Although the Jedis did assist the Rebel Alliance in overthrowing a tyrannical emperor, it's clear that the Knights were originally set up to enforce the Galactic Senate's big government agenda.
Dan Drezner responds:
I must say, I find Jesse's lack of faith disturbing. Based on the Star Wars films, we know very little about the Galactic Senate's pre-Phantom Menace agenda, but we do know that Chancellor Valorum is a pretty weak leader. We also know Palpatine's designs. Upon becoming chancellor, he vows to put down the separatists, raises a Grand Army of the Republic, stays in power well beyond the expected number of years/terms, and finally reorganizes the Republic into the First Galactic Empire. That's as big of a big government agenda as you're going to get.
In sticking to a small government/good big government/bad dichotomy, Drezner and Walker are missing the fact that the real problem with the Galactic Republic was the type of government. Sure, it's fair to say that the Galactic Republic was large, but it was a completely decentralized institution, responsible mostly for facilitating trade, moderating disputes and maintaining a standard currency. They had no standing military and a weak chief executive, which is precisely how Palpatine took over in the first place. If anything, Palpatine's ability to manipulate the initial dispute between Naboo and the Trade Federation into a full-on conflict is an example of what happens when government doesn't have the ability to ensure the market remains free and fair.
Sure it's easy to see Palpatine soliciting advice from John Yoo, but it's not like his ultimate goal in conquering the galaxy was passing Social Security or health-insurance reform. If the Galactic Republic had been assembled with a strong but accountable executive that had control of a standing volunteer army with a monopoly on force, the trade dispute on Naboo would never have escalated into a full-scale war, the corporate entities that formed the separatists would have found it more difficult to raise armies, and Palpatine would have had a harder time pushing the Republic toward dictatorship -- at the very least because the security and stability of the galaxy wouldn't have been entrusted to a cloistered religious elite vulnerable to resentment and bigotry. Palpatine's plot against the Jedi would never have worked had he not managed to, in Nixonian fashion, exploit resentment against a supposedly monastic order living a life of luxury in their giant palace in the middle of the Galactic Capitol -- and if they hadn't been replaced by a clone army with no emotional or social ties to the population.
UPDATE: Jonathan Berenstein has a more detailed post comparing the Galactic Republic to the Articles of Confederation.