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The Democrats Go Scouting For A Savior

Win and the world smiles with you. Lose in politics, and you're a bum. So it's no wonder that the loudest Bronx cheer in Washington goes to lame-duck Democratic National Committee Chairman Terry McAuliffe, who has presided over two disastrous election setbacks in 24 months. "Terry McAuliffe proved that raising money isn't enough," says Democratic moneyman Andrew S. Rappaport, a general partner at August Capital Associates LP in Menlo Park, Calif. "[He] is the person who is most responsible for the predicament the Democrats are in."

That may be a bit hyperbolic, but as the Dems try to pick up the pieces after a shattering election, they're looking to replace McAuliffe in February with a party boss who not only talks a big game but actually delivers. Indeed, the crowded campaign for DNC chief is fast becoming a battle for the future direction of the party -- not to mention a possible early test for putative 2008 Presidential front-runner Hillary Clinton.

-- If the party wants bash-Bush, man-the-barricades liberalism mixed with the latest in Internet-fueled fund-raising and organizing, it can tie its fortunes to former Vermont Governor Howard Dean.

-- If it seeks a hard-charging centrist who reaches out to swing voters, including the growing Latino population, it can embrace Simon B. Rosenberg, founder of the New Democrat Network.

-- If the party wants its chair to raise wads of money and build bridges to business, it has a contender in longtime telecom exec Leo J. Hindery Jr.

-- If Dems want to emphasize minority candidates who won big in "red" states, it could turn to ex-mayors Wellington E. Webb of Denver or Ron Kirk of Dallas.

-- And if the party is convinced that only the Clintons can save it, the man for the job could well be former Bill and Hill consigliere Harold Ickes.

In practice, the DNC contest is usually decided by state party chairs, who are scheduled to meet on Dec. 4 in Orlando. "They literally have the power to deliver the chairmanship, but they don't have a candidate," says Clinton-era DNC head Joe Andrew, an ex-Indiana party chair.

The candidates have wildly different appeal. Dean is favored by insurgents who want to clean house. "It's time to do some risk-taking," says former party chair Steven Grossman, CEO of MassEnvelopePlus in Somerville, Mass. But the Clintonistas will only allow such a takeover "over their dead bodies," says one DNC veteran.

Ickes, a driving force in the 527 committees that proliferated in this election, is often seen as a stalking-horse for his close friend Senator Clinton. That could be a problem for those who want a party-builder.

For Democrats who long to see the DNC run more like a business, there's Hindery, an ex-Tele-Communications Inc. president and AT&T Broadband & Internet Services (T) CEO. But some worry about Hindery's later tenure at scandal-plagued Global Crossing Ltd. (GLBC), a company to which McAuliffe also had connections.

A dark horse is the relentlessly disciplined Rosenberg, who has worked for a decade to steer the party toward the center while building a new generation of tech-savvy activists. "The world has changed," says Rosenberg. "We need a new strategy to take on modern conservatives." One veteran activist says Rosenberg, a fave of Demo-bloggers, starts out as "everybody's second choice" and could eventually win if no other contender catches fire.

The remaking of the Bush economic team continues. Stephen Friedman, who heads the National Economic Council, is resigning, White House aides say. Friedman, who has served as a behind-the-scenes policy coordinator, was a co-chair of Goldman Sachs & Co. before he joined the Bush team in December, 2002. While Bush had not named a replacement by the time BusinessWeek went to press, the inside track belongs to Tim Adams, a former top Treasury aide who served as policy director of the President's reelection campaign.

Adams, a low-key policy expert, would fit the recent Bush pattern: choosing long-time loyalists to fill sensitive posts. Adams is unlikely to bring his own agenda to the job.

Congressional Republicans are united behind Social Security private accounts -- a key plank in President Bush's second-term platform. But a major struggle is breaking out over how to pay for the transition to a system that allows workers to divert part of their payroll tax into their own accounts. House Republicans would pay for the shift -- which could cost $1 trillion to $2 trillion -- either by borrowing the funds or by cutting other spending. But Senator Lindsey Graham (R-S.C.) says he would even be willing to back tax hikes for individuals or corporations to fund the transition and woo Dems. "If we are not able to attract some Democratic support, this isn't going anywhere," Graham says. The White House has not yet said how it would pay for the transition.

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