And here, I see the usual modern conservative argument against government, and thus to shrink it, is that government doesn't work.  The claim is, because government doesn't work, it should be shrunk, so that citizens would then be free to get real solutions that would benefit them.

I would say this is a false claim.  The issue isn't that government doesn't work, but the reality that it does.  It is because it works that people turn to it and use it.  Well, what is the context for my saying this?  Well, as follows:

* Government passes laws that restrict people.  Government regulation, with enforcement, can end up driving people out of business.  It can also put people in prison.  It can also declare wars and execute people.  

* Government can both have its central bank increase money supply, and tax, and get any money it needs to complete anything that it has agreed to via its government processes.  It can end up landing someone on the mood, build infrastructure (like the Internet), and do a number of other things, like employing every person who is without a job, doing anything.  Government could, for example, spend money into existence, and accomplish anything it wants.

* In keeping with the last point, the government can end up getting people and organization whatever money they want, via subsidies and other handouts.  There are entire organizations that wouldn't exist if it wasn't for government spending.  Heck, there are entire industries that wouldn't exist if it wasn't for government spending.

* Government can fund research also, and if it is possible by the laws of nature, eventually make anything manifest itself in time.

So, as seen here, governments do work.  They can accomplish anything just about.  Maybe they don't do it optimally, and maybe in some cases, there are better options. But the reality is that governments are a fairly sure be to get things done, and safer than other ways actually, because they don't face limitations on resources and use of force that other areas do.  If it weren't so, do people think  business and other organizations wouldn't be lobbying as much as they do, and throwing money at elections?  The reality is that those who are successful at lobbying get what their hearts desire in the end.  Government is like a giant genie for them that grants them wishes, their every wish.

Now, where should the debate be then, for those who want smaller government.  Well, it should be to realize that governments do work, and realize why those who want smaller government have the problems with governments working.  They should realize that the body politic loves having the genie of government available to them, and knows that individuals who are lucky enough to get the government to respond, make out real well.  This seduction of power people don't want to give up, and when you cry for less government, you then hit the harsh reality of hitting specifics that if you mention, will result in conversation ending with the person you are persuading.  End result is that you have to speak in terms about "smaller government" in ways that are vague, because you lose people when you talk specifics.  You aren't going to get enough people to go with you, if you start to name WHAT you want the government to do less of.

And those who cry for smaller government should realize this that the cries for "freedom" and "liberty" are because government HAS been working in areas that prevent someone from them really doing what they want.  It is NOT because government doesn't work, it is because it does work.  Sometimes the genie, powered by public opinion, will turn on people and their personal wishes.  And real cries of "government doesn't work" is actually a cry for MORE government (done better mine you), not LESS government.

Well, it depends on how you define "work". The Government is very good at some things, and terrible at others.

What most people mean by "Government doesn't work" is that increased Government hinders prosperity. The Government itself works fine, it's just a cancer on everything else.

I do challenge anyone who wants smaller government to say exactly what should be cut and what should replace it.

The Republicans are terrible at this, they don't name anything (for electoral reasons as you say, but also because they wouldn't cut government while in power because that would reduce their power). Spending doesn't reduce under either US party.

Government works much better than inefficient competition (like bidding on train franchises, military contracts, regional monopolies on water) but worse than efficient competition. Smaller government necessarily means handing over functions to the markets and if the replacement system involves bidding for contracts or outsourcing to a single provider it's not going to work very well.

There is more but off the top of my head?

1) Most welfare programs should be cut and replaced with a negative income tax.  This would allow us to spend less, while giving more money directly too the poor, and to all the poor who need it rather then those who fit specific criteria through a giant windign bueracracy... and who need it... if they are quick enough.

2) Farm and Food subsidies should be cut, and replaced with..... nothing.  So we stop paying taxes to make are food cause more to support giant agriculture buisnsses who make their money off of exploiting the poor and illegal immigrents  loophole in minium wage.

3) The department of education should mostly be cut.  It should mostly just send checks to the states.  Let each state be responsible for what it teaches, competitiveness will make sure that most states teach the right things.  Strict government standards just seem to add a stiffness to the system and leads to teachers teaching students how to pass a test, rather then teaching them to learn.

4) The overseas military budget should be cut.  We don't need military bases all over the world, and defenititly not in germany and Japan.  This should be replaced with... nothing.   The military in general should be downsized, EXCEPT for military research.  To have an extremly modern small military should be the goal... plus military technology sales are good buisiness.

5)  Greatly reform student loans.  The way they work now they do way more harm then good for most students.  Stop making student loans unconditinal and instead tie them to academic factors and fields that have high rates of employment..  

In otherwords, don't give the person with a straigth C average a student loan to get a communications degree... funnel them into a degree that will likely land them a job so they can pay them back, since you can't go bankrupt on student loans.  If they aren't likely to get a job anywhere... don't set them up for failure AND huge unavoidable debt.

6)  Replace Social Security.  Instead of it being invested in government bonds... have the excess money be invested in NON-goverment bonds and stocks.  This will bring far greater benefits then returns, so on the rare crashes, chances are the fund will still be ahead of where it would be using government bonds... and on the very very unlikely chance it isn't... government can always find a way to bail out senior citizens.  The US I beleive is the only country in the world whose pension system is funded by a bunch of IOUs from the government.

7) Cut the IRS staffing office by removing ALL deductions outside of dependents and lower all tax rates to the average effective tax rate being paid.  Greatly lowers fraud, makes it a lot eaiser for people do their taxes.  More equity in the tax system.

8) End Military spending for other countries.  Doesn't really seem needed.

Note I'm debating you on whether those actions reduce government size, not whether I agree with them. Very little of what you've said is reducing the scope or employment count of government. If you did all of the above I can imagine maybe a 1% cut in employed people?

1) Not really.  All that would be needed staff wise is the IRS... and less then what they have now due to the below.

3)  Yes it will.  Education is already state run, and then there is a huge federal layer on top of that, which does nothing but make vague national standard suggestions and create simple and incredibly stupid standards that deny funding to states and counties that are doing worse and funnel them to other school areas doing better.  Oh and sometimes they take over locally run schools that fail anyway. 

5) Sure it is, this would undoubtly lower the amount of student loans given out.  Lowering government size.

6)  It will lower the amount of taxes needed to fund social security.

8) No i'm not... 4 was about our military spending, bases in other countries.   This one is about the money we send to other countries to fund THEIR militaries.

Actually, people who argue that government doesn't work, will end up saying the government does a poor job at things.  Word is "the private sector can do it better".

Well, what I was saying, when it comes to implementing the will of the people influencing government, it is able to end up getting the needed money, distributing it, and using law enforcement to slow down and hinder things it doesn't like.  It doesn't mean the government can completely stop things, as markets tend to skirt around a lot of government action.

I did end up comparing government to a genie, and this would fit.  And I could go further by connecting genie in this context to the Muslim tradition of genie being jinn (genie comes from that).  Genies would be comparable to that of a demon I believe, and I believe in Muslim tradition. there are stories of how genies would end up destroying people by granting them wishes.  If one has issues with government, it would be that the genie (government) keeps granting the wishes of those who call on the genie to do this, and this set of wishes ultimately destroys the wishes of the people.  Evil versions of the genie would do this.  

So, one can end up arguing the government is a genie that can destroy a nation, if it isn't tempered.

Actually, Jinn are different from demons.   Demons are pretty much only ever  considered evil.  While Jinn are like people, they can be good, or evil or whatever.

As for the government working or not working though... if your point is, it works at screwing up... then sure.

Government can theoretically accomplish any one goal, but it's going to screw up a lot of other stuff in the process...

and even then it's not guaranteed to get results... because it might attempt the wrong methods, or in the research case, fund the wrong research.

With so few people deciding where resources are allocated, the chances for mistakes are much higher.

I first became aware of this when I had a Muslim tell me about genies, and mention jinn.  He specifically said "demons".  I believe, with Muslim theology, the jinn is the closest thing to demons in other religions.  Islam doesn't have the same view as the Christian religion in regards to these entities.  Christian theology would have demons as fallen angels.  In Islam, they are seen as different.

http://en.wikipedia.org/wiki/Demons_in_Islam#Islam

While different religions can come from a similar origin and connect, there can also be differences, as is seen with this.  

Anyhow, if you can any evidence that Islam has entities that are distinctly demons, and not jinn, please post a link here.