The Plutocrat as Populist

"We are so far behind," exclaims Terry McAuliffe, gazing out his window toward the Capitol. "I got a briefing last night that absolutely shocked me. I'm not going to give you the numbers. Let's just say they"--the Republicans--"have 50 times as many e-mail addresses as we have. It's unacceptable."

McAuliffe has had to use this word a lot lately. It wasn't just the carpeting at Democratic National Committee headquarters, which "smelled terrible," and which McAuliffe had fumigated even before he was elected DNC chairman last February. The whole place was decrepit. There was, for instance, the DNC's internal computer system, a 14-year-old relic that no one in the building used. "What is our technology?" he asks no one in particular. "We don't have any." The Democrats' direct-mail list, a crucial fundraising and mobilization tool, was one-tenth the size of the Republicans'. The national voter files--an all-important database that synthesizes demographic and voter registration data, allowing precise voter targeting--were "at ground zero"; the GOP's file, he laments, contained roughly 150 million names. ("Unacceptable!") Outside the Beltway, McAuliffe has discovered, things were even worse: Many state parties were functionally nonexistent three years out of four; some didn't even have fax machines; and the average tenure of a state party executive director was a mere eight months. "Eight months!" he shouts. "Unacceptable."

To those who pay attention to such things, McAuliffe's diagnosis comes as little surprise. For much of the past two decades, the institutional Democratic Party has teetered between bankruptcy and irrelevance, limping along as a part-time, cash-strapped collection of bickering fiefdoms--even as the GOP, during the same period, transformed itself into a flush, unitary, and formidable nationwide political machine.

What is surprising is the source. To his critics, the youthful, extravagantly extroverted McAuliffe represents a Democratic Party that has become very good at raising money but less good at the nitty-gritty of elective politics. More than anyone else, McAuliffe is identified with his party's creative evisceration of the Watergate-era campaign finance laws, a process that vaulted him to a position of unusual influence and the Democrats to a period of unusual affluence. Yet last November, even after pulling in a record haul of campaign dollars over the past two years--and despite strong voter turnout--the Democrats found themselves the minority party for the first time since 1953 (albeit briefly). And so for the last few months, McAuliffe has waged a very different kind of drive: convincing the party faithful that he can engineer a true grass-roots revival of the Democratic Party.

Can he? After all, the 44-year-old McAuliffe has been a fundraiser for most of his adult life. In 1979, on a whim, McAuliffe took a hiatus from law school and volunteered for President Jimmy Carter's re-election campaign. There, wearing fake horn-rimmed glasses to make himself look older, McAuliffe roamed as a field operative for finance chairman Tim Finchem, eventually becoming one of Carter's top fundraisers. After finishing his law degree at Georgetown, McAuliffe worked on the finance staff of Walter Mondale's campaign; in 1985, California Congressman Tony Coelho hired McAuliffe to be finance director of the Democratic Congressional Campaign Committee (DCCC). At the time, Coelho was presiding over a bonanza in Democratic fundraising, leveraging the party's House majority to raise money from traditionally Republican sources. While Coelho hit up lobbyists and business PACs in Washington, McAuliffe went back on the road, building up a network of donors consisting largely of non-Wasp businessmen--Jewish, Irish, Italian, Asian, and other parvenu entrepreneurs who had retained their Democratic affiliations on the way up the economic ladder.

At the DCCC, McAuliffe solidified his reputation as a rising star in the world of post-Watergate campaign finance, a realm where energetic networkers who could round up hundreds of $1,000 contributions were supplanting lone million-dollar-check writers. Whereas most political types found the money chase a grubby necessity, McAuliffe clearly relished it as a worthy, even exalted, pursuit. "I lived on the road," he says today. "What I loved to do was go out on the road and air-bomb into a city and say, åLet's go put together a big, huge event with a thousand people.'" Unembarrassable and unburdened with self-doubt, McAuliffe became known for wooing secretaries with Valentine's Day flowers, letting reporters watch him work the phones, and, once, wrestling an alligator for a $15,000 check from Florida's Seminole tribe. During the 1985–1986 cycle, McAuliffe helped the DCCC bring in a record $15 million and turned heads among the party's presidential aspirants--one of whom, Missouri Congressman Dick Gephardt, eventually convinced McAuliffe to come on board as his finance chairman.

Along the way, McAuliffe ratcheted up his extracurricular career as a businessman and entrepreneur. While most fundraisers are already wealthy when they get into politics, McAuliffe gave the old formula a twist, converting his network of donors into a network of business contacts. The Gephardt campaign, for instance, kept several million dollars on deposit at the Federal City National Bank, a small, Washington-based operation of which McAuliffe had become chairman in 1987. In 1991, McAuliffe bought property belonging to American Pioneer Savings Bank (a failed thrift owned by his father-in-law, Democratic financier Richard Swann) with $39 million in backing from a union pension fund run by Jack F. Moore, a friend from McAuliffe's Gephardt days who at the time was secretary of the International Brotherhood of Electrical Workers. McAuliffe himself put in just $100 but, according to an article by the Washington City Paper's Stephanie Mencimer, received a 50 percent share in the deal. A few years later, in 1995, McAuliffe bought a bankrupt home-building company, American Heritage Homes, with financing from Carl Lindner, a wealthy Republican and Democratic donor who, along with his company, American Financial, had given about $350,000 to the Democratic National Committee during the previous two years.

Friend of Bill

But the most obvious beneficiary of McAuliffe's fundraising has been Bill Clinton, whom McAuliffe met while serving as finance chairman of the DNC in 1994, and whom McAuliffe today describes as his best friend. And why not? McAuliffe has raised more than $300 million for Clinton's re-election campaign, inauguration festivities, presidential library, legal defense fund, and wife-turned-senatorial-candidate--in the process becoming the most famous presidential financier in recent history.

It is not the prolificity of McAuliffe's fundraising that astonishes, however, but the scope. McAuliffe's fundraising has built a network of friends, donors, and political allies that stretches across nearly the entire Democratic empire--from labor to business, from the presidential wing to the congressional wing--and that permeates the constellation of Democratic-aligned interest groups. Clinton is one of McAuliffe's closest friends, but so are Gephardt (an usher at McAuliffe's wedding) and AFL-CIO President John Sweeney. Indeed, McAuliffe has raised money for every one of the party's presidential nominees since 1980, for many of the older Democratic members of the House, and for a number of Democratic senators--all in all, more than half a billion dollars in largesse spread over two decades.

This ecumenism accounts, in no small part, for the ease with which McAuliffe ascended to the chairmanship. Within a few hours of deciding to run for the post, McAuliffe had the support of Gephardt, Sweeney, Al Gore, Tom Daschle, former Labor Secretary Alexis Herman, and California Governor Gray Davis; most of the Democrats' other top leaders, including all the party's officers and even Jesse Jackson, followed soon thereafter. But what accounts for that ecumenism?

Though McAuliffe would call himself a moderate, it's clear that he views politics through the lens of party, not ideology. Indeed, in some respects, McAuliffe--the son of a county party treasurer in Syracuse--is a throwback to the ethnic politicians of yore. "Terry's a typical Irish Democrat," says Coelho, "committed to the party, committed to providing opportunity to people, not really an ideologue." McAuliffe describes himself as a stubborn party loyalist, and his fundraising career as his "25 years of service to the Democratic Party." This is no doubt a little self-serving. But it's also revealing. Parochialism, after all, holds little reward for a fundraiser. If McAuliffe was a coalitionist by upbringing, he remained one out of necessity: Despite being near the center of Democratic presidential politics in the 1980s, McAuliffe managed to steer clear of the fractious intramural quarrels that split the party during that decade. "He didn't get involved in policy or politics," says one colleague from McAuliffe's DCCC days. "He was a perfect money person in that he didn't cross the line at all."

Even during the Clinton years, McAuliffe never seems to have been involved in policy discussions beyond fundraising strategy, and his ties to Sweeney and Gephardt remained strong even when Clinton's--especially during the debate over the North American Free Trade Agreement--did not. "No one pushes me one way or the other on pro-labor, pro-business," McAuliffe says. "I'm not here to redefine the ideological base of the party. I'll define my success very simply: Did we win elections?"

Still, it's ironic that McAuliffe came to the peak of his prominence during the same years--the mid-to-late 1990s--that the institutional Democratic Party went into near-terminal decline. At the beginning of the decade, the Democrats could claim steady progress in party building under the aegis of then–DNC chairman, the late Ronald H. Brown. Ron Brown, a former aide to Ted Kennedy and, later, to Jesse Jackson, was a man with roots both in the mainstream civil rights movement and--as a onetime lobbyist for the firm of Patton, Boggs, and Blow--on K Street. With the support of Kennedy, Jackson, and the AFL-CIO, Brown had run--much as McAuliffe did--on a platform of party professionalization and unity, going out of his way to woo southerners and the nascent Democratic Leadership Council (whose members were wary of letting a Jacksonite head the DNC). "Party governance and the nominating process were the definition of the party from '68 on," says longtime strategist Carl Wagner, who conducted an extensive review of the DNC apparatus for Brown in 1989. "And when Ron came on, the issue became, 'Can we move on from governance issues to election issues?'"

In large part, Brown succeeded. Assembling a political team headed by the well-respected Democratic operative Paul Tully, Brown sought to fuse the 50 state parties, the DCCC, and the Democratic Senatorial Campaign Committee into a single political machine. Over the next few years, Tully and Brown updated and expanded the national voter file, revivified the DNC's direct-mail operation, and put together voterregistration-and-education programs that could be shared with campaigns and state parties across the country. Under Brown's direction, the DNC took an active role in both the 1989 off-year election--it contributed to several upset victories along the way, including Douglas Wilder's successful bid to be the first black governor in Virginia history--and the 1990 midterm congressional campaign. "The DNC became relevant for the first time in my lifetime," says AFL-CIO political director Steve Rosenthal, who worked under Tully for a year in 1992. Brown and Tully, adds Rosenthal, "did an extraordinary job to set the stage for the Democratic nominee."

In the end, that candidate was Clinton, who was benefiting greatly from Brown's work: By 1992 the Democratic Party was able to run a truly coordinated presidential, congressional, and senatorial campaign for the first time in history. Aided by a slumping economy (which provided a unifying campaign theme) and by Ross Perot's insurgent Reform Party candidacy, the Democratic Party won joint control of the White House and Congress for the first time since 1976. Control, moreover, brought with it a chance to replicate the GOP's party-building efforts during the 1970s, when Republican National Committee chairmen like Ray Bliss and William Brock (partly to counter what was then a natural grass-roots advantage provided to Democrats by labor) made long-term investments that, during the early Reagan years, blossomed into a today's well-oiled machine.

Soon after the 1992 election, Carl Wagner produced a 70-page memo for Clinton detailing how the Democrats might finally catch up to the GOP. "I spent a lot of time on it, talking to former chairs of both parties," Wagner recalls. "Ron and I met with Governor Clinton, and I summarized the state of the institutions. The Democrats had a 22-seat majority in the House. They controlled the Senate by 12 seats. Democratic governors represented 80 percent of the country. They controlled 40 statehouses." He pauses. "Now it's a little different."

A President Displaces His Party

So what went wrong? One way or another, the Democrats' current travails stem in large part from the election of 1994, when a nearly supernatural confluence of bad luck and bad politics led to the Republican takeover of Congress: the health care debacle; the House banking "scandal" engineered by Newt Gingrich and his allies; the passage of NAFTA, which alienated and depressed the labor vote; Clinton's tax hike the previous year, which energized the Republican base; and the normal off-year swing to the opposition party. That the party is still recovering from 1994 more than seven years later, however, owes much to the neglect of the White House.

At first, the neglect was justifiable. Generally, the year after a presidential campaign is the best time for parties to make long-term investments in party infrastructure. But in 1993, Clinton and many Democratic leaders believed that the party should devote all its efforts to forcing health care reform through Congress; if passed, they reasoned, such landmark legislation would guarantee the allegiance of a generation of voters. Upon taking office, the new DNC chair, David Wilhelm--who had plans to build on Brown's work--was told to concentrate on rallying support for Clinton's budget and, after that, the ultimately unsuccessful health care plan. Handling most of the White House's polling and issue management operations would not merely be a function of the DNC, the administration decreed; it would be the DNC's primary task. "There was a big debate about whether we'd focus on issues or focus on winning elections," says Minyon Moore, who became the DNC's political director early in 1993. "We did lose sight of the fact that the sole focus of the DNC is to win elections."

Despite the vast fundraising advantages that came with control of the White House, little attention or money went to voter-file and direct-mail expansion. Meanwhile, the DNC payroll was larded with patronage outlays: $200,000 per year for office space for Clinton in Little Rock--for a man who occupied the Oval Office--along with $500,000 per year for a line item titled "gifts and trinkets," and $700 a week to pay Tony Rodham, Hillary's brother, for playing golf with Democratic contributors. Worse, the White House deemed its strategic research proprietary; for instance, pollster Stanley Greenberg was paid $4.5 million out of the DNC's budget, but neither the DNC nor any of the other party committees was allowed to make use of his polling. "There really wasn't any lead person in the White House who had any vision for this," recalls a former senior administration official. "And you had a president who got elected in '92 more on free media than by spending money in the field."

"If we had passed health care, even some version of it, we would have done a lot better in the '94 midterm elections," Wilhelm says today. This is probably true. But as it turned out, the Democrats' broader strategic assumption--that they were the majority party--was disastrously mistaken. Democratic strength in Congress depended heavily on several dozen conservative southerners who subsisted largely on incumbency and whose constituents had been voting for GOP presidential candidates in ever increasing numbers since 1968. Clinton, moreover, had won not only by a bare plurality but with a smaller percentage of the vote than Michael Dukakis had earned losing to George Bush the elder in 1988. And Democratic turnout, though it had ticked up gradually since 1980, still hadn't recovered to its 1976 levels.

None of this seemed to percolate through to the White House. That summer and fall, the DNC put few of the kinds of resources into the campaign that Brown had in 1990. "We were running the air war without ground troops," recalls one Democratic field operative. "The party put nothing into the streets. We had no legs."

Though 1994 devastated the Democratic Party, there's a sense in which it made Terry McAuliffe. McAuliffe had spent the early part of Clinton's first term running the DNC's Business Council, the party's big-donor fundraising and networking group. By the spring of 1994, McAuliffe had become DNC finance chair; and the impending loss of Congress notwithstanding, the DNC raised three times more than it had during the previous off-year cycle. So as the White House looked ahead to the coming primaries, Clinton intimate Harold Ickes urged the president to put his re-election fundraising in McAuliffe's hands.

Clinton was at first reluctant, worrying that McAuliffe was too close to Gephardt, who was then a potential rival for the nomination. But the president was soon convinced. At the time, he had a particular need for McAuliffe's talents; the 1994 debacle had left Clinton's future in question and his donors looking elsewhere. In December 1994, McAuliffe and Clinton got together for a breakfast. McAuliffe promised Clinton that he would raise the money he needed for his re-election campaign and urged him, as part of the overall fundraising strategy, to find some "quality time" to spend with big donors--by inviting them to coffees, for instance, or even overnight stays at the White House. Several dozen of these coffees and many overnight visits would follow, helping McAuliffe (who also hit the road, as usual) to raise about $37 million in primary funds even before the campaign had officially begun.

In retrospect, the coffees and sleepovers were only a minor part of the broader story. During 1995 and 1996, the White House's desperation for campaign money drove the Democrats to exploit the so-called soft-money loophole, which permitted the DNC to raise unlimited amounts of money so long as it was not used for explicitly coordinated campaign expenditures. It was Ickes and his arch-rival Dick Morris who decided, in 1995, to turn the DNC into a White House fundraising apparatus, using soft money to fund an ostensibly noncoordinated advertising blitz against the GOP; the GOP, of course, immediately adopted the practice for its own fundraising. And McAuliffe would later argue, not implausibly, that these kinds of favors were and are a relatively benign way to reward supporters. "What are we supposed to do with donors?" he told The Washington Post in 1999. "Take them out to Pennsylvania Avenue and pistol-whip them?"

But just before the election, stories about the coffees began trickling out in the national press--in particular, reports that a convicted stock swindler, a onetime drug dealer, and a Chinese gunrunner with ties to the People's Liberation Army had been among the contributors rewarded with attendance at the klatches. The trickle of stories quickly became a flood, and the crassness of it all proved irresistible to Republicans on the Hill, who seized on the coffees (and, later, the sleepovers) as symbols of the White House's insatiable and possibly illegal drive for campaign money. Within a few weeks of the election, Republicans in Congress launched what would become an endlessly metastasizing series of investigations--into Clinton; into his wife; into his attorney general, Janet Reno; into Ron Brown, then running the Commerce Department--and, not least, into the Democratic National Committee.

Beyond the Lincoln Bedroom

To this day, McAuliffe has never been explicitly linked to any of the White House's 1996 fundraising abuses. Although he helped in the initial fundraising drive during 1995 and continued to raise money for the Democrats after stepping down from the Clinton-Gore campaign that November, he was not involved in most of the cases that particularly interested Republicans and the press--the Yah Lin Tries, the Roger Tamrazes, and others. (In 1997 and 1998, however, congressional and federal investigators questioned McAuliffe about his alleged involvement in a plan to launder contributions to the re-election campaign of former Teamsters President Ron Carey. Carey was ultimately indicted, along with several aides.) So McAuliffe for the most part was untarnished. In fact, as the damaging stories were breaking, the White House was trying to convince McAuliffe to become DNC chairman. At the time, McAuliffe declined, saying he wished to spend more time with his family.

This turned out to be a smart move. Republican staff lawyers spent the postelection months subpoenaing their way through the DNC finance department, wiping out Democratic fundraising efforts, and utterly demoralizing what staff had not already fled. At the White House, Ickes took the fall. Steve Grossman, who was brought in as chairman shortly after McAuliffe turned down the job, ended up spending much of his first year talking to the party's lawyers and trying to keep the DNC from bankruptcy. That spring, after returning more than $3 million in donations and spending hundreds of thousands of what remained on lawyers' fees, the DNC was as distracted as it was broke. It would be months before Grossman finished overhauling the finance department, and still more months before the DNC's political operation got back on track. "When I started out, the political shop was more or less empty," says Jill Alper, who took over as political director during the investigations. "There were people who thought the division shouldn't even be rebuilt."

So in 1997, the Democratic Party once again missed the post-presidential-year window for party building. Indeed, the DNC couldn't provide any meaningful help even for the two off-year gubernatorial races in New Jersey and Virginia; both Democratic candidates lost. Even a year later, during the 1998 elections, the DNC was still in debt and could spare only about $4 million for political operations (about $3 million less than was spent in 1994). As a consequence, responsibility for the upcoming campaign shifted even more than normally to the DCCC. But there, under the direction of Donna Brazile, the Democrats ran exactly the kind of campaign that had not been run in 1994.

"The DNC was still trying to get its sea legs back," says Brazile, a well-known Democratic field operative and, like McAuliffe, a Gephardt alum. "We had less than $2 million for radio, TV. So we went local." The DCCC targeted 25 congressional districts for intensive get-out-the-vote efforts. Campaign strategists integrated the down-ballot races and focused on voters who had come out in 1992 and 1996 but not, for various reasons, in 1994. Combined with organized labor's nascent grass-roots program and carefully coordinated with efforts by other left-of-center interest groups, the Democrats' 1998 campaign was exceptionally successful: if not a full repudiation of 1996's suburb-oriented and advertising-heavy campaign, then certainly an affirmation of a broader approach. Labor's share of the voters went from 13 percent of all households in 1994 to 23 percent in 1998. And despite overall declines in voter participation, African-American turnout at the national level stayed constant at around 10 percent, while in most of the targeted states it jumped anywhere from 5 percent to 10 percent. (The Monica Lewinsky scandal, which dented Democratic fundraising in 1998, ended up helping Democratic get-out-the-vote efforts.) Against nearly every prediction, Democrats not only didn't lose House seats but gained back five. Two years later, Brazile would urge Al Gore to make the same kinds of efforts. And for all its woes, the Gore campaign listened. As a result the Democrats had their best turnout in recent history: Gore got more votes than the man currently residing in the White House did.

"We won," says Brazile. "We got 50 million people out to win the election. We got almost 50 percent of the vote. We got our people out." And for 2002? It is "ironic," Brazile says reflectively, "that Terry's going to align himself with the grass roots of the party when most of the resources that he raised between 1996 and 2000 went to media consultants and pollsters. If Terry is committed to bringing the party back to its roots, back to where its strength lies, then that means we gotta put a lotta resources into it--into updating voter files, and voter education. The big question is," she adds, "how much will Terry be able to raise, and where will that money go?"

So far McAuliffe seems to be following through. "Frankly, I'm relatively high on the first month of McAuliffe," Mark Gersh, Washington director of the liberal National Committee for an Effective Congress, told me in March. At the time, McAuliffe had just announced his commitment to raise $13 million for the Democrats' upcoming redistricting and reapportionment campaign--the first time the DNC will cover those costs, and to many an early sign of seriousness on McAuliffe's part. But other surprises have followed. Early this spring, McAuliffe hired Minyon Moore as the DNC's executive director and canceled all the DNC's extant polling contracts with plans to consolidate--and, for once, share--all the party's polling under one roof. McAuliffe still talks to Clinton every day, but in May he quietly canceled plans to hire at least three former White House aides for DNC jobs, according to the New York Daily News. Instead McAuliffe picked up Michael Meehan, a former aide to Tom Daschle, and Gerry Cavanaugh, a former chief of staff to Ted Kennedy. Two of McAuliffe's other top hires--Gail Stoltz for political director and Maria Cardona for communications director--are veterans of Brown's DNC. (Stoltz, a highly regarded field operative, was until recently government affairs director of the Service Employees International Union.) "The fact that he is as focused as he seems on rebuilding the party--and is coming in here and listening to us ... ," muses the AFL-CIO's Rosenthal. "I think Terry McAuliffe, in some ways, could be Nixon to China."

"For the last 20 years, for a variety of reasons, the party has been too short-term oriented," says former White House political director Doug Sosnik, who helped McAuliffe plan his campaign for the chairmanship. "It hasn't taken the long view on professionalizing the operations of the party, building up and maintaining our donor base, and helping to build up our state parties. And I think Terry is really prepared to step up and do the long-term investments that are needed."

To that end, McAuliffe has another, somewhat perverse advantage that his predecessors lacked: For the first time in decades, Democrats control neither the White House nor the House of Representatives and have only the most tenuous hold on the Senate. If it takes a Terry McAuliffe to engineer a grass-roots revival, is that any less odd than the fact that the Democratic Party needs one? In two years, the Democrats may have a party again--if they can keep it.