Nathan Lott made a smart comment here which he then expanded into a post on his blog.
Here’s the core:

The strategy of preying upon the economic worries of the working- and middle-classes counts on fear more than hope. Consequently, it does little to improve the Democratic image as dour yet untrustworthy. By that I mean that Bush is viewed as a happy hick on one hand but trusted with protecting the nation on the other. Meanwhile, Gore is a no-fun wonk and a national-security liability in the mind of most Americans. The current Democratic populism not only relies on the American tendency to identify with the working-class but attempts to exploit middle-class fear of a descent into poverty (that really is a retreat to the New Deal). But that fear may not exist. As long as the Republicans can present a hopeful instead of fearful front, they’ll win.
The problem here is not unlike that behind the Democrats unsuccessful objection to Bush’s tax cuts: They mis-define the middle class. Or, more often, they confuse working class with needy. This has two problems: 1) it alienates those middle- and working-class families who no longer identify with the (outdated?) image of honest folks struggling to make ends meet and 2) it forces the party to attempt to buy off the people footing the bill—big government circular spending. Brave Democrats muster the courage to tell voters they’ll increase taxes to spend the receipts wisely. But very few are brave enough to offer middle-class voters only dignity in return, not new government benefits. If Democrat policies targeted only the truly needy, the party couldn’t try to bribe Americans who can afford drugs with free prescriptions, for example. However, they could offer scaled-down solutions to real problems and sell themselves as a party of community.

Here I read three major points:
1) Defending the working class relies on fear rather than hope;
2) That fear is not as prevalent as some would suggest; and
3) These policies are mis-aimed in that they try and speak to secure middle-class Americans about the fears of the (he suggests relatively fewer) who are economically insecure.
I think Nathan’s well-intentioned comments are off the mark. Most indicators show consumer confidence as slowly drifting downward, and the reality of the job mix that we are seeing in this ‘jobless recovery’ is that the classic ‘middle-skills’ ‘mid-career’ jobs can no longer support a middle class family.
(Ironically, this is both masked and caused by the same thing…the explosion in home prices.)
Note that I owe cites on this but can’t get to them today.
If he interpreted my challenge to the party as a ‘create pork jobs’ plan, I apologize for misspeaking. I don’t at this point have a well-cooked plan (if so, I’d be standing at the party doorsteps, nailing it up), and part of what I try and do here is to engage in the dialog which will lead people smarter and better-informed than I to help me come up with one.
That plan should have a few key characteristics:
– Focus on jobs, not just output. Most economic policy uses aggregate employment (unemployment) as an indicator, along with GDP or overall dollars of output.
Since I believe that everyone manages to their metrics, select metrics that involve employment levels and employment quality (stability and income).
– Realize that creating European ‘jobs for life’ is a recipe for disaster, and that we cannot legislate employment. But … legislation in the form of fiscal, economic, and tax policy have huge impacts on employment, and we need to be mindful of those impacts and more specifically, working to have positive, rather than negative impacts.
– Look at the precursors to quality employment, which certainly have some things to do with the workforce. Education, training, culture. Again, not all of these are things the government has been good at doing. So let’s ask how to get them done.
– The reality is that small and medium businesses are the engine of American capitalism and of social stability and mobility. We need to find ways to tilt the playing field back toward the small business; this will have to do with simplifying regulations (not necessarily changing the requirements, but making it easy to understand and comply), tilting the tax laws, and changing the economics which make the government and regulator the ally of the larger company.
Here again we have a bad example – Japan, in which the maze of regulation is designed to protect the small farmer and small businessman to the complete detriment of the consumer.
These are just a few notions of the directions we need to go into. More later.
But dealing with these issues should be a way to offer the average American – the household of 4 making $40K/year – hope for a better future for themselves and their children.
That’s not fear…that how you make fear go away.