Rich Karlgaard:  Where would the U.S. space program be today if run not by NASA bureaucrats but by Silicon Valley geeks and financiers–by crazy entrepreneurs?

Light years ahead is my guess. Well, perhaps not literally light years. But I do think a Mars commercial shuttle might be up and running by now. The world’s affluent would be trading their Mars ducats on eBay (nasdaq: EBAYnews people ) or StubHub. I’ve no doubt that Forbes would be in the thick of this, running investment voyages to Mars and featuring lectures by Steve Forbes and Ken Fisher.

Sadly, in 2006 it is painful to contemplate the state of the American space program, to look back and remember how far and fast it progressed in the 1960s, only to slow down abruptly, as if slamming into a meteor field.

On May 25, 1961, President John F. Kennedy, just four months in office, said to a joint session of Congress: "I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the Earth." A great American moment. It was like Babe Ruth pointing to the outfield seats in Wrigley Field seconds before blasting the next pitch into those very seats.

Where did JFK find the moxie to make such a prediction? Alan Shepard’s trip on Freedom 7 into space only three weeks before was no real space voyage. It was a parabolic arc, not an orbit. On this one thin proof point, JFK predicted a manned moon voyage?

He did. Eight years and eight weeks later, Apollo 11 completed the job, flying to the moon and back in July 1969. Remarkably, Apollo 11 did so with onboard navigational equipment that was as bulky and primitive as computers were at the time.

Remember the movie "Apollo 13"? I like the scene in which Tom Hanks plays astronaut Jim Lovell escorting a U.S. senator around the headquarters of the National Aeronautics and Space Administration in Houston. Hanks points to a box and proudly says the computer onboard the space capsule contains a megabyte…a whole megabyte!…of memory. My iPod Shuffle contains more than that. Yet the Apollo program, apart from a training fire that killed three in 1967, somehow got men safely to the moon and back seven times.

That was a long time ago. It’s been 34 years since we put a man on the moon. During this period, computational power has advanced more than a million-fold. The Internet has exploded. The biotech industry was born. And the space program has gone nowhere. Some might say it has gone backward. Apollo’s successor, the Space Shuttle program, failed to capture America’s imagination, or attention, except in 1986, when Challenger blew up, killing seven, and in 2003, when Columbia disintegrated on reentry, killing another seven.

So why is the American space program stuck? It isn’t about the money. NASA’s annual budget in 1969 was $4 billion. Today it is $16 billion, or only about 25% less than it was in 1969, adjusted for inflation. But during that time, the cost of computation has dropped so much that if you strip out those costs, NASA’s budget today is probably equivalent to what it was in 1969, in constant dollars.

If money is not the problem, what is? At the risk of making enemies, I’ll take a stab at defining the problem. I think it comes down to lack of talent and everything we usually associate with it: imagination, courage, will, persistence, etc. The undeniable truth is that America’s space program no longer gets the first cut of science, engineering and management talent.

In the 1960s, the two coolest places in America to work if you were a top scientist or engineer were NASA and Bell Labs. Ask yourself: How many MIT or Caltech grads lust to work for NASA or Lucent (nyse: LUnews people ) today? I give about a 100 speeches around the country every year, many to college students. I don’t recall any student ever talking about NASA as a dream place to work.

While my observation is anecdotal, to be sure, it is suggestive, and it does map trends. Can you imagine Google (nasdaq: GOOGnews people ) founders Sergey Brin and Larry Page working at NASA? I can’t either.

For the past 30 years, the coolest places to hang your hat if you’re a scientist, engineer, or wild duck have been in private industry–Silicon Valley kinds of companies, especially. So here’s a suggestion. If America wants to rekindle its space program, it must follow the talent. The talent is in the private sector.

NASA’s annual budget, as I said, is $16 billion. Within that budget, NASA sets aside $20 million for prizes to reward real accomplishments, not just paper proposals. But that’s w-a-a-y-y-y too little money. It’s a puny one-eighth of 1% of NASA’s budget.

Why not increase the annual prize to $2 billion? The U.S. would get a lot more bang than it gets now for that $16 billion. Latest example of NASA bloated spending: The agency has already spent billions of dollars on the National Aerospace Plane, the X-33, X-34, X-37, X-38 and the Orbital Space Plane. None of these has flown.

By comparison, Burt Rutan’s SpaceShipOne was built for less than $40 million and twice flew into space last year. It is amazing what talent and entrepreneurialism can do.

Space may be the last frontier, but it deserves the first cut of talent.

More here.