I don't know any Republicans who think their party doesn't need a new direction. Should the GOP become the party of liberty in the libertarian sense? Shikha Dalmia makes the case at Reason.
They could begin, first and foremost, by showing some embarrassment with the label "conservative." Democrats have been embarrassed with the term "liberal" ever since it became synonymous with tax-and-spend in the public mind. Interestingly, even Obama, who is nothing if not a tax-and-spend liberal and then some, has shunned the label.
More interestingly, the libertarian economic policies that Dalmia recommends only carry the label conservative" in the United States. Elsewhere, they are usually called "liberal" or the pejorative "neoliberal." Regardless of what they end up being called, there's no logical reason why those set of economic policies--smaller government, a focus on liberty over equality--should be caught up with the "conservative" label. But there might be good political reasons.
That's where Dalmia falls short. What I found lacking in this piece was any reason why it would benefit the GOP politically in the short-term to switch from conservatism to libertarianism. It's not enough to argue that such a shift would make for better policies. There also needs to be an argument for why it would be in the GOP's self-interest--not just the nation's--to make that shift.
It's easy to say that the big spending the Republicans promoted in the Bush years has led them to their current political crisis. Putting my own thoughts on big vs. small government aside, I think that analysis might be mistaking correlation for causation. I'm not so sure the GOP is in the gutter because of their support for big government, or because their support for big government came at the same time as a complete failure to provide a counter-narrative to Obama and the Democrats--regardless of whether that narrative is conservative or more libertarian. When it comes to specific policies, voters seem to like big spending. Gene Healy as much in the polling data in a piece in today's Washington Examiner.
At the same time, where's the harm in trying something different? It's hard to imagine the Republicans embracing liberty on social values issues anytime soon (gay marriage is one of their few "winner" issues left, although maybe not for long). But maybe it's worth a try to make a change when it comes to economics.
It's doubtful that the Republicans will abandon the label "conservative," however, as long it's politically useful to bundle "liberal" (in the international sense) economic policies with conservative social ones.