Recommended: Rick Pearlstein et al. (2005), The Stock Ticker and the Superjumbo: How the Democrats Can Once Again Become America's Dominant Political Party (Chicago: Prickly Paradigm Press: 0976147505) http://www.amazon.com/exec/obidos/asin/0976147505
That I recommend it does not mean that I agree with it. I'm a Democrat, and I believe that I will always be a Democrat: Richard Nixon's decision that the appropriate reaction to Lyndon Johnson's commitment to Civil Rights was to turn the Republican Party into The Party for People Who Don't Like Black People was a sufficiently evil action to make it next to impossible for me to think of situations in which I would vote Republican (and it may well have destroyed the soul of the Republican Party). But I would be happy to build bipartisan coalitions from the center outward, based on what policies are likely to work and achieve agreed-on long-run prosperity and security. I would, that is, if there were grownup Republicans to be found...
In my view, the Democratic Party is doing OK in an age of high income and wealth inequality. The rich are spending lots of money to brainwash the rest, and the Democrats have to hold on against that tide. The Democratic Party is doing OK given its extraordinary success over the past two generations in pushing social equality and liberty--for African-Americans, women, homosexuals, Hispanics... pretty much anyone who isn't white and male--faster and further than large components of the electorate are comfortable with. Twenty-seven percent of Americans still disapprove of interracial marriage. They aren't going to vote Democratic. That's a powerful Republican base.
The real catastrophe in today's America is what has happened to the Republican Party. Fixing that is job #1.