Ross Douthat doesn't have any idea what he's talking about when he claims that prominent moderate Republicans are really "liberals."
He's flat wrong when he suggests that the Republican party doesn't need socially moderate Northeastern Republicans, like the recently departed Arlen Specter.
And those moderate Republicans voted for "$800 billion in deficit spending" not because they are secretly fiscally liberal, but because they understand that deficit spending is the economically sound government action in minimizing the impact and duration of a financial crisis.
The Republicans have an important role in the recovery, though. While an expansion of the government's balance sheet was a necessary and unavoidable action, a corresponding expansion of the regulatory state could slow the recovery considerably. The bank and auto bailouts were necessary, if extreme actions, but the fact that government had to intervene to save them doesn't mean government knows how best to run them.
The Democrats have a message that excessive financial risk-taking caused the crisis; big-shot CEOs make juicy targets for blame, even though a full accounting has to place responsibility on investors ravenous for financial products with high returns, small-fry mortgage brokers who were flat-out crooks and borrowers who took loans they knew they could never pay back.
We need risk to recover, and the Republicans have to stand against an expansion of federal bureaucracy that will waste tax dollars and kill good businesses.
That should be the message of the new Republican party; conservative orthodoxy on gay marriage and abortion is now a minority position in the United States, and the Republicans can no longer depend on that to win elections for them. Further, the Republican South is no longer solid. Virginia is a swing state. Florida is a swing state. Republicans will have to fight for safe seats in their strongest regions soon, and Douthat's idea that they can just cede the coasts is totally wrong, unless they want to be consigned to permanent minority status.