Wiring the Vast Left-Wing Conspiracy

By MATT BAI

Published: July 25th, 2004, NY Times
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IAndy 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 million.

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 Punkvoter.com, 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 well.''

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 government?

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, MoveOn.org -- 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 altogether.

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 Tito.''

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 slides.

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 presentation.

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 MediaTransparency.org, 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 materials.

''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. MoveOn.org 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 politics.''

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 MoveOn.org, 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 MoveOn.org 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 MoveOn.org 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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