It's just a financial sink-hole.
The best justification I've heard about is that work on embryonic stem cells would provide basic knowledge about how stem cells work; theoretical research as opposed to practical. IE discovering how stem cells develop, say, into a liver. You then go 'we need to get adult stem cells to do
that'. Because the research is more theoretical in nature, it's less likely to result in hugely profitable patents, thus is underfunded by businesses.
Otherwise, embryonic stemcells are of limited medical use, lacking any cells saved from the time you were a fetus(umbilical cord stem cells), treatments with embryonic or near embryonic would be lacking due to the same rejection issues that stem from organ transplants today.
On the other hand, you'd think that the rest of the world could make up for the lack of government sponsored research in the USA with their own subsidies rather easily. Not being a cellular biologist, that the other countries haven't made up the difference makes me think that those trying for funding of those lines of research haven't been able to prove that the research will be of value in line with the costs.