I know this question was posed years ago, but I just saw the movie and the decision to pull back the jaeger program and build a useless massive wall actually makes perfect sense AT THE TIME for the people in charge.
Let me give you a real life example of a decision that seemed to make perfect sense AT THE TIME makes absolutely no sense in hindsight.
I am a civil engineer. I sometimes design bridges and sometimes manage construction projects. A few years back, my company was hired by a town to design and rebuild a bridge across a river. I was not involved in this project, but due to lawsuits pertaining to this project my company is still dealing with the fallouts.
So, what happened? The local department of transportation wanted a bridge rebuilt as cheap as possible. Our people presented them with 2 options: (1) close down half the bridge, rebuild one side, and repeat with the other side, or (2) shut down the whole bridge and rebuild the whole thing all at once.
Option 1 would take twice as long and cost twice as much as option 2. Also, keep in mind that option 2 would shut down the crossing for 3 months and the next crossing to get to the other side was almost 6 miles away. Well, the people in charge decided to go with the cheaper option.
Lawsuits started coming in from the town, businesses, and residents in that area.
In hindsight, shutting down the bridge for months forcing people to take a 12 mile detour was a very bad idea. But at the time, the people in charge only had 1 thing in mind: to save money!
Some of the worst decisions in history made perfect sense to those people back then but makes no sense to us nowadays. Many of the decisions in WW2 by the leadership on both sides make no sense to us in hindsight. To me, the decision to pull back on the jaeger program and full speed on the wall of life is no exception. It is not a plot hole at all.