Jeb Bush got it right. He told conservatives at the National Review summit this past weekend that Republicans lost the 2006 elections because they abandoned their principles of limited government and fiscal responsibility.

Ronald Reagan won two landslide elections on a limited-government platform. Bush has twice squeaked through with his big-government conservatism.

The Republican Congress came to power in 1994 promising “the end of government that is too big, too intrusive, and too easy with the public’s money.” But for the past six years, with Republicans controlling both the White House and Congress, they have instead delivered the biggest spending increases and the biggest expansion of entitlements since Lyndon Johnson, the federalization of education, the McCain-Feingold restrictions on political speech, and the Sarbanes-Oxley regulatory burden.

When you combine that with a misguided war and a series of scandals that reminded voters why no party should stay in power too long, is it any wonder that conservatives were dispirited in the 2006 election?

The big problem for Republicans last November was the loss of moderate, independent, and libertarian voters to Democratic candidates. A new analysis of the American National Election Studies data shows that libertarian-leaning voters made up 15 percent of the electorate in 2002 and 16 percent in 2006.

Those voters gave Republican candidates for the House a 47-point margin in 2002, but that margin dropped to just 8 points in 2006. About 2 million libertarian voters switched parties in 2006, for a net Republican loss of 4 million votes. The shift was strongest among the youngest voters.

For decades, the Republican party united libertarians and conservatives against the big-government Democratic party. But the recent Republican trend toward big spending and centralization has discouraged both groups.

In one recent poll, voters preferred the Democrats by 2 to 1 to deal with the economy and the federal budget. Meanwhile, the party’s tilt toward social conservatism—the anti-gay marriage amendment, the clumsy intrusion into Terri Schiavo’s hospital room, the “intelligent design” crusade—has turned off younger and more libertarian voters.

One bit of good news for the Republicans is the beginning of the post-Bush era. Jeb Bush took pains to note that he was criticizing the Republican Congress, not his brother, the president, but who’s he kidding?

If Jeb thinks that Republicans “lost … because we rejected the conservative philosophy in this country,” he must realize that it was President Bush and his White House staff who inspired, enticed, threatened, bullied and bully-pulpited Republicans into passing the prescription drug bill and other big-government schemes. Now Republicans are starting to break out of lockstep.

As Republicans start to develop a strategy for 2008 and beyond, they should remember that lots of Americans don’t like big spending and nanny statism. In the most recent poll that asked the question, 64 percent of voters said that they prefer smaller government with fewer services and lower taxes, while only 22 percent would rather see a more active government with more services and higher taxes.

In a new Zogby poll, fully 59 percent of respondents said they’re “fiscally conservative and socially liberal.” That’s a majority for a modern Republican Party. Republicans need to look to the future: Younger voters are more likely to be libertarian, more likely to accept gay marriage, and more likely to have voted Democratic in 2006.

Republicans need to reach them before the Democrats lock them in. They can do that with an optimistic, inclusive message of liberating people from the dead hand of the federal bureaucracy—a smaller and less intrusive federal government, encouragement of enterprise and economic growth, a government that respects but doesn’t embrace religion, and a de-escalation of the culture wars.

After Ronald Reagan inherited an economic mess from Jimmy Carter in 1981, he used to recall the great baseball player-manager Frankie Frisch. As Reagan would tell it, after a rookie he sent into center field promptly committed two errors, Frisch stormed out of the dugout, grabbed his glove and said, “I’ll show you how to play this position.”

The next batter slammed a line drive right over second base. Frankie came in on it, missed it completely, and fell down when he tried to chase it.

He threw down his glove, and yelled at the rookie, “You’ve got center field so fouled up, nobody can play it.”

Bush may have the Republican image so fouled up, nobody can play it in 2008. Even so, Republicans need to be planning now for the party that will compete for votes in years to come.