That's a false dilemma. There's no moral reason we can't believe that our governments should provide the public with more services.
True. But if a country is democratic, and the people democratically decide to increase their tax burden, then what is the problem with that?
That's true. The government is bloated, not well managed. It also employs like 10% of Americans, when counting not just federal but all state and local municipalities, so to significantly trim it would require mass layoffs that would affect our economy.
And it's true that if you have an edge you are capable of getting the same government services at higher quality and at lower cost, but most people don't have an edge in every area, so for those areas where you have no edge, having the government as a 'fallback' option isn't the worst thing in the world I don't think.