They'd probably spend twice that much that way. The academic system will siphon off a ton of money before it gets to the actual scientists.
However, salary for tenured professors is guaranteed regardless.
So, if you are a tenured professor, you can choose to do esoteric research that will not get a government grant, but you won't have any grad students.
It actually works out because the less practical, more theory oriented profs do not really need grad students. Whereas the more practical, application oriented profs need grad students to do all the work and they end up "setting up shop" like little companies---and get grants to pay for the students (mainly tuition, also a small stipend).
Not that I'm defending it, but it has a kind of internally consistent logic.