What they are afraid of? Many things, but two concerns dwarf all others: big government and big deficits. Let's start with big government.
There are two ways one might define the size of government; the first is how much it costs. As a percentage of gross national product, the federal government has grown from 8.03% to 44.48% in the last hundred years. State governments' growth has kept pace; the combined burden is often expressed as "tax freedom day", or how long you have to work just to cover your taxes. In 1910, taxes took all your income earned through January 19th; this year it's April 9th. It should be noted that these numbers do not include deficits or fees, such as license plates, which can exceed $500.
Another way to measure the size of government is by power. The original form of the federal government was too weak to govern; it didn't even have the power to outlaw slavery- that required a Constitutional amendment. But today- proving the axiom that there is no happy medium in politics- the federal government can control such picayune minutia as whether you can turn right at a red light. But the provision in the new healthcare law that one must buy insurance is a whole new level of overreaching. As I noted before, the commerce clause in the Constitution has already been stretched to say that the federal government has the right to overturn state laws on the basis of an interstate market that has no legal existence. What this new law claims is that the federal government has a right to overturn state laws on the basis of an interstate market that does not exist at all, and cannot exist in the future unless that same federal government changes the law to make it so.
Conservatives fear that if this stands, it erases the 10th amendment altogether; one can always fantasize some hypothetical trade that would then need federal regulation- there would be no practical limits on federal power whatsoever. We will in fact have changed our very form of government from a union of sovereign states to a single state with some limited local autonomy without the democratic procedure of amending the Constitution. Now perhaps you think we should change the Constitution to make us "One Nation" in law as well as poetry; a good case for that can be made- through the democratic process. But the Tea Party type of conservative feels that one cannot "preserve, protect, and defend the Constitution of the United States" by violating it. And they fear the mindset of a person or a party that thinks you can.
By the way, if you think that fear shows the right wingnut nature of the tea Partiers, then you are deeming 56% of the country to be wingnuts, according to this CNN poll. "Fifty-six percent of people questioned in a CNN/Opinion Research Corporation survey released Friday say they think the federal government's become so large and powerful that it poses an immediate threat to the rights and freedoms of ordinary citizens." You will have also confirmed the diversity of the Tea Party; even 37% of Democrats agree with them in this.
Ronald Reagan held the deficit record for 25 years at 6% of GDP in 1983; Bush was a piker by comparison- though his deficits looked big in dollars, they were scarcely 2% of GDP. But now, early in his first term, President Obama has succeeded in his ambition to be a transformative figure like Reagan was; 2009's deficit was 9.9% of GDP, more than half again bigger than Reagan's- in fact, the 2009 budget deficit is larger than all budget deficits from 2002 through 2007 combined. More than 43 cents of every dollar Washington spends in 2009 will have been borrowed.
What's this doing to the national debt? According to this Washington Times story, "The federal public debt, which was $6.3 trillion ($56,000 per household) when Mr. Obama entered office amid an economic crisis, totals $8.2 trillion ($72,000 per household) today, and it's headed toward $20.3 trillion (more than $170,000 per household) in 2020, according to CBO's deficit estimates.
That figure would equal 90 percent of the estimated gross domestic product in 2020, up from 40 percent at the end of fiscal 2008." This puts our economic condition somewhere between Bulgaria and Greece.
More about deficits in part three, "Why now?"