“[Embracing fiscal restraint] would help in a host of ways in terms of just ending the notion of Democrats as free-wheeling spenders, 'government solves all your problems.’ Because that leads right into the slippery slope of Democrats being lax on moral issues, faith issues. Fiscal issues are a huge opportunity for Democrats.”

-- Sen. Mark Warner, D-Va., talking to the New York Times for a Nov. 7, 2004 piece: “Baffled in Loss, Democrats Seek Road Forward.”

Heartbroken Republicans would do well to consider how much worse it was for Democrats eight years ago.

In 2004, Democrats lost not only in a bid to unseat an incumbent president much hated by the party’s liberal base, but also saw the Republicans solidify what had been tenuous majorities in the House and Senate.

While President Obama’s re-election margin was more decisive that President George W. Bush’s was in 2004, Democrats failed to roll back the large Republican majority in the House and added only two seats to their Senate majority.

Some over-eager Democrats and deeply depressed Republicans are seeing the collapse of the GOP: a demographic cliff and an eventual unraveling of the conservative party. The conventional wisdom is that Republicans are doomed without a move to the middle.

But in 2004, Democrats were looking at what seemed to be a generational oblivion.

The combination of the Republican advantage on national security and social issues combined with Democrats isolation as the party of the urban poor and costal elites seemed to spell doom for the Blue Team.

The answer offered by party mandarins and the establishment press was that the time had come for Democrats to return to the moderation and centrism of the Clinton era, to reject the anti-war liberalism that had inflamed the party’s base and go back to fiscal and social moderation before the party lost all credibility with voters.

Wise men and women assumed that the party was headed back to Clintonism, either in the person of Hillary Clinton, junior senator from New York, or with another southern or border state Democratic moderate like Sen. Mark Warner of Virginia.

The last thing that the smart set would have suggested was that the newly elected senator from Illinois – he of the anti-war left, African parentage, utterly socially liberal and with the middle name Hussein – would be the best bet for 2008.

And yet, Obama won. Twice. And for two years presided over the largest Democratic majority in Congress since the Watergate wipeout for Republicans.

For all the talk of oblivion for Democrats, it was just two years later that thanks to growing frustration with the Iraq war that Democrats would retake the House in a 31-seat swing and erase the Republican gains in the Senate.

Democratic success in 2006 was part of a strategy of finding moderate Democrats who could use opposition to the war and deficit spending to pick off vulnerable Republicans by tying them to Bush policies. The wave John Kerry had hoped to ride into the White House crested two-years too late for the Massachusetts Democrat, who was also too elite and too liberal to connect to heartland voters.

Liberal Democrats were growing very concerned that the party was lurching rightward and losing sight of its principles. They went to work to make sure that the Clinton wing of the party did not reassert itself and, like 2004 contender Howard Dean, set about mainstreaming and moderating the message, but not changing the ideals, of the left.

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In Obama, Democrats found someone who shared all of the beliefs of the liberal base but who could talk about them in such a way as not to terrify moderate voters. The left knew Obama was their man, freeing him to talk like a moderate. And with a thin voting record in the Senate, he was tough for the Clintons and later Republicans to find fresh evidence of positions outside the mainstream.

With the backing of the left, a Democratic desire for racial justice and a campaign strategy that combined inspirational rhetoric with bare-knuckled tactics, Obama vanquished Clinton and then, thanks in large part to voter fatigue with Republicans and the Panic of 2008, swept past the GOP into the White House.

It’s a story that few would have even imagined possible in mid-November 2004. A very liberal senator with little experience, born in Hawaii to a Kenyan father? No chance.

Republicans can’t know yet what the opportunities and challenges of the next years will bring. Neither can they tell who will be available to carry the party’s banner. Any pundit or Republican operative who can tell you exactly what the GOP ought to be doing now is likely just flattering themselves. Moderates believe the party ought to be more moderate. Conservatives believe the party ought to be more conservative.

But as Obama has proven, politics is about exploiting opportunities foreseeable and unforeseen.

There’s no doubt that Republicans need to show moderation and a conciliatory countenance in the wake of Obama’s re-election and the split decision by voters. But the direction the party will take in the 2014 midterms and beyond will be about how voters, markets and international foes respond to another term of Obamism and the political gifts of individual Republicans – those well known and still mostly unknown.

And Now, A Word From Charles



“I think one thing he might do if it's not Simpson-Bowles would be to offer the Treasury to Romney. I'm sure he would probably turn it down but it would be the ultimate gesture. I don't think it will happen. I agree John Kerry will probably end up at secretary of State. But I must say that my sources in the Obama White House have been rather quiet since January 2009.”



-- Charles Krauthammer on “Special Report with Bret Baier.”



Chris Stirewalt is digital politics editor for Fox News, and his POWER PLAY column appears Monday-Friday on FoxNews.com. Catch Chris Live online daily at 11:30amET at http:live.foxnews.com.