Michael, I took Bill Kristol to be making more of a tactical point: that conservatives need to make their case on the grounds of what they are for rather than what they are against, because the argument against big government in the abstract doesn’t really appeal to enough voters. That’s not to say that we should accept or encourage the growth of government, but that its size can’t be the essence of our case to the public. Rather, the uses to which it is put and the abuses to which it gives rise should more commonly be what we argue about.
He argues, I take it, against the Democrats’ automaker bailout, not for it; and against Obama’s make-work infrastructure spending, not for it. But he suggests there are ways for the government to help economic growth both by stepping out of the way—through tax cuts and deregulation—and sometimes by stepping into the breach, for instance by easing mortgage refinancing in some circumstances (as Larry Lindsey has argued) or increasing defense spending, which is good policy anyway.
In other words, I took him to be saying that small government is not an end in itself but a means to the ends conservatives pursue: economic freedom, prosperity, a thriving culture, strong families, and a secure America, among others. Why not make those the primary terms of the arguments we make, provided the arguments themselves advance the conservative cause (and with it, limited government)?
Some elements of Kristol’s case did seem to push in the direction you’re suggesting (his criticism of Jeb Bush’s comment, for instance: if Kristol is right that running as a “small government Republican” isn’t enough, certainly Jeb Bush is also right that running as “big government Republican” doesn’t make any sense), but the thrust seemed to me to be a point about emphasis, not direction—and in that sense seemed right.