The idea that the Republican party needs to find a new directions seems to have a counterpart -- it simply needs to find a competent leader. The neo-con ideas of the Bush Presidency, in other words, are perfectly fine ways to think about governing the country; they have just been ineptly executed.
In foreign policy, I can see some merit to this concept. The world has people who consider themselves our enemies and, for better or worse, we find ourselves in hostilities with them. The question is what are are we going to do about it. One of the reasons that I like Rudy Giuliani, despite some anticipated imperfections (weakness on civil liberties, tendency to autocratic governing style) is the fact that he promises, with some credibility, to make the government competent in its foreign policy again.
Bill Clinton made us loved, at least in Europe. George W. Bush has made us despised. Ronald Reagan made us feared -- Hizzonner said in an interview with the Paper of Record, he armed himself and presented an unpredictable face to the world, while at the same time presenting a resolute, audacious grand vision of where things would end up.
We can be both feared and loved, by the way. But if we had to pick between the two, Giuliani has read il Principe and seems to take its lesson to heart. His candidacy is asking whether we want a teddy bear or a tough guy in the White House, and I think that's a winning sort of question for him to ask.
As for governmental competence at home, it's a little harder to identify where things need to be done and where things are best left to work out for themselves. Should the government bail out people who got marginal mortgages and now comprise a massive wave of home mortgage foreclosures? (I heard on NPR last Thursday that one in 200 houses in America is in foreclosure; I wonder how true that statistic is.) Generally, I think that the answer should be "no," the market needs to sort out the problem on its own and in the process, it will re-correct the inflated value of houses that caused this problem in the first place -- and in that way, recycle at least some of these people back in to houses in a few years. If there is a role for the government, it should be in better sorting out the kinds of financial products available and how they are used. A 1% flexible ARM with reverse amortization and a two-year cliff is not appropriate for a young family starting out. (The Wife and I are applying for a plain-vanilla 30-year fixed mortgage, by the way -- I'd sort of like to start accumulating equity right away with my new house, regardless of whether the property appreciates or not.)
Belief in the fundamental power of the government to make things better is more of a Democratic vision of the world than a Republican one, and Republican leaders are generally right to be skeptical of "big government" ideas, particularly coming from leaders within their own ranks. The problem now with demonstrating skepticism about government activity is that after nearly eight years of the Bushmen running the show, the Republicans desperately need to demonstrate that they are not incompetent and can be trusted with the reins of power at all.