I can understand both your arguments for smaller government (and I agree, spending is slowly but steadily going out of control), but I don't think it can realistically be achieved. I'd be all for making it as effective and efficient as possible, but how do you achieve that? Somehow the same measures that are in place in the free market don't seem to work for public servants...
As a company you can't just magically turn up your income, especially if you have competitors that sell their products for a smaller price. If there are enough companies that make roughly the same product, the customer gets to choose and each company has to have some sort of selling point, like lowest price, best quality, best value for money etc.
But a government doesn't feel this pressure. At least not to such an extend. The only competition is in the form of other governments, which requires the "customer" to actually move to another country. Ok so the government needs to keep the economy going. But apart from that there is little incentive for a government to be as efficient as possible, since it can control its own income through taxes (to a certain degree).
I used to work in public services in Germany, and almost every time you had to deal with the administration it was a fucking bureaucratic nightmare.
And a friend of mine who works as a teacher tells the same story. For instance the public school he works at gets a certain amount of money each year (from the city, which in turn gets it from the goverment, which gets it from taxes). That amount of money is based on how much they spent the year before. This immediately leads to two things:
1) The school will make damn sure to spent *all* the money by the end of the year, because otherwise it would get less money the next year because some dumb fuck would reason "but you only spent 90.000 ? last year instead of 130.000 ?, so from now on we will only give you 90.000 ?". This means the school will spend money on bullshit it doesn't really need. It just needs to blow some money away.
2) The school can't save up for a couple of years, for instance if it wants to buy something expensive that could not be purchased with one years worth of budget.
While the first point is just tragic, the second is downright stupid because if the school wants to buy something really expensive, they can't save up for it, but instead they need to notify the city council and explain to them what they want to buy. Then the city council does the actual purchase. Nevermind that this means that some uninterested dimwit from the city administration now has to deal with external contractors without knowing all the details. This means that projects get screwed over because the company that gets the contract never actually has any contact with their customer (the school). Instead the company has to deal with a middleman that's probably not awfully interested in getting things absolutely perfect.
And I'm pretty sure there are loads more examples for highly inefficient government administrations and rules that would simply break a company because it would be wasting too much money on administration.