Republicans on Capitol Hill have been engaged in a re-branding exercise since losing their majorities in the House and Senate in 2006. But GOP lawmakers and strategists are divided over whether the party should espouse conservative principles or a more moderate image in light of 2007 election results.

Eight of the 17 Republicans who have announced their retirements from Congress this year are staunch moderates, and reports suggest that Republican freshmen and junior members appear to be eager to swell the ranks of House conservatives, and are enthusiastically trying to recruit like-minded candidates for 2008.

That's also the case among some in the emerging leadership, including Republican Conference Chairman Adam Putnam of Florida, who was put in charge of helping advance a new brand.

"We lost our way," said a leadership aide who did not want to be identified. "There is a division, a healthy discussion in the conference. That is going to be resolved in the coming weeks and months. There is time to work that out."

This branding battle is also taking place in the states, where recent elections could be interpreted to show either the first step toward a Republican revitalization or another step toward GOP disintegration.

In Virginia, for example, Republicans lost control of the state Senate as well as a handful of seats in the House of Delegates. Historically bright red Republican, Virginia has been moving blue since the 2002 election of Democratic Gov. Mark Warner, who was succeeded by his lieutenant Tim Kaine, and the upset of Republican U.S. Sen. George Allen by Democrat Jim Webb last year.

The reasons for the Democratic shift in the state are complex, but some conservatives say the GOP has moved too far away from its right-leaning principles.

"It's very sad," said James Parmelee, head of Republicans United for Tax Relief, a grassroots organization in Virginia. Parmalee says state Republicans bombed on Nov. 7 because they lost their conservative ways.

"If there was ever an election that showed that abandoning Republican principles doesn't work, this would be one of them," he said.

Other Republicans in the state say too much movement to the right has turned off moderates, particularly in the more urban and populous Northern Virginia, and that has hurt the state party.

"Our brand is damaged. We have a damaged brand just like a product on a shelf at the supermarket that has an alert out about it that it's not safe," said Republican state Sen. Russell Potts, who is retiring this year and believes a takeover of the state party by right-wing conservatives has led to the current peril.

Republican lobbyist Larry Ceisler said he too is unsure whether steering rightward is going to protect the party from more election upsets next year. He said Pennsylvania Republicans this month were dealt key losses, particularly in the suburban Philadelphia counties and in the state supreme court, and the fault lies primarily with the unpopularity of Republicans in Washington. Ceisler said unless the presidential nominee and the party as a whole can reach out to moderate voters, they’re facing another brutal year at the polls.

"There's a really bad feeling about Republicans" in some critical districts, said Ceisler, who runs the PoliticsPA.com Web log. "There is a major disconnect between President Bush and the Republican Party among these suburban voters, which are fiscal conservatives and social moderates. They are looking at a national party and president who are the opposite of them."

This divide seems most evident where fundraising is concerned. In Virginia, for example, the Democratic Party raised $3.4 million as of Sept. 30, according to the Virginia Public Access Project. Comparably, the Republican Party raised $1.7 million for the first three quarters of the year.

As for total contributions, Virginia Democratic political action committees made up for the top three money raisers — totaling nearly $10 million by the end of September.

The money issue is even more dramatic at the national level. At the end of October, the Democratic Congressional Campaign Committee had $29 million on hand, compared to just $2.5 million for their counterparts at the National Republican Congressional Campaign Committee.

Republicans are far behind on the Senate side, too, trailing $8.3 million to the Democrats' $22.8 million as of Sept. 30.

Stephen Farnsworth, an associate professor of politics at the University of Mary Washington in Virginia, said Democrats are benefiting from a surge in enthusiasm and promise, which has no doubt boosted their fundraising prospects in Virginia and beyond.

Meanwhile, "There is nothing more terrifying to lobbyists than backing the wrong horse," which accounts, in part, for the increase in big donors to Democrats since their big wins last year, Farnsworth said.

But not all is gloom and doom, as Republicans in other states are quick to mention recent elections that offer glimpses of hope. In fact, some politicians and pundits alike are calling Election Day 2007 results a "mixed bag," while Republicans in New York go so far as to say they have seen an end to the storm that was the Republicans' darkest days.

"This was a positive step forward," said Matt Walter, spokesman for the New York State GOP, pointing to five county executive wins upstate. "We have come a long way toward rebuilding and revitalizing the party. It's a clear sign we've turned a corner and things are improving."

But New York Democrats claimed victories too, particularly in claiming the majority of the Duchess County Legislature for the first time in 30 years. Angst over Gov. Eliot Spitzer’s now aborted plan to give driver's licenses to illegal immigrants seemed to have little impact on the majority of the races statewide.

Officials said local elections turned on local issues, rather than national concerns or bad feelings emanating from Washington.

Republicans are also pointing to Louisiana, where Republican Bobby Jindal won the governorship, and Indiana, where Republican Greg Ballard won the mayor's race in Indianapolis, beating a two-term incumbent despite being way outspent.

Republicans say they also had good showings in Kentucky, despite a defeat of troubled Republican Gov. Ernie Fletcher, and are finding positive indicators in the 5th Congressional District in Massachusetts, where Democrat Niki Tsongas narrowly won a special election in September over Republican Jim Ogonowski, despite the largely Democratic makeup of the district.

“I think the Massachusetts special election provided a blueprint in some ways in how a Republican challenger can succeed in this environment,” said Ken Spain, spokesman for the NRCC.

But for every GOP win, the Democrats point to one or two victories across the country that embolden their cause. In Kentucky, for example, Democrat Steve Bashar beat scandal-embattled Fletcher, 58 to 41 percent.

Farnsworth said Republicans would do best to see the 2007 election as a warning and work from there.

“I think the Republican defeats are invariably a very powerful sign for Republicans on the congressional level for 2008,” he said. “There really isn’t much of an advantage for Republicans there.”