A robust debate is under way about the future of conservatism, and there are plenty of lessons to be learned from the 2012 election and current trends in American politics. Unfortunately, the conversation so far has largely consisted of calls for modifying basic conservative positions, especially on social policy, and for targeting government spending and programs to appeal to particular demographic groups.

But layering new programs on top of an existing bloated framework is little more than low-budget liberalism. This approach fails substantively and will not widen support for the conservative message. Conservatives should reject the assumption that government handouts are the way to win friends and influence people.

The better and more confident way forward lies in America’s principle of limited government and its promise of unlimited opportunity. We need a smarter application of these ideas to the hard challenges of our day.

The liberal model has been a disaster. Government, far from acting as a catalyst for opportunity as intended, has become opportunity’s chief barrier. Government spending, taxing, and borrowing are killing the American economy, and we are wrapped in endless rules and regulations. Poverty rates remain high, our public-education system fails the least fortunate, and the family — the key to the well-being of children — is falling apart among poor and low-income Americans. Meanwhile, our ever-growing welfare state crowds out the very private activities and institutions that make up not only society’s best safety net but also its seedbed for self-improvement and advancement. And the government’s uncontrolled costs and unsustainable promises threaten long-term economic growth and will pass on crushing debt and social burdens to our children and grandchildren.

Conservatives must fundamentally reject the administrative, redistributionist, and creepy “Life of Julia” statism of modern liberalism. But what does an appealing conservative opportunity agenda look like?

First, we should continue to insist that we cannot have opportunity and prosperity without constraining and reducing the size and scope of government. Rather than engineering society to try to guarantee economic outcomes, government should ensure a positive environment for economic growth and human flourishing. That means clearing away the red tape that impedes enterprise and breaking down the artificial structures that prevent competition; it means keeping tax rates low and reducing government spending, which crowds out private ventures and piles up debt. A growing economy puts more money in families’ pocketbooks and charities’ budgets, helps the poor and unemployed find jobs, and helps families save for retirement and their children’s education.

Second, conservatives should lead the public debate about the structural changes in entitlement programs — not only because such programs are the largest drivers of government spending but also to save those entitlements from complete collapse. Conservative reform can be fiscally sound as well as socially responsible. The Heritage Foundation’s “Saving the American Dream” fiscal plan, for example, calls for a fundamental shift in Medicare and Social Security from the current benefit model (which is unsustainably costly) to one of true insurance — one that provides better security for those who actually need it while not providing Social Security or subsidizing Medicare for affluent retirees.

Third, conservatives should engage aggressively and honestly in the debate over income and wealth inequality. The Left obsesses over those at the very top and won’t discuss how its own approach has devastated those at the bottom. Making Warren Buffett a little less wealthy will do nothing to stimulate wealth creation in poor households that don’t save, and more spending will not help those trapped in dismal inner-city schools with no job prospects. The conservative response should not be a little less redistribution or more efficient programs, but policies to strengthen the social and human capital that will empower everyone to move up the ladder of success. That focus, and those solutions, will appeal to key demographics in the future just as they have in the past.

This conservative message works in principle, works in practice, and would work politically too. It’s how we changed the debate and the politics of welfare. The great majority of poor Americans despise the numbing dependency of welfare, and the core conservative principles of strengthening families, expecting work in return for assistance, and regarding welfare as a springboard rather than a way of life enjoy broad support.

We should not let up in stressing the importance of the married-father-and-mother household as the foundation for the successful child, and should take further steps to strengthen families as the seedbed of social capital. We began during welfare reform to remove disincentives to marry. We need to press further.

An education that teaches the skills required for success is critical to economic upward mobility. Subsidies and income redistribution are not the answer. We should be relentless in insisting that bottom-up “customer” control of education and competitive innovation be the driving forces in education reform. School choice, charter schools, home-schooling, blended learning that combines online information with conventional teaching: These approaches epitomize American ingenuity and competition and strike at the heart of the dull, bureaucratized, unionized public-school system. Likewise, in higher education the way forward is not to acquiesce in the current system of rising tuition costs, debt-financed education, and a cozy higher-education establishment, but to let loose the powerful forces of transparency, competition, and innovation to drive down the cost of college while increasing its efficiency and spurring new business models.

And we should preach the principles of capitalism everywhere, including our inner cities. We speak from experience in saying conservatives will find a receptive audience. Nonaligned and even many self-described liberal organizations realize that building a culture of savings in poor communities is critical to upward mobility. We should work with them to change regulations at all levels of government that inhibit savings and wealth preservation. We should also unleash enterprise in depressed areas by reducing regulations and taxes on neighborhoods rather than bulldozing them for the benefit of politically connected developers.

All of this means having the confidence to engage a wider range of Americans. This is not the time for self-limiting retrenchment or a retreat into political pragmatism. Conservatism fails when it is timid and small-minded, and wins when it is truly reformist and offers solutions for all. Conservatives should not tinker around the edges, satisfying themselves with making the welfare state better managed or slightly less expensive. Instead, they should adopt an ambitious reform agenda that is fiscally responsible and puts government once again at the service of opportunity and mobility.

– Mr. Butler directs the Heritage Foundation’s Center for Policy Innovation. Mr. Spalding is its vice president of American studies.