The New York Times by 3TGsB50a


									                                   The New York Times

                                  July 25, 2004 Sunday
                                   Late Edition - Final

SECTION: Section 6; Column 1; Magazine Desk; Pg. 30

LENGTH: 8014 words

HEADLINE: Wiring the Vast Left-Wing Conspiracy

BYLINE: By Matt Bai.

Matt Bai, a contributing writer, is covering the presidential campaign for the magazine.


Andy Rappaport made his millions as a venture capitalist,searching out what he calls
''ideas that change the world.'' About six years ago, for instance, when most everyone else
in the high-tech industry thought wireless communication was going to depend on new,
exotic semiconductors, Rappaport threw $2.5 million into a start-up called Atheros
Communications, whose founders were focusing instead on building low-cost radios
using common chip technology. It was a smart move. When the company went public last
February, the initial investment by Rappaport and his partners was worth more than $60

Rappaport is also, increasingly, an avid investor in liberal causes, and in this context he
might be called a political venture capitalist. Rappaport and his wife, Deborah, whose
philanthropic activities in recent years include several million dollars in donations to art
museums and after-school music programs, have committed at least $5 million this year -
- so far -- to support a bevy of fledgling liberal groups, like Music for America and, aimed at mobilizing younger voters.

I met Rappaport, who is 46, in early June in his firm's offices on Sand Hill Road, Silicon
Valley's answer to Wall Street. As we talked in a plush conference room flanked by a
sunlit terrace on one side and a pool table on the other, events in the world outside
seemed to be tilting strongly in the Democrats' favor. Public support for President Bush's
handling of the war in Iraq was dropping precipitously. The price of oil had shot up to
$42 a barrel. Only hours earlier, voters in South Dakota sent a Democratic woman,
Stephanie Herseth, to the U.S. House in a special election -- a race widely viewed as a
potential harbinger for November.

But if all of this made John Kerry a good bet to become the next president, it did nothing,
in Rappaport's view, to solve the Democrats' underlying problems. When I asked if he
was skeptical about the direction of the party, he smiled, then said dryly, ''If you've been
able to discern a direction on which to be skeptical or optimistic, then you're doing pretty

In fact, Rappaport was surprisingly downcast about the party's prospects, which, he said,
would not be improved simply by winning back the White House. Though he sat and
thought about it, he said he was unable to name a single Democratic leader in the years
since Bill Clinton left Washington who he thought was articulating a compelling new
direction for the party. ''There is a growing realization among people who take very
seriously the importance of progressive politics that the Democratic Party has kind of
failed to create a vision for the country that is strongly resonant,'' he said. ''And our
numbers'' -- meaning Democrats as a whole -- ''are decreasing. Our political power has
been diminishing, and it's become common knowledge that the conservative movement
has established a very strong, long-term foundation, whereas we've basically allowed our
foundation, if not to crumble, to at least fall into a state of disrepair. So there are a lot of
people thinking, What can we do about this?''

Actually, Rappaport says he may be on to an answer. Last summer, he got a call from
Simon Rosenberg, president of the New Democrat Network, a fund-raising and advocacy
group in Washington. Would Rappaport mind sitting down for a confidential meeting
with a veteran Democratic operative named Rob Stein? Sure, Rappaport replied. What
Stein showed him when they met was a PowerPoint presentation that laid out step by
step, in a series of diagrams a ninth-grader could understand, how conservatives, over a
period of 30 years, had managed to build a ''message machine'' that today spends more
than $300 million annually to promote its agenda.

Rappaport was blown away by the half-hour-long presentation. ''Man,'' he said, ''that's all
it took to buy the country?''

Stein and Rosenberg weren't asking Rappaport for money -- at least not yet. They wanted
Democrats to know what they were up against, and they wanted them to stop thinking
about politics only as a succession of elections. If Democrats were going to survive, Stein
and Rosenberg explained, men like Rappaport were going to have to start making long-
term investments in their political ideas, just as they did in their business ventures. The
era of the all-powerful party was coming to an end, and political innovation, like
technological innovation, would come from private-sector pioneers who were willing to
take risks.

For Rappaport -- who, like other Democratic donors, had grown increasingly doubtful
that his donations to the party were being well spent -- Stein's pitch came as something of
a revelation. This was a new way to look at progressive politics (politicians who 10 years
ago called themselves liberals now prefer the less-demonized label ''progressive''), and it
was an approach he understood as well as anyone.

In March of this year, Rappaport convened a meeting of wealthy Democrats at a Silicon
Valley hotel so that they, too, could see Stein's presentation. Similar gatherings were
already under way in Washington and New York, where the meetings included two of the
most generous billionaires in the Democratic universe -- the financier George Soros and
Peter Lewis, an Ohio insurance tycoon -- as well as Soros's son and Lewis's son. On the
East Coast, the participants had begun referring to themselves as the Phoenix Group, as in
rising from the ashes; Rappaport called his gathering the Band of Progressives. More
recently, companion groups have come together in Boston and Los Angeles.

What makes these meetings remarkable is that while everyone attending them wants John
Kerry to win in November, they are focused well beyond the 2004 election. The plan is to
gather investors from each city -- perhaps in one big meeting early next year -- and create
a kind of venture-capital pipeline that would funnel money into a new political
movement, working independently of the existing Democratic establishment. The dollar
figure for investment being tossed around in private conversations is $100 million.

''You're talking about raising a lot of money,'' I said doubtfully.

Rappaport tilted his head to one side. He looked as if he felt sorry for me.

''A hundred million dollars,'' he said, ''is nothing.''

As Democrats converge on Boston this week to hold their party convention and formally
anoint Kerry as their nominee, all the talk will be of resurgence, unity and a new sense of
purpose. Don't be fooled. It's true that a kind of all-consuming, blue-state animosity
toward George W. Bush -- not just for the war and the tax cuts, but also for what
Democrats see as his venality and secrecy, his contempt for all things coastal, the way he
walks and the way he laughs, the fact that he was ever sworn in as president to begin with
-- has, remarkably, brought a sense of coherence to a party that had been groping for a
mission. Nearing the end of his first term, Bush has at last delivered on his promise to be
''a uniter, not a divider,'' except that the people he has united will be crammed, standing
room only, into Boston's FleetCenter for the next four days, rhetorically -- if not literally -
- burning him in effigy.

But whether the Democrats win or lose in November, what will happen -- to put a twist
on the old Engelbert Humperdinck song -- after the hating? Four years from now, in
2008, these same Democrats will come together again, in Miami or Phoenix or Las
Vegas, perhaps to renominate President Kerry or perhaps to give the stage to Hillary
Rodham Clinton or John Edwards or to some now-obscure governor. Either way, Bush
will be receding into history, and the party's left and center factions will again be
wrestling over free trade, social programs and tax cuts for the middle class. The questions
that will loom over the Democratic Party will be the same ones that have resurfaced
regularly since the end of the Great Society: what, beyond a series of disconnected policy
proposals, is the party's reason for being? What does it stand for in the era after big

Andy Rappaport isn't the only one asking these questions. The party's decline is a
constant source of gallows humor among Democrats in Washington. It is true that in
terms of voter identification, the country remains more or less evenly divided between
Democrats and Republicans, and in fact, the best data show that Democrats still enjoy a
slight advantage among the ever-shrinking pool of voters who do identify themselves
with one party or another. But the historical arc of the parties tells a different story. Since
the 1950's, when nearly half of all voters called themselves Democrats, nearly one in six
Democrats has left the party, according to a University of Michigan study, while
Republican membership has held close to steady.

Reflected in this trend -- although it is by no means the entirety of the problem -- is that
the Democratic Party has seen an exodus of the white working-class men who were once
their most reliable voters. In the suburbs, according to the Democratic pollster Mark
Penn, the percentage of white men supporting the party has plummeted 16 points just
since Bill Clinton left office.

When measured in terms of electoral success, the growing imbalance between the parties
is quantifiable. From the election of Franklin D. Roosevelt in 1932 until the Republican
takeover of 1994, Democrats never lost control of the House of Representatives for more
than one election before regaining it, and that only happened twice. They have now failed
to control the House in five straight elections. Similarly, for 46 of those years, Democrats
ruled the Senate by a margin of at least 10 seats. In contrast, they have spent most of the
last decade in the minority, and during that time they have never enjoyed a majority of
more than a single vote. More sobering for Democrats, the realignment that began in the
1960's -- when the battles over civil rights and Vietnam began to drive white men and
rural voters away from the party -- has finally begun to erode the party at its very
foundation: the state and local level, where it was dominant for decades. Thirty years ago,
Democrats could claim outright control of 37 state legislatures, compared with only 4 for
Republicans; Democrats now control just 17.

''The deterioration is steady, and it's spreading like a cancer,'' says Patrick Caddell, the
onetime strategist for Jimmy Carter and Gary Hart, who has been compiling this data
from statistical abstracts. ''So much for thinking that if we could just go back to the
glorious 90's, the party would be fine. The 90's were our worst decade since the 1920's.''

Privately, and sometimes publicly, leading Democrats will admit that the party's
shrinking influence has its roots in the most basic problem of ''message.'' Despite having
ruled Capitol Hill for a half-century, during which time they successfully enacted a
staggering array of innovative programs, Democrats have been maddeningly slow to
adapt their message to the postindustrial age. ''The truth is that a lot of the people who ran
the Democratic Party in the 70's and 80's ran it into the ground,'' Simon Rosenberg said.
''The imperial Congress was in charge of America for 50 years, but we lost our way, and
we've got to fight back.''

In his 1992 campaign, Clinton vowed to drag the party into the new economy, bringing it
toward the center on social and economic issues that mattered to an anxious middle class.
Parts of that agenda, like a middle-class tax credit and welfare reform, met with success.
But weakened by the Republican takeover of Congress and then his impeachment,
Clinton's lasting legacy to the party seems to have amounted to something far less than an
ideological modernization; somewhere along the line, Clintonism devolved into a series
of rhetorical gimmicks -- ''fighting for working families,'' ''working hard and playing by
the rules'' -- aimed at appeasing conservatives and winning over pet constituencies like
''soccer moms'' and ''office park dads.'' Underneath all the now-tired mantras, there
remains a vacuum at the core of the party, an absence of any transformative worldview
for the century unfurling before us.

Into this vacuum rushes money -- and already it is creating an entirely new kind of
independent force in American politics. Led by Soros and Lewis, Democratic donors
will, by November, have contributed as much as $150 million to a handful of outside
groups -- America Coming Together, the Media Fund, -- that are going
online, door to door and on the airways in an effort to defeat Bush. These groups aren't
loyal to any one candidate, and they don't plan to disband after the election; instead, they
expect to yield immense influence over the party's future, at the very moment when the
power of some traditional Democratic interest groups, like the once mighty
manufacturing unions, is clearly on the wane. Meanwhile, Rappaport and the other next-
generation liberals are gathering on both coasts, having found one another through a
network of clandestine connections that has the distinct feel of a burgeoning left-wing
conspiracy. They have come to view progressive politics as a market in need of
entrepreneurship, served poorly by a giant monopoly -- the Democratic Party -- that is
still doing business in an old, Rust Belt kind of way. To these younger backers, investing
in politics is far cheaper than playing in the marketplace, and the return is more important
than mere profit: ultimately, they say, it is the power to take back the country's agenda
from conservative ideologues.

Spurred on by legal reforms that were in fact supposed to reduce the torrent of private
money into politics, the new political venture capitalists see themselves as true
progressives, unbound by any arcane party structure. If their investment ends up
revitalizing the Democratic Party, so be it. If they end up competing with the party to
control its agenda, or even pushing the party toward obsolescence -- well, that's fine, too.

As the old union bosses and factional leaders who dominated the Democratic Party in the
20th century file into the FleetCenter this week, waving signs and hooting for their
heroes, be sure to take a long, last look. The Democratic Party of the machine age, so
long dominant in American politics, could be holding its own Irish wake near Boston's
North End. The power is already shifting -- not just within the party, but away from it

By the time this election year ends, George Soros will have contributed more than $13
million to the independent political groups known as 527's. (The term is shorthand for the
section of the tax code that makes them legal.) For this reason, Republicans insist that the
74-year-old Soros, who may become the largest single political contributor in history, has
resolved to buy the Democratic Party.

This is, on its face, a little silly. To put things in perspective, $13 million is a fraction of
what it takes to run a serious modern presidential campaign, let alone control a party.
And Soros, who made his fortune as an international investor, is worth an estimated $7
billion; his foundation alone gives away some $450 million every year. In other words, if
George Soros really felt like buying the party, you would know it. For Soros, spending
$13 million on a campaign is like you or me buying 100 boxes of Thin Mints from the
Girl Scout next door.

The real significance of Soros's involvement in politics has little to do with the dollar
amount of his contributions. What will stand out as important, when we look back
decades from now at the 2004 campaign, will be the political model he created for
everyone else. Until this year, Democratic contributors operated on the party-machine
model: they were trained to write checks only to the party and its candidates, who
decided how to spend the money. But by helping to establish a series of separate
organizations and by publicly announcing that he was on a personal mission to unseat
Bush, Soros signaled to other wealthy liberals that the days of deferring to the party were
over. He became what the financial world would call the angel investor for an entirely
new kind of progressive venture.

To understand why Soros matters, you have to slog, however briefly, through the mind-
bending swamp of the nation's campaign finance laws. Democrats in the 90's became
obsessed with erasing the Republican advantage in fund-raising, so much so that it was
fair to wonder which party wasn't representing the rich and privileged. Under Clinton,
who became the most powerful money magnet the Oval Office had ever seen, the
Democratic Party and its various committees began sucking up mountainous
contributions from what are known in politics as access donors -- corporations, Wall
Street firms and trade associations whose leaders had an interest in certain legislation or
who coveted a ride on Air Force One. Unlike the ''hard money'' checks that an individual
might write to a candidate, these corporate contributions to the party were ''soft money,''
meaning they had no legal limits; it was as if both parties were drawing cash from an
endless equity line, with power as its only collateral. During the 2000 presidential
election cycle, lawyers and law firms gave more than $33 million to the Democratic
Party, while securities and investment firms anted up more than $25 million, according to
the nonpartisan Center for Responsive Politics.

For ideological donors like Soros, whose goal was to effect changes in Democratic
policy, these were not the best of times. You could give millions of dollars in soft money
to the Democratic Party, if you were so inclined, but a lot of ideological donors were not.
(Soros gave $100,000 to the party in the 2000 cycle.) Donors had no control over how the
money was spent -- badly, a lot of them suspected -- and because the party was getting so
much money from large industries, the influence that might have been gained through
such a contribution was instantly diluted. In other words, a $5 million check might buy
you an invitation to a state dinner, but it wasn't going to make anyone at the Democratic
National Committee listen seriously to your idea for a national health care plan.

A lot of ideological donors continued to give money to independent interest groups like
Emily's List, Naral Pro-Choice America and the Sierra Club. These issue-based groups,
however, were notoriously balkanized and territorial. Your dollars might be useful in
organizing pro-choice voters or in preserving Pacific woodlands, but there was no way to
contribute money that would have an impact on the overarching framework of
Democratic ideology.

Then came the campaign finance law passed in 2002, known informally as McCain-
Feingold (after its iconoclastic Senate sponsors, John McCain, a Republican, and Russell
Feingold, a Democrat), which prohibited the parties from accepting soft money.
Overnight, the era of the access donor essentially ended. Individual lawyers and
executives could still wield influence by bundling small personal contributions from
employees or colleagues, but their firms could no longer write the giant checks that let
them rent out the party as if it were a billboard or a blimp.

For the ideological donors, however, the new era seemed quite promising. McCain-
Feingold left untouched and unregulated a vehicle that had been little used on the national
level up to that point: the 527. And last fall and winter, the surprising success of Howard
Dean's campaign convinced a lot of wealthy liberals that a new ideological movement
could be nurtured outside the constraints of the Democratic Party. By controlling 527's,
donors believed, they could determine, to a greater extent than ever before, the message
and the strategy of a Democratic presidential campaign. ''This is like post-Yugoslavia,''
Andy Stern, president of the Service Employees International Union, told me. ''We used
to have a strongman called the party. After McCain-Feingold, we dissolved the power of

Having financed projects in the former Communist bloc, Soros understood the
opportunitites that political tumult can create. He and the more reclusive Peter Lewis
began by contributing about $10 million each to America Coming Together (ACT), the
largest of the new 527's, which was designed to do street-level organizing for the
election; the donations enabled ACT to expand its canvassing campaign from five critical
swing states to 17. ''I used 527's because they were there to be used,'' Soros said bluntly
during a conversation in his Manhattan office.

Soros's and Lewis's donations made it possible for longtime leaders of Democratic
interest groups to do something they had never done in the modern era: work together.
Now the insular factions have begun to form alliances. The founders of ACT included
Ellen Malcolm and Carl Pope, the heads of Emily's List and the Sierra Club respectively,
Andy Stern from the service employees' union and Steve Rosenthal, the former political
director of the A.F.L.-C.I.O. Suddenly, because they no longer had to compete with one
another for contributions -- and because they had such a galvanizing villain in Bush -- the
leaders of the party's most powerful adjunct groups were able to look beyond the more
limited interests of their own membership.

Strangely, for someone who is supposedly staging a hostile takeover of an entire party,
Soros said he is only nominally a Democrat, and he evidenced an obvious distaste for the
business of politics. ''I hate this kind of political advertising,'' he said at one point,
complaining about the anti-Bush attack ads he had paid for. ''I always hated it, but now
that I've sort of been involved in it, I hate it more.'' Soros said his only goal is to get rid of
Bush, whom he believes is endangering American democracy. After that, he said, he
didn't expect to continue meddling in politics at all, and in fact, he seemed eager to be rid
of it.

And yet, even if they walk away after 2004, both Soros and Lewis have begun to expand
on what they started -- by handing off their political portfolios to the next generation.
Both Jonathan Soros, a 33-year-old Harvard-trained lawyer, and Jonathan Lewis, a 45-
year-old restaurateur, have become deeply involved in monitoring their fathers' political
investments day to day. They have also traveled extensively throughout the country,
asking their contacts in different circles -- business types for Soros, while Lewis hits up
the Hollywood crowd -- for million-dollar checks.

Both sons, and particularly the younger Soros, are also looking to play a deeper role in
the future of Democratic politics. Last January, at the invitation of Alan Patricof, a New
York venture capitalist who has been one of the Democratic Party's most reliable fund-
raisers over the years, both Jonathans attended a hastily planned meeting of wealthy
Democrats at Patricof's Park Avenue office. George Soros and Peter Lewis were there,
too, along with some 45 other Democratic donors. No one at the meeting quite knew why
Patricof had summoned them. Then he introduced them to Rob Stein and his PowerPoint

My first meeting with Rob Stein occurred over breakfast at the Four Seasons hotel in
Washington. Our conversation was strictly off the record, a sort of get-to-know-you chat.
Our second meeting took place on a sun-bathed balcony outside a Starbucks near his
home in northwest Washington. Stein, who is a young-looking 60, has a full head of gray
curls and an air of serenity about him. He is a native West Virginian, although his accent,
oddly, makes him sound like a Yankees fan. He carried with him a metal loose-leaf
binder, which he laid on the table and kept always within his reach. In a short while, Stein
said, I would become only the third person in Washington to possess my own copy of his

By the time we met, in the middle of May, Stein estimated that some 700 people had seen
his PowerPoint show. He told me his story and explained how he had ended up at the
center of a minimovement. He had been a Democratic operative, rising to become chief
of staff at the Commerce Department under the late Ron Brown. Then he managed a
venture capital firm. After 2000, he, like a lot of Democrats, watched with growing alarm
as his party ceded ground at every level of government. ''I literally woke up the day after
the 2002 elections, picked up the paper, had breakfast and we were living in a one-party
country,'' he said. ''And there it was. That was my wake-up call.

''I said: 'O.K., there's now Republican dominance down the line. It's not only that they
control the House and the Senate and the presidency. But it's growing. There's no end in
sight.' It wasn't only that they had reached a milestone, but they were ascendant.''

Stein read a few reports that liberal research groups had published on the rise of the
conservative movement. Then he began poring over tax forms from various conservative
nonprofits and aggregating the data about fund-raising and expenditures. He spent hours
online every night, between about 9 p.m. and 1 in the morning, reading sites like, which is devoted to tracing the roots of conservative groups and
their effect on the media. To call this an obsession somehow seems too mundane; Stein
spent much of the spring of 2003 consumed with connecting the dots of what Hillary
Clinton famously called the ''vast right-wing conspiracy'' and then translating it into flow
charts and bullet points.

The presentation itself, a collection of about 40 slides titled ''The Conservative Message
Machine's Money Matrix,'' essentially makes the case that a handful of families -- Scaife,
Bradley, Olin, Coors and others -- laid the foundation for a $300 million network of
policy centers, advocacy groups and media outlets that now wield great influence over
the national agenda. The network, as Stein diagrams it, includes scores of powerful
organizations -- most of them with bland names like the State Policy Network and the
Leadership Institute -- that he says train young leaders and lawmakers and promote
policy ideas on the national and local level. These groups are, in turn, linked to a massive
message apparatus, into which Stein lumps everything from Fox News and the Wall
Street Journal op-ed page to Pat Robertson's ''700 Club.'' And all of this, he contends, is
underwritten by some 200 ''anchor donors.'' ''This is perhaps the most potent, independent
institutionalized apparatus ever assembled in a democracy to promote one belief system,''
he said.

''What you need to understand about me is that I try to be respectful and objective about
this,'' Stein went on. ''Not only is it a legitimate exercise in democracy, but I think they
came up with some extraordinary ideas.'' The problem, he said, was that conservatives
had moved beyond those policy ideas, into the realm of attack and innuendo. And
Democrats had to understand that they were overmatched.

Nothing in Stein's presentation seemed notably new, even if the details were nicely laid
out. I had seen David Brock, the one-time conservative smear specialist who wrote a
book about his defection to the other side, draw similar diagrams of the conservative
power structure on a piece of paper. John Podesta, the former White House chief of staff,
echoed many of the same ideas when he founded the Center for American Progress last
year; they were, in fact, the basis for that new liberal policy group. What made Stein's
work compelling was the genius of its packaging. For some reason, perhaps because most
political operatives don't function in the business world, no one had ever thought to
unearth all the evidence and put it on color-coded slides in a way that ordinary people
could immediately grasp.

''I describe myself as having a master's degree in the right-wing conspiracy,'' Podesta
said. ''Rob got the Ph.D.''

Stein was convinced that the left needed to focus on the long term, on building its own
network of well-financed nonprofit groups, rather than simply strategizing for the next
election. But he was not an especially powerful man in Washington, and all he had to
work with was a slide show. For a while he considered writing a book. Instead, he began
lugging his slides around town, hoping someone could tell him what to do with them. He
was like a traveling salesman, convinced he was hawking a valuable new invention but
not quite sure what it did.

In the spring of 2003, a friend Stein knew from the Clinton White House arranged for
him to meet Simon Rosenberg at the New Democrat Network. Ambitious and
hyperarticulate, Rosenberg once worked for the Democratic Leadership Council, the
centrist group that laid the groundwork for Clinton's '92 campaign, before splitting off
and forming his own political-action committee in 1996. Although he made his name in
the party as a centrist New Democrat, Rosenberg, now 40, saw opportunities for his
organization -- and, naturally, for himself -- in the increasingly confrontational slant of
the party's base during the Bush administration. He didn't agree with all of Howard
Dean's positions, but Rosenberg was among the first centrist Democrats to embrace
Dean, sensing early on the potential of Dean's following. While the Democratic
Leadership Council attacked Dean for his angry brand of populism, Rosenberg looked for
a way to tap into the genuine passion among Democrats for a more creative, more defiant
kind of politics. He talked to donors around the country, like Andy Rappaport, who were
angry at the Clintonesque rhetoric that obscured the sharp ideological divide between
them and the Rush Limbaugh right; they were desperate for new policy ideas and for a
more aggressive, coherent strategy.

Rosenberg had hired a Silicon Valley consulting firm to suggest ways for the New
Democrat Network to find a niche in this new world. One recommendation, which
Rosenberg embraced, was to bring together a group of progressive contributors to talk
about financing new kinds of ventures outside the party structure. It was Erica Payne, his
New York director, who put a name to the fledgling project: the Phoenix Group. Payne, a
business-school graduate and one-time Clinton campaign official, seized on the name one
night after getting sucked into a Harry Potter book.

To Rosenberg, then, Stein's presentation was like an elaborately wrapped gift on
Christmas morning: the deeper into it he got, the more enthusiastic he became. Stein had
given him, in 30 minutes' worth of slides, a jolting summary of the challenge that needed
to be met if the Democratic Party was to avoid total collapse. And the idea was inherently
neither centrist nor leftist. Here was something he could take to donors and say: This is
why you're losing. Forget this election. Plan for the future.

Progressives needed more than a single think tank, like Podesta's group, to counter 30
years of well-targeted conservative philanthropy, Rosenberg argued. The same kind of
donors who were willing to shell out millions for political 527's could have a greater
impact if they also threw their dollars at nonprofit foundations or institutes. ''If you're a
32-year-old state legislator and you're a conservative, you get to go through all these
philosophical trainings,'' Rosenberg said. ''You get all these organizations that are trying
to put you through their leadership institutes. You get all these groups sending you their

''Now, you're a 32-year-old Democratic state legislator, and what you do is you learn how
to check boxes,'' he continued. ''You learn how to become pro-choice. You learn how to
become pro-labor. You learn how to become pro-trial lawyer. You learn how to become
pro-environment. And you end up, in that process, with no broad philosophical basis.
You end up with no ideas about national security. You end up with no ideas about
American history and political theory. You end up, frankly, with no ideas about
macroeconomics and economic policy, other than that it's scary.''

Rosenberg became convinced that the donors had to take the lead. This was already
beginning to happen in reaction to the Bush presidency -- wealthy liberals taking it upon
themselves to seek out and give money to entrepreneurs with new ideas.
was founded in 1998, during Clinton's impeachment hearings, by Wes Boyd, inventor of
the once-ubiquitous flying-toaster screen saver; it was a fringe group until Soros and
other donors, mobilized by the debate over Iraq, discovered it in 2003 and started pouring
in money. MoveOn now has 2.2 million members and is the most dynamic online
enterprise in politics. Rappaport adopted Music for America when it was raising money
for the Dean campaign, and he helped keep it going after Dean dropped out. But these
were chance encounters, random collisions of money and ideas. What Rosenberg
envisioned was a ''virtual marketplace,'' patterned very consciously after the kind of
incubators that venture capitalists set up in the 90's, in which major investors could
systematically get to know like-minded bright, young innovators. Then the investors,
given a choice of ideas, could decide which projects they wanted to get behind.

''We will only succeed if we build an entrepreneurial culture in Democratic politics,''
Rosenberg said. ''What we are is this beleaguered group of badly funded, nonscalable
nonprofits. You know, Luke Skywalker was able to kill the Death Star with his
beleaguered band of warriors, but I'm not sure that that's the model we should shoot for --
shoot the thing down the middle of the tube and hope it blows up the Death Star. We
need to build our own answer to the Death Star.''

Rosenberg introduced Stein to Payne, his New York director, who in turn hounded Alan
Patricof, the 69-year-old venture capitalist, until he agreed to hold a few screenings of the
slide show. Word that the Soroses and Lewises were involved swelled attendance from a
handful of participants at the first meeting to close to 50. The network spread. In Silicon
Valley, Rappaport began to hold regular meetings, drawing crowds of 80 or more, and he
and his wife flew into New York to attend a session there as well. In Washington, Bren
Simon, an Indianapolis-based donor to Democratic causes, brought together a Phoenix
Group meeting. Last month, Chris Gabrieli, another major contributor, held his first
showing of Stein's presentation for financial executives and dot-com types in Boston,
with Jonathan Soros as the star attraction. In Los Angeles, the director and activist Rob
Reiner helped set up a chapter for Hollywood liberals, too.

The group's name made it sound like a highly selective hedge fund, but in fact it was
more like a self-help program. The gatherings became primarily a forum to air
frustrations over the state of the party and ruminate on what a liberal answer to the vast
right-wing conspiracy might look like. ''The Phoenix Group does not raise money,''
Patricof said when we first met in May. ''The truth is nobody knows why they're coming
to these meetings. They don't know what they'll do afterward. We just have an interest in

When I talked to Patricof earlier this month, however, he said the nebulous approach of
the Phoenix Group had started to come into focus. A dozen principals from across the
country had gathered in New York to formulate a plan, he said, and they decided that
soon after the election, all the participants will come together for a massive investor
meeting, with, perhaps, regional meetings to follow. There, they will hear pitches from
progressive entrepreneurs with ideas that need money, and it will be up to the individual
members to determine where their money is best spent. No one expects the new
progressive organizations that the Phoenix Group backs to look like mirror images of the
Heritage Foundation or other conservative behemoths. The goal, instead, is to find the
equivalent of these 1960's political models for a faster-moving online world.

The different geographic factions of the Phoenix Group seem to have different ideas
about which models should be financed. In New York, where the financial markets rule,
there is an inclination toward investing in proven entities -- people like Podesta and
Brock, who recently founded his own organization to monitor the conservative media. In
the Bay Area, however, where the new economy already feels old and where jeans and
loafers remain the standard business attire, Rappaport's group leans toward more
interesting and idiosyncratic kinds of investments. As Rappaport explained it to me,
donors should focus on finding the unknown -- young entrepreneurs with risky ideas and
no money to test them. The more projects that are given time and capital to germinate, he
said, the better the chance that one or two would ultimately generate the kind of ideas that
might someday match the momentum of the right wing.

''In Silicon Valley, there is a great belief in the strength and power of individual
entrepreneurs who are not yet a part of -- and may in fact have exclusively broken off of -
- the existing institutions of power,'' Rappaport said. ''So there's a natural belief that
David can slay Goliath, and that, in fact, Goliath inevitably will be slain. It's only a
question of finding the right David. And by the way, because it's hard to find the right
David, we can tolerate the fact that for every one David that slays a Goliath, there are
going to be 99 that won't have so much to show for their efforts. And that's O.K.''

Given how desperately the activists behind the Phoenix Group want to dispatch Bush this
November, the paradox is that their longer-term goals, from a purely tactical standpoint,
may be better served if he wins. Millionaire Democrats are being driven to act by a
perception of powerlessness and deterioration. If Kerry wins, some of the passion will
likely drain away, and a lot of Democrats will tell themselves -- like gambling addicts
after a hot streak at the blackjack table -- that everything is just fine and that, despite the
statistics and the polling, the party remains as vibrant as ever. Raising $100 million for a
bunch of think tanks might no longer be so easy.

But if Kerry does not ascend to the presidency, and Democrats fail to make significant
gains in Congress, then the party and its various factions will be as close to debilitating
disunity and outright irrelevance as they have been in almost a century. Leftist investors
will see their opening -- a chance, at last, to swoop in and save the party from empty
centrism. The struggle for control in 2008 will begin almost immediately.

''If John Kerry loses, we're going to have a real fight for the soul of the Democratic Party,
which began in my campaign,'' Howard Dean told me. His new political action
committee, Democracy for America, is giving money to liberal candidates in states where
Democrats are edging toward extinction. ''And whether the progressives win or not,''
Dean said, ''will determine whether the Democratic Party has a future in America.''

It is, perhaps, futile to try to predict what the Democratic Party -- or much of anything in
politics, for that matter -- will look like in 2008 or 2012. Terry McAuliffe, the party's
chairman and one of the best fund-raisers in its history, says the party's continuing
relevance in American life is assured, no matter how many rich donors establish their
own competing groups or how many factions vie for dominance. With a new high-tech
headquarters, $60 million in the bank and 170 million names in a voter database,
McAuliffe said, the old party apparatus isn't going anywhere. ''In 30 years, the institution
of the Democratic National Committee will be stronger than it has ever been,'' he said
with characteristic bluster.

And yet implicit in Dean's prediction are two possible outcomes worth considering, if
only because they lend themselves to historical precedent. The first is that the new class
of Democratic investors could conceivably end up skewing the party ideologically for
years to come. A lot of the political venture capitalists were strong supporters of Dean in
the primaries, in the fervent belief that his campaign -- which became, in effect, a classic
liberal crusade, in the Jerry Brown mold, only with more money -- was leading the party
back in the right direction. Although several donors described themselves to me as
''pragmatic'' in their worldview, the moderate Kerry seemed to elicit in them all the
passion of an insurance actuary (Soros labeled him ''acceptable''), and they manifested a
pointed distaste for Clintonism as a political philosophy. The way they look at it, centrist
Democrats spent a decade appeasing Republicans while the right solidified its occupation
of American government. The donors see themselves as the emerging liberal resistance,
champions of activist government at home and multilateral cooperation abroad.

There is, of course, a striking disconnect between the lives of these new Democratic
investors and those of the party's bedrock voters: laborers, racial minorities and
immigrants, many of whose faith in sweeping social programs has been badly shaken and
who tend to be more culturally conservative than the well-off citizens of New York and
Silicon Valley. But if the multimillionaires harbor even the slightest doubts about their
qualifications for solving social and geopolitical ills, they don't express it.

To see the potential effect of such motivated ideological donors on a political party, you
need only study the modern Republican Party. The families who contributed the seed
money for what would become the conservative movement were philosophical rebels
who followed Barry Goldwater. Like the new venture capitalists, these ideologues started
out not with specific policy ideas but with a broad sense of fear, a notion that the system
of free enterprise was under siege from radical forces. (The guy who most kept them up
at night, oddly enough, was Ralph Nader.) Their money spawned academic proposals,
some of which, like privatized Social Security or missile defense, were so far beyond the
mainstream of their time as to be considered ludicrous. Not only did these ideas
ultimately infiltrate mainstream Republican thought, but much of the agenda ultimately
triumphed in the broader arena of public opinion.

That success built a governing majority for Republicans, but it may have come at a cost
to politics as a whole. In 1965, the Republican Party was an inclusive organization,
comprising not just Nixonian pragmatists and Goldwater zealots but also liberal followers
of Nelson Rockefeller and Henry Cabot Lodge. Forty years on, it is getting increasingly
difficult to find a true moderate in the Republican Party, let alone a liberal, so far to the
right has the party's equilibrium tilted. This was in large part -- if not entirely -- a
consequence of the kind of political philanthropy that Stein and Rosenberg have come to
emulate. The culture of the party came to reflect the ideology of the men who subsidized
it, and the national dialogue, as a result, has grown less temperate and less tolerant.

Perhaps the New Age, liberal analogue of this can already be seen in a group like, which has leveraged its big donations to create a remarkably committed
and democratized membership; in April, the group raised $750,000 from its followers in
a national bake sale. As a reactionary force, it also demonizes Republicans with an
apocalyptic fury. MoveOn was castigated by its critics for displaying on its site an
amateur ad comparing Bush to Hitler. Lately, MoveOn has called, repeatedly, for
Congress to censure Bush and for Donald Rumsfeld to resign.

Every time I talked with someone about the Phoenix Group, I posed these questions: even
if you succeed in revitalizing progressive politics, might the Democratic Party, like the
G.O.P., be pushed toward extremism? And if so, might that make it all but impossible to
repair the party's standing in huge swaths of the country -- the South, the West -- where
Democrats are fast becoming a permanent minority?

''Deep down, that question is in the subconsciousness of all the people who are involved
in this, if not in their consciousness,'' Stein said. But he didn't have an answer. Perhaps
the most illuminating reply came from Robert Boorstin, a former White House aide who
now works on national security at the Center for American Progress. ''Everything has
risks,'' he said. ''I would rather take that risk than keep it the way it was.''

The second potential outcome to which Dean alludes -- that the Democratic Party, per se,
might not always exist in America -- might sound, coming from Dean, characteristically
overwrought. But it does raise a significant question about the political venture
capitalists: what if, in the future, they decided not to support Democrats at all? Suppose
there came along an independent candidate, free from the baggage of Democratic Party
politics, who espoused with conviction the kind of agenda that donors of the Phoenix
Group or America Coming Together really wanted to hear? The forbidding barrier to
independent candidates has always been money. But the 527's aren't tied to a party; they
can provide unlimited amounts of money to support any cause they want, provided they
adhere to certain legal technicalities.
When I suggested this to Stern, the service employees' union president, he thought about
it for a moment before answering. ''There is an incredible opportunity to have the
infrastructure for a third party,'' he said. Stern assured me that he himself has no interest
in that, but, he added, ''Anyone who could mobilize these groups would have the
Democratic Party infrastructure, and they wouldn't need the Democratic Party.''

We tend to think of the two political parties that have ruled American politics for the last
150 years as being cemented into the framework of the Constitution. In fact, parties, like
the political movements that sustain them, have shelf lives. In the 1840's and 1850's, the
Whig Party, at various times, controlled the White House and both houses of Congress.
By 1860, at a loss to coherently address slavery, the defining debate of the time, the
Whigs vanished from the planet like a bunch of pterodactyls, replaced by Republicans. It
is not unthinkable that the privatization of Democratic politics is a step toward
institutional obsolescence. People like Andy Rappaport and Jonathan Soros might
succeed in revitalizing progressive politics -- while at the same time destroying what we
now call the Democratic Party.

What seems all but certain is that the future of Democratic politics will more closely
resemble than it will resemble anything that happens on the convention
floor in Boston. On Memorial Day, I spoke with Harold Ickes, who had been running the
Media Fund, a 527 charged with airing anti-Bush ads in the period before this week's
convention. Ickes -- like his father, who was a close confidant of Franklin D. Roosevelt's
-- has spent a lifetime in service to the Democratic Party, reaching its very highest levels.
As we talked about the influence that millionaires and independent groups will have in
the years ahead, Ickes sounded more weary than excited, like a man who has accepted
change in the family business without entirely embracing it.

''When you go out and talk to them, people are much more interested in something like than in the Democratic Party,'' Ickes said. ''It has cachet. There is no cachet
in the Democratic Party.

''MoveOn raised a million dollars for a bunch of Texas state senators, man,'' he went on to
say. ''Plus their bake sale. If they continue with their cachet and really interest people and
focus their people on candidates -- boy, that's a lot of leverage. No party can do that. And
what the political ramifications of that are -- '' Ickes's voice trailed off. He shrugged.
''Who knows?''

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