After 18 months in the majority and a series of unsuccessful outreach efforts to the business community, Senate Majority Leader Harry Reid (D-Nev.) has lost patience with Republican dominance on K Street and started a systematic campaign to force a dramatic realignment backed with threats of a hostile environment on Capitol Hill.

Several well-placed Democrats said Reid is looking at the looming battle over a package of tax extenders that would favor many business and manufacturing interests as a key test of K Street’s willingness to change its ways. According to these sources, the Democratic leader expects companies and trade associations with an interest in the bill to make a concerted push for it similar to one they made for Republican initiatives during the GOP’s reign.

As a result, Democratic leadership staff convened a meeting with a number of key lobbyists Wednesday with aides from Senate Finance Chairman Max Baucus (D-Mont.), House Ways and Means Chairman Charlie Rangel (D-N.Y.), Speaker Nancy Pelosi (D-Calif.), Reid and House Majority Leader Steny Hoyer (D-Md.). One Democrat described the meeting as a “come to Jesus moment” designed to push K Street to abandon its allegiance to the GOP and throw its weight behind the bill.

That session comes just a week after Reid took National Association of Manufacturers President John Engler to task for involving the group in the 2005 “nuclear” option fight over Democratic filibusters of President Bush’s judicial nominations. The confrontation came during a closed-door meeting with Reid and top members of NAM, and those close to the Majority Leader said his decision to openly express his displeasure was designed to be the beginning of Reid’s offensive against K Street.

Although lobbying firms, trade associations and individual companies have picked up the pace of Democratic hires in recent months, Democrats on Capitol Hill and K Street said the bulk of those positions are low- and mid-level slots, and Republicans remain entrenched at the top of most prominent firms. Even with the hiring of some new Democratic faces, much of the business community has continued to take its lobbying, advertising spending and policy research cues from the GOP, which Democrats argue has significantly eroded the already weak relationship between Congress and K Street.

“I think they haven’t come to terms with what happened two Novembers ago,” said Sen. Bob Menendez (D-N.J.), adding that while Democrats are willing to meet with Republican lobbyists, the lack of a common philosophical and policy background makes it hard to communicate and build consensus.

Menendez and others warned that businesses will find an increasingly inhospitable environment on Capitol Hill if they do not move quickly to alter not only the political composition of their lobbying shops but also proactively work with Democrats to move legislation. Without changes, many companies and industry sectors might find it “a little difficult at the end of the day for them to achieve the success they want,” Menendez said.

“There still has not been much of a sea change,” one Democratic lobbyist agreed, noting that Republicans continue to hold the leading spots at groups such as the Chamber of Commerce and the National Association of Manufacturers, as well as dominating the banking, telecommunications, health care, aviation and automotive industries. For instance, one Democratic Senate aide pointed to the health care giant Aetna’s hiring this week of Steven Kelmar, a longtime Republican supporter, as their top federal relations lobbyist.

“Hard to believe there wasn’t a qualified Democrat out there for this job,” the Senate aide said.

“Sometimes old habits are hard to change,” Sen. Byron Dorgan (D-N.D.) said. “Some organizations are so accustomed to being an adjunct of the Republican majority agenda, it’s hard to break those habits. To me, it’s not about how many Democrats are hired. It’s about how they weigh in on issues that are important for the country. The fact is control of the country has changed, and I hope they would start to work with us.”

Republicans are discounting the significance of K Street’s demographics, arguing that any conflicts are a result of philosophical differences between business interests and the Democratic Party. A shot of new Democratic hires on K Street won’t change those dynamics, they said.

“How many Republican trial lawyers or unions do you see?” one GOP aide asked.

One Republican lobbyist agreed while acknowledging that he has “counseled clients that they need to start talking” to Democrats on Capitol Hill. The lobbyist, however, questioned the notion that only Democratic lobbyists can represent clients before a Democratically controlled Congress, arguing that during GOP control, K Street was instrumental in wooing Senate Democrats to pass major pieces of legislation.

Democrats on K Street said they have been wondering for months why Democratic leaders on the Hill have taken so long to press major lobbying organizations and trade groups to accept the new majority. One Democratic lobbyist suggested that there will be consequences for the party if it doesn’t act. “If Democrats want to hold the majority, they don’t do it by playing Mr. Nice Guy. You don’t hold power if you don’t know how to use that power.”

Many Democrats say Congressional leaders seemed satisfied to give K Street time to change on its own, hoping they wouldn’t have to force a transition. Democrats came into power with pledges to cut the tight bond between influence peddlers and lawmakers, and as such have sought to keep their distance.

But some say the party has overcompensated for past GOP missteps and should push K Street to increase its Democratic hiring at the highest levels, increase contributions to Democratic candidates and heighten Democratic legislative outreach.

“It’s not going to happen on its own,” one Democratic lobbyist said. “I think people need to be pushed.”

According to sources close to Reid, his approach to K Street in the beginning of his tenure as Majority Leader was shaped by a desire to avoid having a scandal similar to the “K Street Project” whereby top Congressional Republicans threatened to cut off access to lawmakers and staff to pressure firms to hire Republicans.

Reid instead opted to dispatch colleagues such as Sens. Tom Carper (D-Del.) and Debbie Stabenow (D-Mich.) as emissaries to the business community. The two lawmakers were natural choices, aides said, since Delaware is home to much of the country’s financial industry, and Stabenow has ties to the heavy-manufacturing interests that dominate Michigan’s economy. But those efforts were largely unsuccessful.

Democrats acknowledge the K Street problems have been easy to ignore because of the fundraising muscle exercised by Sen. Charles Schumer (N.Y.), who as chairman of the Democratic Senatorial Campaign Committee has tapped K Street donors of all political persuasions. Plus, in a presidential election cycle, the money tends to flow more freely — a circumstance most Democrats anticipate will change quickly during the 2010 midterms, a period likely to prove daunting for the party in charge.

Stabenow, chairwoman of the Democratic Steering and Outreach Committee, said in her role she has been working with the leadership to encourage business and manufacturing trade groups to embrace the new majorities in Congress. She said the transition is coming, but it’s been more sluggish than she anticipated when the party came to power in early 2007.

“You are starting to see it in who they are hiring, and there’s now a willingness to talk to us, meet with us, work with us,” she said, but she was quick to add that the shift has come “slowly, but slowly.”

Carper agreed, saying he has seen signs that the business community is coming to terms with Democratic control. “Market forces, if you will, have led the folks on K Street to hire some folks with longstanding relationships” with Democrats, though he acknowledged that many major trade associations remain the “last bastions of denial.”

Stabenow accused many of the prominent lobbying organizations — particularly those in the manufacturing sector — of failing to shift from years of cozying up to the Bush administration. “What we’ve seen is with too many trade associations they have just been promoting the Bush agenda as opposed to the American people’s agenda,” Stabenow said. “That’s a problem.”

One issue that Democrats have repeatedly highlighted is the tax-extenders package. According to Democrats, staff from the Senate Finance Committee and House Ways and Means Committee have attempted to work with lobbyists on the bill, which includes tax breaks for research and development coveted by the manufacturing sector. But businesses have resisted requests to aggressively push the bill or help pick off the handful of Republicans and Democrats needed to pass it.

“The feeling is that they’d be pushing Democrats if they were in the minority,” one Democratic lobbyist familiar with the situation said, adding that Democratic leaders had hoped the trade associations “would shape up and start exerting some of their muscle … and you’re just not seeing much of that.”

Sen. Ron Wyden (D-Ore.) said regardless of what Democratic leaders do to try to prompt an awakening from the lobbying world, the turnaround will happen. He said backers of those groups and associations will eventually grow frustrated if their priorities fall on deaf ears in Congress.

“What’s striking about it is sometimes you get the sense they are buried so deeply in their foxhole that they can’t see clearly what’s in the best interest of their clients,” he said.

Wyden pointed to his pet issue of health care reform, noting that he’s working on legislation with a bipartisan group of 13 other Senators but has run into roadblocks from lobbying groups. He said he’s confident there will be a rising up from the grass roots to their representatives on K Street, saying: “When they see they can do good and do well simultaneously, then they will climb out of their foxholes and look at what’s really going on.”