Why'd the Republicans get creamed last night? Read this and this. The latter link, by Ron Brownstein of the LA Times, seems about right -- the GOP has ceded the middle or allowed the Democrats to make that appear to be true (see the Sowell column I linked yesterday). As Ryan Sager has noted time and again, the GOP is too heavily reliant on evangelicals and has turned off libertarians in the recent past. That's a recipe for disaster in the probable 2008 swing states of the northern midwest, moderate southwest and Florida.
That said, there are certain caveats: (1) the president is a Republican, and that means that the foreign policy controls are still in GOP hands -- Bush should use them more than he has; (2) reliance on moderates to pass an ambitious partisan agenda is notoriously ill-advised -- Pres. Reagan worked his agenda through Congress using the moderate Southern Democrats; Pres. Bush has failed to make headway on his "ownership society" thanks to Chafee, Snowe, Collins and other soft GOP senators; Clinton's most ambitious economic and social legislation FAILED despite a Congress controlled by his party, and he instead has his best legislative wins(NAFTA, Welfare Reform) with a GOP Congress.
The problem for Bush is twofold: the Democrats have never conceded his legitimacy as President thereby creating the most rancorous political situation in DC since the 1850s, and he has failed to show any follow-through in his legislative agenda (the complete opposite of Reagan, who worked bills through Congress one-at-a-time, whose administration actively worked with Congress to craft bills, and who would smack Congress in the nose with his veto pen).
Finally, the American people may realize something's amiss when the UN (which has a lower approval rating than Congress), the Europeans, and the Islamofascists are singing the same tune about yesterday's elections.