Let me put it simply, what went wrong went wrong from the very top of the party. In both political and policy terms, the President of the United States, the head of the Democratic party, created this disaster.
Nothing tracks electoral success better than the economy. Barack Obama did not do what it took to pull the economy out of the doldrums. This is true both with regards to the stimulus, which was too small, too larded up with tax cuts and too ineffective and with regards to the Federal Reserve, where Obama's chosen chairman Ben Bernanke is about to drop stimulus (nicknamed Quantitative easing 2) on the economy after the election instead of doing it before the election. There was no economic reason not to do it months ago, when it would have helped both struggling Americans and Democrats.
Barack Obama took pains to let down or gratuitously harm virtually every major Democratic constituency. Whether it was increasing deportations of Hispanics, whether it was putting in a Presidential order against Federal money being used for abortions which was more restrictive than Rep. Stupak had demanded, whether it was wholesale violation of civil rights climaxing with the claim that he had the right to assassinate American citizens, whether it was trading away the public option to corporate interests then insisting for months he hadn't, whether it was not moving aggressively on card check (EFCA) for unions, or whether it was constantly stymieing attempts to end Don't Ask, Don't Tell, Barack Obama was there making sure that whatever could be done to demoralize the base was done.
Meanwhile, the majority of Americans think that the policies Obama pursued were socialistic, progressive or liberal. They think this is what left-wing governance looks like. In 2 years Obama has managed to discredit the left, possibly for a generation.
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