Here's a chunk from 'Habermas: The key concepts' by Andrew Edgar. Beware of typos - am copying from the book.
"At one level... [the] legitimacy [of capitalism] is secured through the plentiful production of consumer goods, and the relative secruity that the welfare state provides. However, this leads to increasingly bureaucratic or administrative interventions in the everyday lives of citizens. The welfare state intervenes, for example, in education, health and the social services, and is supported by legal and financial institutions. Crucially, Habermas suggests, the welfare state therefore entails a highly instrumental way of thinking about itself and its activities, which is to say that it is concerned with the efficient realistion of its plans, rathe than with the value of these plans and their goals. This makes the welfare state highly vulnerable to failures and inefficiencies if, for example, the consumer goods that the public demands are not made available, or, perhaps more significantly, as apparently top-heavy and over-bureaucratic state institutions seem to hinder their freedom and well being.
Such problems lead to a legitimation crisis not directly, but rather indirectly, because the 'instrumental reasoning' of the welfare state inhibits the use of 'communicative reason', and thus of proper discussion about the role of government and the purposes of the welfare state. This is compounded by the fact that the population itself is increasingly well educated and critical, and thus resistant to the state's attempts to indoctrinate it. As Habermas puts it, meaning cannot be administratively generated, which is to say that the government administration cannot dictate to the people what they should think of it, or indeed what they should make of their lives.
In practice, we continue to see a growing disenchantment with modern government in the industrialised world through, for example, falling attendance at elections (as the electorate fails to perceive a difference between the rival parties, or considers them to be avoiding the pressing issues of the day such as environmental crisis and global injustice), and the rise of popular protests (for example against the invasion of Iraq, or now routinely at G8 summit meetings). All may be seen to be symptomatic of a crisis in the legitimacy of modern forms of government."
Dunno about the last bit so much, but the idea that the welfare state follows a kind of internal logic that does not resonate with (or even alienates) the public rings true. This bleeds into systems theory, and there's some other good stuff in the book about how the way we accept systems (such as the implicit relationships in a trivial act like buying something in a shop) as crowding out more meaningful communication.