Among advocates of limited government, there is growing unease about the fiscal fight in Washington.

This is not because anything bad has happened. Indeed, Democrats thus far have been acquiescing – at least on a temporary basis – to conservative demands for $61 billion of spending cuts over the rest of the current fiscal year. This is remarkable after 10 years of endlessly expanding government.

Here’s what Jennifer Rubin wrote at her Right Turn blog.

A senior Senate adviser wisecracked, “A month ago, they said they couldn’t possibly cut a dime. Then they said the $4 billion [in] cuts in the first CR were a non-starter. Now they’re bragging about cutting spending?” It is a remarkable turn of events and another sign that Reid was bested in this round of budget battling. Twice now he capitulated to House Republicans.

This analysis is right, and it is very similar to what I wrote back on March 2 regarding the first short-term agreement.

So why, then, am I worried?

I’m nervous because the fiscal fight is evolving in a bad direction. In that March 2 post, I warned that “Republicans should be very careful about having their energy dissipated by a series of diversionary battles over short-run spending bills.”

That prediction, unfortunately, seems to have been rather accurate. Democrats have reluctantly agreed to some spending cuts, but their decisions perhaps could be characterized as a rope-a-dope strategy - tactical retreats designed to regain control over the field of battle and win the ultimate fiscal war.

The elephant in the living room, of course, is the threat of a government shutdown. Republicans seem terrified that they will get blamed if there is a stalemate and this leads to a shutdown of the non-essential parts of the government. And they are terrified of this outcome even if they have approved a budget and the stalemate exists solely because Harry Reid has blocked their budget in the Senate and/or Barack Obama has vetoed their budget.

I’ve already explained, in an article for National Review Online, why GOPers should not allow themselves to be blackmailed on this basis. The 1995 shutdown was a big policy success. Republicans did not get everything they wanted, to be sure, but the final result was real fiscal restraint - a four-year period where government spending grew by an average of less than 3 percent.

Moreover, the shutdown was hardly a political setback. Democrats on Capitol Hill were defecting to the GOP side during the fight, and the political people in the Clinton Administration were genuinely concerned that they might not be able to sustain the President’s veto. Some GOP political operatives thought, after the fight was over, that they lost because Clinton polled better than Gingrich, but this certainly didn’t keep Republicans from comfortably holding the House in 1996 and actually picking up seats in the Senate.

So what happens now? Republicans basically have two choices of how to proceed. Both options have some risk, but one approach almost surely leads to failure.

1. Draw a line in the sand and pass a strong budget with cuts and meaningful reforms, even if it means the Democrats block the spending bill and cause a shutdown.

Upsides - This approach is more likely to lead to an outcome that reduces the burden of government spending. Moreover, it surely would trigger more activism from libertarians, conservatives, and other supporters of limited government. A victory based on this approach (or even a draw) creates momentum for both the FY2012 budget resolution battle and the debt limit fight.

Downsides - The left, including the establishment press, will portray the GOP negatively. More specifically, they will claim Republicans are “shutting down the government” because of supposedly extraneous issues like abortion (i.e., the funding controversy over Planned Parenthood), the environment (the debate over the “rider” provision to curtail the EPA’s power grab), or healthcare (defunding Obamacare).

2. Do everything possible to avoid a shutdown, even if it means higher spending and no reform.

Upsides - There is no risk of being blamed for a shutdown.

Downsides - This French-army approach basically means that Republicans give up on fiscal policy for the next 21 months. Surrendering to avoid a shutdown means the burden of spending is higher. It means no program reforms or eliminations. Because of this precedent, it is highly unlikely that the GOP could attach meaningful fiscal conditions to the debt limit. Similarly, the loss of momentum would carry over to the budget resolution, undermining chances for fiscal reform in the 2012 fiscal year budget. Last but not least, the “base” would be very disappointed as activists from the Tea Party and elsewhere begin to conclude that fighting against big government is a fool’s errand.

Even in the most ideal scenario, using the line-in-the-sand strategy, fiscal conservatives in the House will not get everything they want. The real issue is which side has the upper hand in the negotiations.

The fight-rather-than-surrender approach gives the GOP leverage. They almost surely won’t get $61 billion of cuts, but they’ll be much closer to that number than with the French-army approach. They won’t succeed with all the “riders,” but they’ll make progress - perhaps temporarily setting aside the Obamacare issue in exchange for clipping the EPA’s wings, or gutting Planned Parenthood but letting NPR off the hook.

Politicians inevitably are worried about the political consequences of any strategy. That’s harder to judge, but they can protect themselves by not making it seem as if they welcome a partial shutdown. I explained in the National Review article that there are several lesson that fiscal conservatives can learn from 1995 that can help them prevail in 2011.

First and foremost, Republicans should keep passing bills to reopen the entire government. They should stress that they want the government open and explain that it is only closed because of Harry Reid’s obstinate support for big government and/or Barack Obama’s use of his veto pen on behalf of special interests. …Keep passing bills to reopen the parts of the government that voters actually care about, such as VA hospitals, the Social Security Administration, and national parks. …Remember that a government shutdown generally puts more financial pressure on the Left. If there is a lengthy showdown, Democratic constituencies begin to squeal. …In 1995, Republicans had to deal with a very hostile press corps. There was no Fox News, no Internet as we know it today, and no cadre of talk-radio hosts to augment Rush Limbaugh. So while it is true that CBS, NBC, ABC, CNN, the New York Times, and the Washington Post will regurgitate Democratic talking points, many voters will have access to conservative news sources, something that was not the case in 1995.