Conservatives seem to be advancing one of two theories here, both of them at odds with reality. The first is that the drift from limited government principles demoralized the GOP base, leading to the Democratic landslide. The first problem with this theory is it's not at all clear it was government spending and not, say, the war, that demoralized conservatives. But, for the sake of argument, let's say that's right. That leaves an even bigger problem: While the GOP's performance among conservatives was clearly disappointing, the party suffered significantly larger losses among moderates.
Of course, that leaves a second theory: that the GOP's abandonment of small-government principles explains the defection of moderates. But I doubt it. While the publicly-available election data can't answer this question definitively, everything we know about public opinion suggests there isn't a majority constituency for economic libertarianism. (Tax cuts, perhaps, but not the smaller government that goes along with it.) Probably the best source on this is an exhaustive 2005 study by the Pew Research Center, which divided the electorate into nine different "typologies." Of the nine groups, only two were discernibly libertarian on questions of economics, amounting to 20 percent of registered voters. The rest were sympathetic to government, to varying degrees. Even more empirically-minded conservatives--like National Review's Ramesh Ponnuru--have conceded as much.
That's just for starters and it gets better. Read the whole thing.