I have a long series of ultimately unrelated but occasionally insightful thoughts below. Read if you feel like letting your mind wander. Sort of like scratchings before the point where they turn into a paper.
Maybe the Democratic Party is confused because it focuses too much on issues. We are the party of health care, but then we can get triangulated by the Republicans and medicare. The Kennedy wing was the party of an interventionist foreign policy, but then that gets triangulated by the neocons.
The thing is, that these are supposed to be wedge issues for the Republicans, but we're forced into a position where we have to say, "Well, we actually want to spend as much money on health care as the Republicans are, but we just want to do it better." And, "Well, we actually want to have an interventionist foreign policy, but we just want to do it better." As soon as you start talking like this, then it opens it up to the political attack of just calling "better" a difference of political interpretation, so why not stick with who is in power and actually has the history of results.
The reason they don't work as wedge issues is because the Republicans are currently on the Democratic side of the wedge issues, but doing it in a Republican way. The Republican small government advocates have got to be muttering under their breaths, because while they currently have big government, they know there's a chance of them getting a really small government through this "starve the beast" approach.
Just as an exercise, it might be interesting to think about ways to mirror this approach. What are the Democratic wedge issues, and how can we be on the Republican side of those issues? One example is gay marriage. (I don't agree with the following suggestion but it's an exercise.) Perhaps disapproving of gay marriage but disapproving of outlawing it even more since we don't need big, untrustworthy government nosing around our personal lives.
The reason the Republican party is in power is simply because that is their goal more than anything else. They are the party of attaining power. Anything else can be compromised for that goal. Power is great when it's used in service of a higher ideal, but by itself it is corrupting, and ultimately negates itself and everything around it. Obviously if we wanted to assure their failure, we could just let them do everything they want, but the problem is the effects would damage all of us, not just them. The Democrats must be about something else that can combat this. I'm sorry, but "health care" doesn't combat "attain power".
Truth is the best combatant to set against their approach, but the problem is that we have a huge judgment that all of the stupid citizens don't want to pay attention to the truth. The truth is that it's a different problem - the truth just isn't accessible enough to them.
Sometimes I wonder why the Democratic party doesn't just pull together the resources to put together a huge distance learning effort. Or a massive wiki on each of the issues. Truth is ultimately spinproof, all it requires is the patience of the listener to read the last rebuttal. It can be hard to understand Congressional Budget Office figures, but with the right flash or shockwave presentation, complicated subjects can be very easy to teach. Look how far Perot got with his little graphs on national television. Make our political issues an actual curriculum that people can click through to learn. If they want to call it spin, let them oppose it by making their disagreements in interpretation public, on the same site. It should even be possible to collectively generate this political curriculum.
The thing is, I've already seen how communities, collectively, get smarter as time goes on, on community sites such as dailykos. The discussion always brings up new issues, constant visitors learn about the issues, the learning curve gets steeper for new participants, and the group knowledge over time actually increases. The problem with these sites is that the knowledge we share eventually falls off the bottom of the page and rarely gets summarized into any living documents. Big bodies of knowledge need summaries, and entry points, and lessons, and tutorials. More and more efficient pathways into the truth. Make it easier and easier to see the manipulations that those in power (for power alone) try to subject us to. Make it as easy as possible for a citizen to become informed; don't just rely on every citizen to go through all the awkward steps to learn just because that's what we did.
The Democratic party needs to be the party of truth, of education, of innovation, of creativity, of honesty and vision. And they need a product, like an accessible body of knowledge or a curriculum, to back it up.