I think you are railing against the size of the government - which is another issue and one I'm sure I wouldn't disagree with you much on.
What I am saying, and I think is in the spirit of the quote, is that government policies are being influenced by small groups of powerful, wealthy people - and that endangers the Republic. All you have to do to see this is look at any proposed bill before Congress - 1000s of pages of special interest 'tackons' that have nothing to do with the main point of the bill. Look at who got the lion's share of benefit from the Bush tax cut, his energy policy, his prescription drug benefit - and look at who has to pay for it.
Unions are far less influential now than they once were (in the 50s and 60s for example), and I won't argue that there are problems with some of them. What I say about unions is that they were a powerful factor in the creation of the American middle class - and that middle class was a big factor in the political stability and high standard of living the country has enjoyed. The pressures of global competition have seriously weakened organized labor in the U.S. -- unions have been steadily losing membership for decades.
As I say I believe the message of the quote is an essential truth in a capitalist democracy, no matter who the author is.
by the way, I read the snopes article and it turns out Lincoln was a supporter of Labor. And that from a REPUBLICAN no less!