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I kinda disagree with the second statement. Society needs to move away from this "rugged individualism" approach and value people for more than simply what they can extract from others. Unfortunately that's not going to change any time soon, at least in the US.
A model similar to the NIH could probably make it through congress as long as the "public-private partnership" stuff is included to allow corporations to get their cut, though that's suboptimal in a lot of ways.
Personally I have abandoned a free hardware project after having received endless feature requests, support requests, etc. and only a $5 tip. I tried various ways to promote and monetize it, but none of it panned out and it all felt kinda sketchy treating it as a business. So now I just don't release open source stuff. It's not worth the hassle.
Honestly it does suck that instead of making a living building useful software that would be a net benefit to humanity, I instead have to spend that time working for a soulless corporation. We honestly should have a significant amount of government grants for high value projects or something, so that the people who write and maintain them can focus their time and attention on that work.
So there's a ton wrong with this approach though. KS is, despite its claims otherwise, essentially a store. Its not a charity and people expect some sort of tangible item in exchange for their money. It's also a situation where its very easy to grift people into paying for relatively useless crap.
FOSS should not have to depend on this kind of model. There are tons of behind-the-scenes coding that may not be sexy or lucrative, but are still necessary and useful. Do you really want to have OpenSSL wait for a KS to fund before they fix the next heartbleed-level vulnerability?
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Linus was a prestige hire. He effectively is paid to work on Linux.