As it stands now, John McCain, Rudy Giuliani, Newt Gingrich, or Mitt Romney are going to be the GOP candidate in 2008. That's very good for the Dems and very bad for the GOP. Candidate by candidate analysis in a minute, but first, let's set the stage.
Republicans enter the campaign with a president with a 30% approval rating. They have held the presidency 28 of the last 40 years, and have won seven of the last ten elections. They have cobbled together a coalition of disparate parts--fiscal conservatives, libertarians, evangelicals, and hawks--and dictated government policy since 1980. They have managed to implement a numbero their major reforms, from tax cuts to invasions, and have very little else to offer voters and keep the coalition together. With the collapse of Iraq, the coalition shattered, and the only way to beat the Dems in '08 is to somehow reconstitute that coalition. Each one of the major GOP candidates thinks he knows how to do it, but the odds are extremely long: the GOP has spent a generation building a vicious, aggressive political machine, and now it's turning on itself
After his defeat in 2000, McCain has tried to add Evangelical chops to his image of a principled moderate. He has waffled about gay marriage, paid fealty to Jerry Falwell and James Dobson, and for his trouble, remains distinctly distasteful to the Christian right. His jump to the right has eroded his "straight talk" cred. Equally as bad, he has kowtowed for Bush and is strongly associated as a supporter of the war. Finally, he has long argued for a troop escalation, and although Bush's "surge" didn't meet the numbers McCain has said were needed, he'll go down with any failures the surge results in. One further barrier, and a rather serious one, is McCain's age: he'll be 72 at the time of the election--and would be the oldest president elected (Reagan was 69).
In the primaries, McCain will be savaged by the Evangelical right and caricatured as a Bush stooge. His own base will be attracted by Giuliani and is less supportive of the "straight talker" in any case. McCain is in serious trouble.
Giuliani is the other "straight talker" in the election, and he will find a base of support among the old school New England GOP--those who don't care about social issues. Giuliani clearly hopes the glamour of his 9/11 moment will carry Evangelicals along, but there are a couple problems. His New York background (failed marriages, infidelity, living with gay men) will be too distasteful for a lot of Dixie voters who would have trouble voting for anyone named "Giuliani" in any case; add these infractions, and he'll get killed in the primaries. It's also not clear that being a stand-up mensch during 9/11 will translate as adequate experience. He has had no national political experience. I suspect Rudy would make a decent foe for a Democrat in the general--particularly if it were a novice like Obama or Edwards--but he'll never get that far. The social conservatives will bury him in the primaries.
Two years ago, Romney wouldn't have thrilled Evangelicals--he's good on social issues, but his Mormonism would have been a problem. (In private, Christians would admit that he's headed the same place as godless Taxachussets liberals.) But the landscape has changed, and he may be the best of a bad lot. For me, the x-factor is whether Evangelicals are going to stay politically active. They'll vote in 2008, but with the failures of Bush to implement bedrock goals (abolishing abortion and gay marriage) and the loss of Congress, this is the most enervated faction of the GOP coalition. That's bad news for the GOP in general: they were also the most energetic political activists. Can Mitt rally them for one more campaign? My guess is no. In his early Massachussets campaigns, he was notably liberal with regard to social issues. That's going to be a major problem down the road. He also doesn't have a great deal of foreign policy credibility. He will be looking for some of the fiscal conservative vote and hoping to get the majority of the Evangelical vote. It probably won't be enough in the primaries, but, if it is, it definitely won't be enough to defeat the Dem.
I have a hard time thinking Newt will actually throw his hat in the ring, but it would be entertaining if he did. Gingrich now believes his own hagiography: he was a principled conservative and clear-eyed intellectual who used reason to spark a populist revolt against corruption. Now he sees himself mounting the white horse to sanitize his own party. What he and his supporters seem to forget is that he was a nasty man whose populism never extended beyond his home district, and that he was the intial cause of the very corruption he now claims to want to address (he was an autocrat and a notorious pork barreler). In the primaries, he would mainly polarize the South against the other Northern and Western candidates, inject a flood of bile into the race, and remind moderates and independents why they want Dems to have a shot. He doesn't have any chance of winning in the primaries, and if he enters, he could seriously damage the campaign of the man who ultimately defeats him.
I don't know that this is a widely-shared view among Democrats and liberals, but the GOP don't really have much of a shot in 2008. They have to hope for a very weak candidate to emerge from the Democratic primaries and then pray for scandal. Anything else, and it's hard to imagine a scenario in which the White House stays in Republican control.