On December 13, 2004, a month after the re-election of George W. Bush, twenty-five of the wealthiest donors in the progressive community gathered at the Four Seasons Hotel in Washington for an important strategy session. The group had collectively poured hundreds of millions of dollars into the effort to defeat Bush–and had nothing to show for it. Yet the despair of John Kerry’s defeat provided an urgent call to arms. “The US didn’t enter World War II until Japan bombed Pearl Harbor,” Erica Payne, a New York political consultant who helped organize the gathering, told the donors. “We just had our Pearl Harbor.”

The time had come for the donors to think differently about how to spend their money, just as conservatives had done forty years earlier when they launched a counteroffensive against liberalism and pushed the Republican Party far to the right. The meeting was led by Rob Stein, a former official in the Clinton Administration, who’d spent the last year and a half developing a PowerPoint presentation vividly mapping the rise of the conservative movement. He’d convened the meeting to encourage progressives to emulate the conservative funders by investing in the “guts” of politics–leaders and ideas and institutions that would last beyond one election. A month later the Democracy Alliance officially came into existence, as an exclusive collective of donors and one of the progressive community’s most ambitious undertakings yet.

Almost two years along, the Alliance’s 100 donors have distributed more than $50 million to center-left organizations and activists–a lot of money, yet still largely symbolic given the deep pockets of its members. Even as the donors pour millions into a new political infrastructure, however, problems have emerged that mirror many of the problems of the Democratic Party today and the progressive movement in general.

The first is determining what, exactly, the group stands for and wants to accomplish. Unlike the money guys who underwrote the right, members of the Alliance seem to lack strong ideological conviction about what the future ought to look like. And they do not have the militant perspective of outsiders eager to disrupt and overrun the party establishment. The right-wingers developed a core set of principles and stuck to them with an insurgent sense of persistence and aggressiveness. The wealthy liberals, in contrast, are still debating among themselves how to spend their money. Do Alliance members just want to be in the club or do they intend to change it? Do they want to stick with the party’s stars–Bill and Hillary Clinton and their cadre of influential aides, who are preaching “moderation”–or are they ready to listen to new voices? Are they really committed, and prepared, to fund long-haul change?

To its credit, the Alliance has largely ignored the 2006 elections in favor of developing a five-to-ten-year strategy. But the much bigger presidential election season just around the corner will test the donors’ long-term resolve. When the Alliance took an informal survey, the greatest fear among partners was that if a Democrat captured the presidency the organization wouldn’t survive. Rob Johnson, an early board member, says the tension in the Alliance is between “party subsidizers” and “climate changers”–those who want to fund organizations that work toward more effectively electing candidates versus those who aspire to change the fundamental nature of political debate with a stronger set of governing principles.

A secondary problem is the struggle these well-meaning wealthy Democrats have had in getting their own house in order. Since its inception, the Alliance has been unabashedly elitist, while also poorly run. The criteria for choosing winners have been maddeningly opaque and the grants themselves contradictory. Far from speeding up the funding of progressive organizations, the Alliance has slowed certain things down. To stabilize the organization internally after almost a year of early stumbles, the partners chose as its managing director Judy Wade, a member of the elite firm McKinsey & Company, consultants to multinational corporations. The appointment perhaps reflected the group’s uncertainty about its goals as well as the economic proclivities of its members. Wade normalized the Alliance operationally but further blurred its identity, increasing the likelihood that it will uphold the economic and political status quo.

“There’s a cautious pathway that traditional Democrats take, and it’s been hard to break that,” says Johnson. If partners propose to fund the liberal Campaign for America’s Future, they must also support its archrival, the DLC’s Progressive Policy Institute (neither has received funding so far). A newly elected board led by members of the Alliance’s progressive wing could make the group more adventurous. But an emphasis on collegiality indicates that risk aversion may well be the order of the day.

It’s too soon to draw any conclusions about the Alliance. But sixty interviews conducted over the past five months suggest that it’s not too early to worry that what began as a bold initiative may end up with as little to show as the earnest but largely ineffective philanthropy it was meant to supplant–which did good but didn’t alter power. Indeed, the Alliance could bolster a timid Democratic Party establishment instead of transforming it. Of all the lessons from the right, the Alliance has forgotten arguably the most important: It takes both money and conviction to achieve victory. “It doesn’t make sense to develop a strategy without a vision,” says James Piereson, longtime executive director of the John M. Olin Foundation, which was one of the key half-dozen funders on the right. “It’s a mistaken analogy that conservatives succeeded because of our tactics. I always thought conservatives were successful because of the ideas we were trying to sell.”

It Started With the Phoenix

The Democracy Alliance began in the offices of the New Democrat Network (NDN) and on the computer of Rob Stein, who’d served as chief of staff to Clinton’s Commerce Secretary Ron Brown. In 2002 and 2003 NDN, a creatively centrist Washington think tank, undertook a strategic review to figure out what the “higher purpose” of the organization and larger progressive movement should be. It called the effort the Phoenix Group, named after the mythical bird that rises from its own ashes and inspired by a character in a Harry Potter book. In the spring of 2003, NDN president Simon Rosenberg and Payne saw Stein’s PowerPoint presentation, which he’d titled “The Conservative Message Machine Money Matrix.”

“The narrative was not new,” Rosenberg says. “But the degree of research and how he pulled it all together was the best explanation I’d seen of how we are where we are today.” Namely, out of power. It wasn’t a question of money–the five largest liberal foundations outspent their conservative counterparts annually by a 10-to-1 ratio–but rather how it was being spent. Back in the 1960s and early ’70s, a handful of wealthy conservative businessmen like John Olin and Richard Mellon Scaife began generously bankrolling an array of policy centers, grassroots mass-based organizations, leadership institutes and intellectuals to beat back what the funders viewed as liberalism’s assault on traditional structures like the family, the free market and the military. Major Democratic Party fundraisers and large foundations like Ford and Rockefeller mounted no similar coordinated defense of liberalism. It was this problem that Stein hoped to address through his presentation.

Payne set up a series of meetings for Stein on the East Coast with prominent Democratic Party donors. Stein presented his research using a lexicon the millionaires and billionaires understood. He called the largest conservative donors “philanthropic venture capitalists.” The leaders of the conservative movement, such as Paul Weyrich and Grover Norquist, were “political investment bankers.” The presentation helped convince the wealthy liberals that the Republican Party’s recent successes were a logical outcome of determined movement building, not an accident of history.

During the fall of 2004, big donors were consumed with trying to oust Bush from office. But after Kerry’s defeat, the nascent Alliance moved full speed ahead, officially beginning its existence in January 2005. Only the most committed and well-to-do donors were accepted into the high-priced club. Those joining included billionaires George Soros, Peter Lewis and Herb and Marion Sandler; major Clinton fundraisers Mark and Susie Buell and Bernard Schwartz; New York venture capitalist and longtime Clinton supporter Alan Patricof; Hollywood celebrities Rob Reiner and Norman Lear; wealthy high-tech Californians such as Working Assets founder Michael Kieschnick; and the AFL-CIO and the SEIU.

Joining the Club

Members, known as “partners,” were required to pay a $25,000 entry fee, $30,000 in annual dues and a minimum of $200,000 per year to organizations recommended by the Alliance. The Alliance would not dole out money itself, but collectively the partners would meet twice a year through its auspices to decide which organizations to fund, forming working groups based on four priority areas: ideas, media, leadership and civic engagement. The working groups would present their recommendations to an investment committee made up of members of the board, who would pass them on to the entire group. Partners could then give money to the organizations they favored, voting with their checkbooks. An Alliance recommendation meant a valuable gold star for prospective progressive organizations. (The Alliance also put a premium on secrecy to protect the anonymity of its donors, actively discouraging members from speaking to the media and forcing grantees to sign nondisclosure agreements. Thus, of the dozens of partners and heads of organizations interviewed for this article, only a small number agreed to speak in detail on the record.)

In April 2005 fifty-plus partners arrived in Phoenix for a three-day conference. Stein, who announced at the outset of the 2004 Washington conference that he didn’t want to run the organization, led the meetings on an interim basis. Even before Phoenix it had been decided that the Alliance would represent an ideological big tent of centrist Democrats, progressive Democrats and even a few disaffected Republicans. As a result, partners and staff, few of whom had known one another before or had a long track record in politics, downplayed their differences and agreed to govern by compromise–never an easy thing, especially among the rich. “We need infrastructure,” says Rodger McFarlane, an adviser to Colorado multimillionaire Tim Gill, describing the views of the Alliance. “The right has taken over. That we agree on. Everything else is in play.”

In those early days, much of the focus–and most of the problems–were internal, as chairman of the board Steven Gluckstern, a retired investment banker from New York, searched for a leader of the group. Meanwhile, for would-be recipients, the process of applying for money was bewildering: completely secret and seemingly changing all the time. Four days before the first round of funding, the board offered the plum $400,000-a-year title of managing director to Robert Dunn, president emeritus of Business for Social Responsibility. When Dunn declined they turned to Judy Wade, who’d been encouraged to run by former Clinton chief of staff John Podesta, although she had no prior experience in politics.

At an October 2005 meeting at the Château Élan Winery & Resort in Atlanta, Alliance partners agreed to give $28 million to nine groups. A few were smaller, edgier, more progressive organizations, like Citizens for Responsibility and Ethics in Washington, a legal watchdog that made headlines by drafting an ethics complaint against Representative Tom DeLay. But the bulk of the money went to familiar names on the DC circuit, like the Center for American Progress (CAP), a think tank run by Podesta, and Media Matters for America, which monitors right-wing media and media bias, headed by former conservative journalist David Brock.

The small number of groups chosen, some of whom were already well funded, and the secrecy of the process infuriated organizations excluded from the club. No one knew exactly why the nine groups had been picked. Funding progressive infrastructure was all well and good, but no one bothered defining precisely what “progressive” meant. The partners themselves, with their business backgrounds, focused on the process by which groups were funded, not what they would do with the money. “There was an almost complete lack of actual substance,” one adviser to a major donor said of the Atlanta meeting. The groups were selected to mirror the right but were far less anti-establishment than their conservative counterparts.

In preparation for the second round of grants, the Alliance began to open up. Wade normalized the selection process so that groups could apply for grants. To appease angry partners, she decided that funding would be determined by a changing menu of issue areas, not based on gaps compared with what the right has funded.

From a morale perspective, the next gathering, in Austin, Texas, the following May, was notably more successful than the one in Atlanta. Leaders of the progressive movement, like labor leader Andy Stern, were invited for panels on economics, foreign policy and media. Heads of organizations mingled freely with partners. And the groups themselves were noticeably more diverse than the initial gathering in Phoenix, where sixteen of seventeen presenters were white males. “I’ve made it a mission to hate the Democracy Alliance,” the head of one prospective organization told me, “and I was pleasantly surprised.”

The funding choices themselves presented more of a mixed bag. As a result of inside maneuvering by partners to fund their favorites, less money went to more groups–$22 million to sixteen organizations, with much of it only for one year. Grassroots organizations working on racial and economic justice issues that probably would have been overlooked in the first round, such as the Center for Community Change, USAction and ACORN, made the cut. On the other hand, the issue areas targeted for spring funding–voter mobilization (known as “civic engagement”), youth outreach, Hispanic media and religious left activism–while all deserving, seemed chosen specifically to coincide with upcoming elections. And some of the larger groups funded, such as EMILY’s List and the Sierra Club, hardly needed the money. The Alliance was created to think long-term and to fund gaps in progressive infrastructure. But with two major elections coming up, short-term electoral needs were bubbling to the surface.

Asurprise guest at the meeting was Bill Clinton, whose agenda seemed to be protecting his wife. But things didn’t work out quite as planned. When Guy Saperstein, a retired lawyer from Oakland, asked Clinton if Democrats who supported the war should apologize, the former President “went fucking ballistic,” according to Saperstein. Forget Hillary, Clinton said angrily during a ten-minute rant; if I was in Congress I would’ve voted for the war. “It was an extraordinary display of anger and imperiousness,” Saperstein says.

The willingness to challenge Clinton at least temporarily reassured progressive Democrats that partners in the Alliance had a spine and wouldn’t be a front group for “Hillary ’08.” But Clinton’s response was a not-so-subtle warning to partners to avoid divisive issues, like the war, that might harm his wife in the next presidential election. Hillary herself has had a number of one-on-one sit-downs with members of the board, as has Howard Dean.

A month after the Austin meeting, a group of partners from the Alliance’s progressive wing were elected to the board on an informal reform slate. They included Gara LaMarche of Soros’s Open Society Institute, Anna Burger of SEIU, Drummond Pike of the Tides Foundation and Rob McKay, Taco Bell heir and president of the McKay Family Foundation. Many of these foundations have been at the forefront of funding progressive initiatives, like the campaign in California to pass a living wage. At a July retreat in Boulder, Colorado, McKay and Burger were elected chair and vice chair of the board. “This is the first really elected board,” says Burger, a longtime union organizer. “It gives it legitimacy. People will feel more comfortable acting.”

Unclear Priorities

But if McKay and Burger are to move the Alliance toward more effective progressive funding, they will have to rethink its priorities, starting with how many groups it funds and for how long. For the first round of grants, Alliance staff repeatedly stressed the importance of following four basic funding principles: Give organizations enough money to compete with conservatives; fund organizations over the long haul so they can achieve financial security and give them flexibility about how they use the money; make sure the groups work together; and urge the groups to use the money to affect public policy or engage with the political process.

In the second round of funding, however, the Alliance fell into the common liberal trap of needing to be all things to all people. After two grant cycles the Alliance is overextended. Wade says she hopes the Alliance, in conjunction with other funding coalitions, will eventually be able to direct an ambitious $500 million annually in grants. But with twenty-five groups under its tent, the Alliance will have to keep growing, by either recruiting new partners or convincing existing ones to give more, to be able to continue to fund those groups it has already agreed to assist. As a consequence, Alliance partners have cut back on some key priority areas, such as foreign policy, economics and media, in preparation for its third round of funding in Miami this November.

Of these, the media cutbacks are the most problematic. Conservatives have aggressively recruited and funded an array of authors, scholars and publications who have formulated controversial ideas. Then they marketed those ideas, through media, to wider audiences with the goal of changing public policy. To date the Alliance hasn’t been deeply involved in idea creation in the same way conservatives have been, but at least initially it expressed interest in funding better ways of getting a progressive message out.

At the first meeting in Phoenix, Alliance partners agreed that funding media would be a front-and-center priority. Instead, says one early member of the media committee, “it keeps getting shuttled to the back, over and over.” Partly that was because at the beginning of the process few members were familiar with progressive media. In time, the media committee developed a plan to fund bloggers, investigative reporting and media reform efforts. Now, in the run-up to Miami, says another media committee member, that plan has been slashed in half. Media Matters did receive an $11 million commitment over three years–but it only tracks right-wing media rather than producing original content. Air America Radio was supposed to receive between $5 million and $8 million from the Alliance, but after months of negotiations it still has received no money. Other efforts, such as The American Prospect magazine and the start-up Progressive Book Club, are also in limbo.

A funding shortfall only partially accounts for the Alliance’s inattention. There are philosophical reasons as well. Idea creation takes time, media development is expensive and both are risky. And the Alliance is highly risk-averse.

Many of the right’s premier ideas–welfare reform, rolling back détente with the Soviet Union, school vouchers–started off as a “riverboat gamble,” as former Senate majority leader Howard Baker labeled Ronald Reagan’s massive 1981 tax cut. “We did a lot of things at the beginning that we didn’t know would work,” says the Olin Foundation’s Piereson. “If we needed a consensus it would’ve never gotten done.” A conference of law students and professors partly underwritten by Olin in 1982 launched the Federalist Society, the right’s premier legal organ. A $25,000 grant to the obscure social scientist Charles Murray led to his influential book on welfare reform, Losing Ground. And so on.

Risk aversion is also reflected in the Alliance’s preference for underwriting organizations that won’t upset the economic status quo. Podesta’s CAP has been keen to avoid trade and globalization issues that separate the party elite from the rank-and-file Democratic base. While CAP won a $5-million-per-year commitment from the Alliance over three years, the unabashedly progressive Economic Policy Institute received a small, $250,000 planning grant. (The other economic organization funded generously by the Alliance, the Center on Budget and Policy Priorities, does research on issues like poverty in a nonpartisan fashion.)

The same topics that are off-limits in the Democratic Party–US policy on Israel, the bloated military budget, the role of big money in both parties, the grip of corporations–are shunned by the Alliance. Groups like MoveOn.org that target corporate Democrats, as the Club for Growth does to moderate Republicans, are brushed aside. “MoveOn.org scares a lot of these people,” says an important partner.

Alliance staff originally conceived of an “innovation fund” to funnel smaller amounts of money (between $25,000 and $250,000) to newer ventures, such as the blogs and MeetUp-type gatherings, at the discretion of the managing director. That concept, too, has yet to get off the ground. Instead of directing the fund Wade, with her McKinsey background, appointed yet another committee to oversee it, reinforcing the inside joke that the Alliance at times resembles a “let’s have a meeting about having a meeting” self-parody. The inability to move quickly and take risks in areas like media has persuaded a number of progressive donors to stay out of the Alliance, most notably Silicon Valley venture capitalists Andy and Deborah Rappaport, whose New Progressive Coalition is specifically aimed at finding and funding under-the-radar policy entrepreneurs and down-ballot candidates at the state and local levels. Joining the Alliance, Deborah Rappaport says, “would have constrained our ability to jump on new things as they appear.”

McKay says he’d like the Alliance to be more decisive, but it’s hard to tell whether that’s possible. Taking a chance isn’t easy when you need to get approval from 100 millionaires and billionaires. “It’s tough to herd cats,” former Alliance chair Steven Gluckstern liked to say, “but herding fat cats is harder.”

Between 1972 and 1999, conservatives created at least sixty new organizations with mission statements modeled after that of the Heritage Foundation, a radical think tank at the time of its founding: “free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.” When pollster Celinda Lake asked a group of white Midwestern swing voters in 2004 what conservatives stood for, most of them repeated those catchphrases. When she asked the same question about liberals, half the voters responded, “I don’t know.”

In its early stages the Alliance, following the lead of Heritage, attempted to hammer out a mission statement for the organization. A year later the document is still a work in progress. Wade says the goal of the Alliance is to strengthen democracy. “That means an actively engaged citizenry…real solutions to critical issues…and a democracy not dominated by the far right,” she says. Laudable goals, but hardly a road map for changing public policy. “There are pragmatists and there are activists,” partners say Wade frequently tells them, “and I’m a pragmatist and that’s where this organization should be.” Needless to say, the early conservative activists, whether at National Review or on Barry Goldwater’s 1964 campaign, couldn’t have disagreed more.

The irony is that as the Alliance attempts to articulate its agenda, the old phase of conservative philanthropy–rich families like Olin and Scaife funding political change–is coming to an end and the conservative movement and Republican Party are running empty on ideas. Signature proposals, such as privatizing Social Security (and everything else) or eliminating the Education Department, have been widely discredited. “Obviously the left, if they can get themselves in position, can make a move,” says Piereson.

The Bush era has jolted liberal philanthropists into action. No matter what the Alliance does, the impetus behind it will find other outlets. State-based donor collectives modeled after the Alliance have started in Washington, California, Ohio, Wisconsin and Colorado. Donors disaffected with the Alliance, like the Rappaports, have created their own organizations. Together these endeavors can create a market for entrepreneurs shopping ideas, just as conservatives did forty years ago. The notion of doing what wasn’t getting done–thinking broadly, taking gambles, going beyond electoral politics and cultivating ideas and institutions and leaders–drew many of the partners to the table in the first place. Perhaps the best plan for the Alliance’s future is remembering why it was started–and why conservatives won.