Second, when you talk about "reducing government" what you mean is to shift it from the people to the private sector. Government is the people. That's the definition. It needs to be managed. But moving it to the private sector just makes it for-profit instead of non-profit, and opens up a whole new can of worms.
Again, look around. Countries with the highest standards of living are not struggling with this. Their large governments are not a problem, and in fact could be nicely argued to have provided that high standard of living.