One common Beltway cliché is that only optimists get elected President. Another hackneyed phrase, somewhat closer to the truth, is that people vote for the future, rather than based on the past. But neither notion is quite right. In fact, what people mostly vote for (or at least what they've voted for at least since Reagan, and probably since Kennedy) is for the candidate who delivers the most compelling vision for what the country OUGHT to be. When people say that the race is a referendum on the incumbent, they actually mean two distinct things: it's a referendum on his vision, and on his ability to execute on realizing this vision.
What Bush did so much better than Kerry was to articulate his vision of what America ought to be. Bush had a vision of the country as, in essence, Texas writ large: a nation of devout, self-supporting individualists who are unafraid to open up a can of whupass on anyone who so much as looks at them the wrong way. In articulating this vision, policy details were secondary. In fact, policy details were only marshaled in order to reinforce people's understanding of Bush's vision. It was in this sense that Bush was right to say again and again "people know where I stand" despite all of the policy zigzags: his vision of the America he wants to create is very clear and very consistent.
Starting now, the Democrats need to make clear the obvious and stark choice between the their vision and the GOP's vision of what America can and ought to be.