Why does the "ever growing size of government" meme live on, when it should have died, long ago?

Because people like the Koch brothers want to cripple government, to prevent regulation.

The Kochs know that their oil refining business would be hurt by proper accounting for the cost of pollution (and pigovian taxes based on those costs). Proper accounting can only be forced by government.

Polluters fund think tanks and media outlets that spread the idea that government, regulation and taxes are inherently bad, because those things threaten their business model.