Political libertarians, by definition, always support reducing the size of government. The political libertarian application of the non-aggression principle (NAP) requires that taxation be kept to a minimum, and therefore the size of government be kept to a minimum. But just like how civil libertarians can sometimes be, but not always are, political libertarians, moral libertarians also are not always politically libertarian. This is because civil libertarians and moral libertarians both focus on one aspect of liberty that is not predominantly economic, while political libertarians emphasize mostly economic liberties and property rights. Therefore, while political libertarians always support smaller government, it is not a foregone conclusion that the same applies to all moral libertarians. But, in reality, should moral libertarians support smaller government?
Moral Libertarians are not always Political Libertarians, because the Economy is a Complex Thing
Since moral libertarianism is necessarily based on the principle of the equality of moral agency, whether a moral libertarian should strive for smaller government also depends on whether smaller government is more consistent with the equal distribution of moral agency or not. For some moral libertarians, the answer is simple. Since they believe that the NAP is the ultimate expression of equal moral agency (since nobody can initiate aggression against another), the full application of the NAP is, in their opinion, the closest we can get to having equality of moral agency. Therefore, supporting immediatist libertarian politics, i.e. cutting government by as much as possible, and right now, is a logical conclusion. Other moral libertarians also see great compatibility between the NAP and equality of moral agency, but recognise that the immediate application of libertarian politics could lead to outcomes where some people's basic liberties (and hence moral agency) could be in a worse situation than is the case right now. Hence they advocate a gradualist libertarian politics. Still others believe that, since the power to coerce people does not solely reside in the government in modern society, the government should be maintained at an adequate size to counter other potentially coercive forces, like gross economic inequality. Again, within this camp, opinions about the adequate size of government can differ. Hence, there is no one single answer as to if moral libertarians should support smaller government.
And that's OK. Because moral libertarianism is ultimately about respecting the equality of individual moral consciences, people are allow to differ in their consciences, and make their case in the free market of ideas. Since each political state can only have one government, the size of government is an unavoidably collective matter. In my opinion, where matters are truly unavoidably collective (i.e. not just conventionally collective like the definition of marriage), every concerned individual owns a part of the matter, and where equal moral agency is respected, a democratic method of decision making (as close to one person, one vote as possible) should decide the outcome. Therefore, in my opinion, moral libertarians should make their case about the appropriate size of government to promote equal moral agency, and should also participate in the democratic process as guided by their individual consciences. It really doesn't matter that moral libertarians will therefore not be voting the same way as each other because, unlike the left, we do not believe in collectiveness in action, except where people have genuinely voluntarily agreed to.
More on the Liberal Debate about the Size of Government
Modern American commentators like to divide liberals into 'classical liberals', who supposedly believe in the absolute right to private property like modern libertarians, and 'modern liberals' or 'social liberals', who spend tax dollars liberally to solve society's problems. In fact, that's not even close to the truth. Even John Locke, often considered the father of classical liberalism, stressed that while society should respect private property rights there should be enough and as good left over for everyone else, a sentiment clearly incompatible with sections of modern libertarianism who believe that all property should be private. Also, John Stuart Mill and Prime Minister Lloyd George supported some wealth redistribution, with the latter raising taxes while in office. Liberalism has always strived to balance property rights with other factors that affect the liberty of individuals.
My personal inclination is towards having a government that is large enough to support a strong social safety net, but as limited as possible beyond that. While a government too big will be tempted to use its powers to coerce individuals (thus violating the principle of equal moral agency), a government too small may mean third parties effectively have the power to coerce individuals, for example via economic means. There needs to be a balance somewhere in the middle. In my opinion, a government that provides a moderate welfare state particularly in healthcare, education and looking after the unemployed, but otherwise respecting the free market and international free trade, as well as private ownership of industries, provides the best balance. I am also a libertarian gradualist, in that I believe the size of government should be reduced when it will no longer adversely affect anyone's liberty as a result, and we should strive to make this situation a possibility in the longer term.
What About Social Issues?
While moral libertarians do not always have to support smaller government in an economic sense, we do need to stay true to the principle of equality of moral agency when it comes to cultural and moral matters. In my opinion, governments should be as neutral as possible in cultural and moral controversies. Here, the role of government is to maintain the free market of ideas, by maintaining the rule of law and the safety of individuals, so people can speak up without fear. The government taking sides is generally incompatible with respecting the equality of moral agency, because that would mean individuals making decisions in the government (e.g. presidents, prime ministers, members of parliament or congress) having greater moral agency than private individuals. Even if the government takes sides based on majority mandate, it would still mean that individuals with the majority view have greater moral agency than individuals with the minority view. Unlike the economy and national security, most cultural and moral issues are not unavoidably collective, and should be de-collectivized as much as possible so that individuals can truly have equal moral agency over these issues. It is due to this reason that I support marriage privatization, for example. In this sense, I do believe that moral libertarians should mostly, if not always, support smaller government.