If the White House is the goal? Pragmatically, they should demonstrate they are no threat to elites and talk about how their choices would benefit different concentrations of corporate power. They should frame themselves in such a way that they say they support both tax cuts for the middle-class and universal health care. They should say they support "free trade" and talk about making investments in areas like education to stay competitive. They can then enter office and say how horrible the fiscal situation Bush left them, how he had lied systematically about costs, and use it to raise taxes and cut defence spending while maybe still trimming the bottom two or three rates (so as to avoid a midterms nightmare) and investing in a few key (and relatively cheap) areas like education and homeland security. Pack into that economic plan a promise to expand access to health care commensurate with future economic growth and a balanced budget within x years. They would win handily in both 2008 and 2012 on such a platform, if they framed it well.
Whether this is consistent with any ideology a given Democrat may hold is a separate issue. A majority rank-and-file supporters seem content with basically the current system with a bit more of a social-democratic bent and without militaristic / aggressive security policies. This fits any poll of the Amerian public's budget priorities that I've seen. But such policies don't get changed through the stroke of a pen, really.
I think it is too late for the Dems. They have chosen a path that leads to political irrellevance, and they are pretty far down it already. The Dean scream, the pandering to loony left, I don't think that most of them believe what they think they have to say to get elected, but do you see the problem? For the Dems, getting elected is the most important thing; I think people can sense that and they don't like it. They want people and a party that stands for something, not just talking heads that will say and do anything to get that ballot.
They've given the GOP a huge opening when they essentially ganged up on Lieberman & drove him out of the party. Now the Republicans have a much easier time of making the Dems-weak-on-security argument.
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