A pretty good discussion was going on over at the Patriot Post Blog, and I thought I'd expand upon my thoughts on the matter here.
There are two very compelling arguments against a strict interpretation of what the Constitution prescribes as the proper domain of the federal government with respect to spending.
The first is that not all Constitutional law is derived from the Constitution, and that indeed one would find that the majority is derived from case law. Without getting into a long dissertation on the value of stare decisis, I think that most spending reform can be accomplished via duly enacted legislation. That's the "democratic process" that constructionists are always referring to when railing against liberal activism in the judiciary, and there's no reasonable basis to suppose that while the genius of our system has been used to lurch ever leftward towards socialism, that the reverse cannot be accomplished using the same mechanisms.
The second argument against a strict interpretation is a little bit harder to refute, but it can be done. It is that where there are powers enumerated, there are also powers implied. There was a great debate early in our founding between Jefferson and Hamilton regarding the constitutionality of a national bank. The Republican didn't want such an institution; the Federalist did. Unless you've been living under a rock your whole life, Hamilton obviously won that debate, and he won it by asserting this same argument. The only problem with this argument - despite its validity - is that it was subsequently used by elected representatives who knew not, or cared not, in what spirit the Constitution was ratified. In other words, sound reasoning was essentially hijacked by inferior minds, or by ill-intentioned characters.
It is evident when we carry ourselves back to the time when the debates on ratification happened that there are clear distinctions between the domains of the federal and the state. I would strongly recommend the Federalist Papers to anyone who is interested in the topic but hasn't read these indispensable essays. Federalist #45 applies in this case, which I quote here:
"The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State. The operations of the federal government will be most extensive and important in times of war and danger; those of the State governments, in times of peace and security. As the former periods will probably bear a small proportion to the latter, the State governments will here enjoy another advantage over the federal government. The more adequate, indeed, the federal powers may be rendered to the national defense, the less frequent will be those scenes of danger which might favor their ascendancy over the governments of the particular States. If the new Constitution be examined with accuracy and candor, it will be found that the change which it proposes consists much less in the addition of NEW POWERS to the Union, than in the invigoration of its ORIGINAL POWERS. The regulation of commerce, it is true, is a new power; but that seems to be an addition which few oppose, and from which no apprehensions are entertained. The powers relating to war and peace, armies and fleets, treaties and finance, with the other more considerable powers, are all vested in the existing Congress by the articles of Confederation. The proposed change does not enlarge these powers; it only substitutes a more effectual mode of administering them."
The American Federalist position (if such a term must be used) on government spending, then, is evident in the above guidance. A return to the plain meaning of our Constitution by all branches at the federal and local levels of government would yield the right and proper result.