and got poached by Google and live in the Bay Area. Others work for the Texas oil companies. Others for FMC in modeling geology out of Salt Lake. A few emigrated and work for ESA or Airbus, those are the only ones whose skills haven't rotted out.

The braintrust is gone. You can’t exactly draft them... so now you have to staff that department up from scratch with green weenies who don't know the systems at all.

So, you have a government project that's fairly "D-list" - that is, the government is willing to tolerate flex on the project. Now you can retain some continuity of staff and expertise, simply because you have other work to give them.

This sort of thing has been done before; this is how Boeing got into the light rail vehicle business.

Eh, to begin with this statement isn't accurate.

SpaceX ... has the same capabilities if not better?

Falcon Heavy as stands can't replace SLS and launch Orion on the required orbit without significant modification. (and even if Falcon Heavy could launch Orion, it wouldn't be able to dual manifest Gateway modules) Dragon isn't comparable in capabilities to Orion and couldn't replace it without again, significant modification, despite what Zubrin may think. Starship is still very much in development phases.

Granted Falcon Heavy can launch large scientific spacecraft like Europa Clipper, which was the other main purpose of SLS. (Stuff like an Europa Lander and the next large astrophysics mission would be outside the capabilities of Falcon Heavy and look to require SLS, but by the time they're launching in the 2030s Starship would likely be in good form)

In summary NASA pursues SLS and Orion because Falcon Heavy, Crew Dragon and Starship are currently unable to replace it for Artemis. (granted there is some congressional pressure due to SLS being a jobs program, but fundamentally, the current alternative in SpaceX isn't clearly better)