wonders if the conservative movement is finally shifting toward a principled libertarianism that opposes socially conservative policies but instead focuses on limiting the size and scope of government.
I think it's clear that while the self-identified libertarians in the conservative movement have been more successful than other elements of the Republican coalition at seizing the public imagination post-Bush/Cheney/McCain and building a new opposition, that a broader shift is not under way. In fact, it is impossible.
This is because the number of sufficiently consistent and principled libertarians is statistically insignificant and the broader public mostly opposes their economic ideology and agenda.
Let's take the inconsistency problem first. It is true that Americans are suspicious of government in principle and strongly dislike taxes in particular. However, Americans also support government projects that help them individually, and this support is strong enough to support a robust government. This is true even of people motivated by small government or anti-tax sentiment. Take, for example, the anti-tax movement in Washington state, particularly as it coalesces around initiative-junkie Tim Eyman. The typical conservative of this type including Eyman himself opposes taxes while simultaneously supporting massive road-building projects. In one specific case, the widespread conservative position on Seattle's Alaskan Way Viaduct is to build a massive deep-bore tunnel that will cost billions of dollars. This project is a priority even as state government is being slashed across the board. The "left" solution is to tear down the existing viaduct and reconfigure surface streets to reroute the traffic. That option is the cheapest available by hundreds of millions of dollars. It also prioritizes local priorities over state priorities. It is the libertarian solution. Yet conservatives (and a plurality of the general public) oppose it. Conservatives also oppose lifting regulations that require minimum parking in city neighborhoods; the progressive left favors lifting the minimum though some also favor instituting maximum parking regulations to take their place. As for government services and tax dollars, they flow disproportionately to conservative areas and conservative voters. Conservatives support building more prisons and keeping more people in them. They support putting more cops on the street. They favor government support of surveillance and torture policies. Some of these policies are or can be good government policy, but what they are not is libertarian policies. Aside from an allergy to taxes and an excessive paranoia about losing their guns, conservatives in a supposedly libertarian region and state have almost no support for libertarian policies. Liberals, even on economic issues, have at least an equal claim to libertarianism.
The same trends exist nationally, with strong support even among many self-identified libertarians for a massive military, law enforcement, and intelligence apparatus. It's not government they oppose, but the wrong kind of government, and in that they're no different from any other American. The clear majority of voters continue to favor a large government that spends lots of money, balancing the interests of different factions but providing something for almost everybody. So principled libertarianism is a political dead end.
What conservatives really need is to ditch the religious conservatives and the fringe wackos (including most libertarians) and embrace an efficient government that supports traditions that have stood the test of time. This would include support of marriage equality and reproductive freedom, opposition to corporate subsidies and trade policies that favor businesses over individuals and families, and a mix of sensible and effective economic regulations and taxes that encourage stable and productive behaviors that strengthen our national institutions. On climate change, for example, this would mean supporting cap-and-trade and use taxes over either the current climate denialism or a more centralized approach that imposes strict mandates and limits. On immigration it would mean allowing immigrants to work under the same rules as citizens, with incentives for citizenship. It would mean directing law enforcement dollars for the drug war to more effective medical treatment policies while legalizing drugs with sensible regulations. It might be libertarian in spirit, but it would be pragmatic in practice. And it would stand a chance of attracting majority support by appealing to independents, which is not true of social conservatism, anti-tax libertarian absolutism, right-wing extremism, or the confused muddle of all of this that makes up the current conservative movement and the Republican Party in particular.
None a hint of this kind of conservatism can be found anywhere in the US; it mostly describes elements that can be found in the more successful parties of the European (and Canadian) right. Until conservatism can learn to embrace new ideas from unlikely places, they'll continue to be a marginalized political force in this country. And libertarianism is a big part of why that isn't happening.