This is all hypothetical, but lets say the government no longer had control of how it spent the money it receives through taxes--instead, people that pay taxes, while still required to pay them, can now actively choose and know where and what every dollar they pay goes to.
The programs that are funded by taxes would now be forced to justify their existence and would have to prove their level of necessity. Programs that aren't beneficial would become uncompetitive, and would either reform or just disappear, cleaning up resource drains and improving efficiency.
I have no idea how it could work, but what is so wrong with this? Is it too idealistic?