The Republican Party is on the verge of its second consecutive election debacle. In two years, the GOP will likely have lost the presidency, more than a dozen Senate seats, and more than 50 seats in the House—if it’s lucky. Republicans will have gone from controlling every arm of government to controlling none.

As it emerges from the electoral rubble, the Republican Party must decide what it actually believes in before beginning rebuilding its battered fortune.

On one side is a growing chorus that believes Republicans need to become more like—well, Democrats. In books like “Grand New Party,” by Ross Douthat and Reihan Salam; “Heroic Conservatism,” by Michael Gerson; and “Comeback: Conservatism that can Win,” by David Frum, big-government conservatives have argued for a more activist federal government that embraces the goals, and sometimes even the means, of liberalism.

In their opinion, the public is no longer amenable to the traditional Republican message of lower taxes and limited government in an age of economic insecurity. To be successful, they say, Republicans must compete with Democrats to give voters what they want, be it national health care, more government spending or a bailout on their mortgages. Their arguments are perhaps best summed up by Minnesota governor Tim Pawlenty, who told the Minneapolis Star-Tribune that “the era of small government is over.” And, they say, Republicans need to adapt to this new reality even if it means abandoning traditional conservative principles.

On the other side of this debate are those who believe that Republicans lost precisely because they abandoned their principles and commitment to limited government. These include young House leaders like Reps. Mike Pence and Jeff Flake of Arizona and Paul Ryan of Wisconsin. Those arguing for a return to smaller government say that after eight years of a Bush administration that increased federal spending faster than any president since Lyndon Johnson, created the first new entitlement program in 40 years, increased federal control over education, and added 7,000 pages of new regulation to the Federal Register, Republicans had lost the ability to differentiate themselves from Democrats.

These Republicans believe that America is essentially still a conservative nation. They point to polls showing that, even in the midst of an economic meltdown and a Democratic landslide, voters by a 2–1 margin continue to identify themselves as conservatives rather than liberals. They therefore want the Republican Party to return to its Reagan-Goldwater roots of support for smaller government and less spending.

These two factions will fight it out in an increasingly bloody battle for the soul of the Republican Party. And while much of the debate will be framed in terms of which is the winning strategy for 2010 or 2012, it is important to ask whether success can be measured only in terms of immediate electoral gains. As Richard Weaver put it in his famously titled book, “Ideas have consequences.” By staking out principled positions in favor of limited government, Republicans can change the terms of the debate for years to come.

Martin Luther King Jr. once said, “There comes a time when one must take a position that is neither safe, nor political, nor popular—but one must take it simply because it is right.” The evidence suggests that reducing the size and power of the federal government would be safe, popular, and good politics. But Republicans should stand for limited government and individual liberty simply because it is the right thing to do.