Stunned by the loss of Senate Minority Leader Tom Daschle (S.D.) and five open seats in the South, Democratic Senators return to Capitol Hill next week to make sense of the 2004 elections and chart a new course for the future.

Democrats are expected to avoid divisive contests for the Caucus’ senior leadership positions, though an internal battle over its direction is expected to occur, with a clear legislative course unlikely to be defined until next year.

Senate Minority Whip Harry Reid (D-Nev.) is in line to replace Daschle as Minority Leader, while Sen. Dick Durbin (D-Ill.) is expected to move into Reid’s old post in the 109th Congress. Both Senators declared majority support from their colleagues last week following Daschle’s historic loss to former Rep. John Thune (R-S.D.). Democratic Senators are scheduled to formally ratify the new leadership team next week.

While the Caucus will rally around Reid and Durbin, defining Democrats’ policy objectives and political strategy will be much more difficult, as disparate factions seek to impose their imprint on the Senate Democrats’ legislative slate. Centrists in the party are already making noise, urging the party to veer more toward the middle and erase the image of the party as a band of obstructionists.

“If we simply oppose the Republican agenda without trying to compromise, we will be seen as obstructionists again,” Sen. Ben Nelson (D-Neb.) warned. “We need to try to work with the majority.”

Nelson said Republicans successfully convinced voters that Democrats were out of touch with mainstream America in this past election, and that his party now must work harder to overcome this image.

“Right now the electorate in America have been told, and I think many of them believe that we want to ban the Bible, burn the flag, want gays to marry, edit the Pledge of Allegiance and open our borders to harbor terrorists,” the Nebraska Democrat said. “We let our folks get defined that way.

“We have to remind [voters] that the GOP does not [corner] the market on values,” Nelson said.

In fact, several Democrats ran on a centrist agenda in red states, but succeeded in winning only one of those seats — the Colorado seat vacated by Republican Ben Nighthorse Campbell, which was won by Democrat Ken Salazar.

Even traditional liberal Democratic Senators acknowledged that the party needs to rebuild its image with middle America and the South, which have become Republican strongholds.

“I think we lost our ability to connect with people’s values systems in a way,” said Sen. Chris Dodd (Conn.), who briefly considered challenging Reid for Minority Leader last week before endorsing him. “We seem to be conceding ground and losing our connection with too many people on those questions and we are going to have to work to get that back.”

Still, some members of the liberal wing of the Caucus are expected to make the case that the problem was not the message but rather the lack of coattails from the presidential bid of Sen. John Kerry (D-Mass.). Democrats are privately griping that Kerry failed to help any of their candidates in competitive races such as Betty Castor in Florida.

“Part of the problem was the messenger,” said a senior Senate Democratic aide, who spoke on the condition of anonymity. “But the core domestic issues of health care, education and affordable jobs still resonates with Americans.”

The Democratic aide acknowledged, though, “Republicans did a great job of presenting their issues through a moral frame and we are going to have to do the same thing.”

Reid, who easily won re-election in a red state this year, is expected to reach out to disaffected voters. It’s one of the planks of his leadership agenda, several sources said. Last week, Reid summoned his most trusted advisers to the small mining town of Searchlight, Nev. — Reid’s storied hometown — to begin mapping out his leadership goals, which are likely to include expanded roles for several members of the Caucus.

Susan McCue, Reid’s chief of staff, would not specifically say what was discussed. But she echoed a comment Reid made last week that changes would occur.

“We have been working around the clock on strategy and reorganization to figure out how we move forward from here,” she said.

Durbin, who hails from a blue Democratic stronghold of Illinois, is likely to serve as a key liaison to core Democratic constituencies. This would create a parallel effort to keep loyal Democrats engaged, while Reid works to lure disaffected Democrats back to the tent.

Other Democrats who could have roles include Sen. Hillary Rodham Clinton (N.Y.), the current chairwoman of the Steering and Coordination Committee; Senate Democratic Policy Chairman Byron Dorgan (N.D.); and several self-described centrist Democrats. Dorgan had considered challenging Durbin for the post before stepping out of the race.

But Democrats both on Capitol Hill and on K Street acknowledge that the Caucus faces both short-term and long-term challenges, none of which will be easy. On the horizon, the Democratic leadership must maintain enough party discipline to ensure that 41 votes are available to maintain a filibuster. And over the next year, Democratic leaders must recruit talented candidates to try to overcome the six-seat deficit to reclaim the majority.

“We need to connect with red-state voters without compromising our principles,” said a Democratic insider, who spoke on the condition of anonymity. “They are not mutually exclusive. You can do both.”