David Boaz, Executive Vice President of the Cato Institute, provides a Libertarian's arguments against government involvement in the arts.
Cato argues that 'it is precisely because art has power, because it deals with basic human truths, that it must be kept separate from government: 'Government...involves the organization of coercion. In a free society coercion should be reserved only for such essential functions of government as protecting rights and punishing criminals. People should not be forced to contribute money to artistic endeavors that they may not approve, nor should artists be forced to trim their sails to meet government standards. Government funding of anything involves government control.'
'That insight, of course, is part of our folk wisdom: "He who pays the piper calls the tune." "Who takes the king's shilling sings the king's song." The American Founders knew that the solution was the separation of church and state. Because art is just as spiritual, just as meaningful, just as powerful as religion, it is time to grant art the same independence and respect that religion has. It is time to establish the separation of art and state.'
See Cato's follow-up note on the 'culture wars'  debates at http://www.cato.org/pub_display.php?pub_id=6102 (also titled Separation of art and state, August 1997).

http://www.cato.org/pub_display.php?pub_id=6853