By Michael Scherer
July 9, 2015

Begin with the anonymous pamphlets left scattered amid the ketchup and mustard packets at Hillary Clinton’s Fourth of July weekend rally in Hanover, N.H. “As Secretary of State, I saw how extreme economic inequality has corrupted other societies,” the sheet read, quoting Clinton from a speech. Those words appeared just above the corporate logos of companies whose employees gave the most to Clinton’s campaigns–JPMorgan Chase, Citigroup and Goldman Sachs, among others. A punch line followed: “Do you believe her?”

Now travel cross-country to Madison, Wis., where Bernie Sanders, a self-described revolutionary and socialist, attracted more than 10,000 people, or nearly twice as many as any other candidate so far in the 2016 cycle, to hear him denounce concentrated wealth and promise redistribution. They cheered his indictment of a growing oligarchy: 58% of new American income goes to the top 1%; the top 10th of the 1% have more wealth than the bottom 90%; the gap is wider than at any other point since 1928. “Too many Democrats are owned by Big Money interests!” he shouted. This time the punch line was in the polls: Sanders joined the Democratic Party in April, but his presidential campaign is now supported by almost 1 in 5 Democrats nationally–and a third of Democrats in New Hampshire and Iowa.

Finish at the White House, where a frustrated President Obama has spent the summer at war with his own party over how to write the rules of global trade. Trust me, he has said, to which Massachusetts Senator Elizabeth Warren answered immediately and emphatically: No. “He won’t let you see the deal,” she told thousands of progressive activists during a mass conference call in mid-June. “You know who does get to see the drafts of the trade deal? The big corporate interests.”

In reply, Obama worked the dugouts at a congressional softball game, lobbied House Democrats in the U.S. Capitol and denounced Warren for stealing his old transcendent golden-boy act. “Elizabeth is, you know, a politician like everyone else,” he told a reporter in May. “Her arguments don’t stand the test of fact and scrutiny.” But he could not prevent the punch line: 78% of House Democrats and 73% of the Senate Democratic caucus initially voted against Obama, who prevailed only by restructuring the votes with the GOP.

There’s something happening here. Not since Woodrow Wilson promised to break the “money monopoly” and Franklin Roosevelt hollered “I welcome their hatred” at the plutocrats has the Democratic Party found itself so inflamed against the intersection of wealth and power. The old arguments and alliances no longer hold sway and won’t draw crowds. And the giants of the party now find their credentials, and motivations, under attack. “The Wall Street wing of the Democratic Party is shrinking quite dramatically,” says Robert Reich, a former Labor Secretary under Bill Clinton. Business leaders in Washington take a more ominous view. “The Democratic Party is being polarized to the left, laying the groundwork for a Tea Party–like insurrection,” explains Bruce Josten, a top lobbyist for the U.S. Chamber of Commerce. “It is a battle for the soul of the Democratic Party.”

The new fire is fueled by a shift in economics that feels like a crisis for many Americans and a clarion call for government action among liberals. Real wages have increased 138% for the top 1% of American income earners since 1979, but only 15% for the 90% below. From 2002 to 2013, the only groups of American households that did not see their real incomes on average decline or stagnate were headed by college graduates and young people in their 20s. At the same time, over a quarter-century, fixed costs such as housing, education and health care have outpaced inflation. Obama, after promising hope and fighting back from the Great Recession, will almost certainly leave office having failed in the central economic challenge of his time: raising incomes for the American middle class.

Into this vacuum, a new Democratic faction has emerged, led by Warren, a law professor who ran and won her first campaign three years ago at the age of 63 with a mantra out of detective noir: “The game is rigged.” A legal academic by training, a teacher by disposition and a pugilist to the core, she never sought politics as a career or party as an identity. Yet the party has congealed around her, making her one of its biggest grassroots fundraisers and most potent surrogates. When she headlined the annual Connecticut state party dinner in June, more people came than at any time since Obama spoke in 2006.

Her message, repeated with precision, is that both Republicans and Democrats have misread the economic challenge and been co-opted by the forces of greed. “The pressure on the middle class is not simply a natural force,” she says. “It is the result of deliberate decisions made by the leaders of this country.” America’s enemy, in other words, lurks within. “This is not a top-vs.-bottom story,” she continues. “This is a top-and-everyone-else story. This is a 90-10 story.”

The message travels easily, and Sanders, who has spent decades in Washington toiling at its margins, has volunteered to take it to the presidential stage. Two-thirds of Americans now believe that wealth should be more evenly distributed among more people, and an even greater share of the country supports raising taxes on those who make more than $1 million. Among Democrats, nearly 90% believe that the government should do more to reduce the unequal distribution of wealth. “When I go out and talk, I am not teaching something people don’t know,” Warren says. “I am just giving words to what is already happening in their lives.”

The response can be measured beyond crowds and vote tallies. In the first few months of the campaign, Sanders received 250,000 donations. Most party elders believe Warren would have done even better had she chosen to seek the presidency. Last winter, in an attempt to nudge her in, Obama’s former online fundraising strategist Joe Rospars wrote Warren an unsolicited memo predicting, based on her past performance and current support, that she could raise more than $100 million online through the first quarter of 2016, more than enough to mount a serious challenge to Clinton. Warren declined the opportunity, deciding that she would accomplish more fighting in the Senate–and that change would eventually come at the top anyway. “America understands, and Washington needs to catch up to the rest of the country,” Warren says. “That will happen.”

To see where the battle lines are drawn, all you have to do is list the fights Warren has picked with her own party over the past year. In December she attacked the White House and Democratic leaders for agreeing to roll back limits on derivatives trading by federally insured banks, even calling out Obama’s current and former advisers for their work with Citigroup, one of the major proponents of the change. She wants to break up the big banks, increase funding for Social Security and slow the revolving door between the White House and Wall Street. When Obama nominated a well-regarded Wall Street investment banker, Antonio Weiss, to the No. 3 spot at the Treasury, she announced “Enough is enough” and forced him to withdraw. When Larry Summers, a top economic aide to both Presidents Obama and Clinton and a former consultant to Citibank, seemed close to getting his dream job as Chairman of the Federal Reserve, Warren joined a Democratic mutiny and sank his chances. This summer she launched a broadside against Mary Jo White, Obama’s Securities and Exchange Commission chair, accusing White of slow-rolling new rulemaking for the finance industry, and highlighting the conflicts of interest caused by her husband, who works at a Wall Street law firm.

The backlash has been fierce, as many in her party warn in public and private that she risks overplaying her hand. “She is pushing the envelope, but there is a danger of going across the line,” says one longtime Democratic supporter of hers. House minority leader Nancy Pelosi says bluntly that Warren’s view of Obama as soft on Wall Street “is not the consensus in our party.” Warren’s targets are less delicate. “I don’t know if she fully understands the global banking system,” needles JPMorgan Chase CEO Jamie Dimon. Warren Buffett has suggested she be “less angry and demonizing.”

Obama talked about the middle-class squeeze as far back as 2005, and he shares much of Warren’s agenda, from increasing the minimum wage to expanding infrastructure investments and overtime pay. But the similarities break down over how far and fast to go in financial regulation and free-trade agreements. Back in the days when he was working as a community organizer in the shadow of Chicago’s shuttered steel mills, she dove into the records of America’s bankruptcy courts, studying the sharp rise in American debt defaults during the 1980s and ’90s. She concluded that the culpability lay not with the great weather systems of technological change and foreign competition but with a bipartisan American ruling class. “She figured out the finance piece of it before other people,” argues Simon Johnson, an MIT professor and former chief economist at the International Monetary Fund. The result was a different perspective. She also concluded that the party’s strong ties to Wall Street were not anodyne or manageable. They were the problem.

In mid-June, as lawmakers rushed to get out of town for the Fourth of July, I met with Warren in her Senate hideaway in the basement of the U.S. Capitol, a windowless room about the size of a janitor’s closet. Such spaces, unmarked and impossible to find without a guide, are handed out according to seniority. Maryland Senator Barbara Mikulski, for instance, boasts a fireplace in hers, and Ted Kennedy’s old hideaway, now occupied by Utah’s Orrin Hatch, features arched ceilings and a bird’s-eye view of the National Mall. Warren’s has the shape and feel of a shipping container, barely fitting two upholstered chairs, a lamp and a couch. “My theory is if we get two matching posters that are of the outside, it will feel to your brain like these are windows,” she said, pointing to the white plasterboard wall. “We’re going to pretend.”

Pretending is necessary because Warren, by disposition and age, has no plans to earn a real window. “I came knowing that large parts of what I understood about how the Senate worked would never work for me,” she says. “I would not have that kind of time, but more importantly America’s middle class did not have that kind of time.”

She was born Elizabeth Ann Herring in Oklahoma, in a home haunted by economic hardship. Her father’s heart attack when she was 12 sent her family to the brink, forcing her mother to go back to work at Sears and Warren to work as a waitress in her aunt’s restaurant. From then on, her life story became fodder for a running debate she has with Minnesota’s Al Franken over who is the most unlikely Senator. He is a former comedian and Saturday Night Live writer, who helped invent the Coneheads, played a gorilla handler and impersonated Mick Jagger in a skintight tank top. “I usually can top Al by saying, ‘Please, I got married at 19 and dropped out of school,'” she says. From there, she steadily rose, juggling two young children with commuter college, law school, a divorce at 30, a law internship on Wall Street and eventually the life of an academic.

Warren came to Washington in 1995 as a scholar recruited by a Clinton Administration appointee for a blue-ribbon panel to study bankruptcy reform. The finance industry was pushing for legal changes that would make it harder to expunge debt, on the theory that too many Americans were gaming the system. Warren’s own research had found that the primary triggers for bankruptcy were job loss and illness and that in many cases debtors were tricked into default by complex financial products and fraudulent sales tactics. “Here is this coalition of giant credit-card companies whose plan was to improve their bottom line by 1 or 2 percentage points by just steamrolling millions of American families,” she says.

Warren toiled for nearly a decade to defeat the bankers’ proposals, even recruiting then First Lady Hillary Clinton to join her effort. The fight ended in defeat in 2005, after Clinton, who had become a New York Senator, switched sides and voted to support the bill. “They really did shove it down my throat sideways. That’s how it worked,” Warren says. “And yet I couldn’t stop.”

She was recruited by Nevada Senator Harry Reid to run a congressional oversight panel for the 2008 bank bailouts and quickly made herself a vocal critic of the Treasury strategy, which focused on stabilizing the biggest banks before turning to the problem of homeowners who were being evicted. “The worldview is just different,” she says of Obama’s other economic advisers, whose careers had revolved around, and often passed through, the biggest banking institutions. “It’s like brains get wired differently over time.”

After she was elected to the Senate, she began laying out a far more radical vision, including an “aggressively progressive tax structure” that would tax earnings much higher for the wealthy whether they come as capital gains, equity grants or regular income. “You built a factory and it turned into something terrific or a great idea–God bless! Keep a hunk of it,” she said, in a candid moment from her 2012 campaign that went viral. “But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.” The new rich, in other words, from Silicon Valley to New York, would need to share.

The question is no longer whether Warren’s agenda will change the Democratic Party but how dramatic the change will be. Obama, for his part, was an early supporter of Warren’s biggest success, the creation of a Consumer Financial Protection Bureau, and has been spending his final years in office doing what he can by executive action to tilt the field in favor of wage labor. He has pushed for changes in how overtime is calculated, for instance, and promoted a new fiduciary rule that would require financial advisers to act in their clients’ best interests.

But the next party agenda will be the province of the Democrats’ 2016 nominee, and centrists have been rushing to propose their own set of reforms, retreating from the long-held view that loosing capitalism from regulation would unleash benefits for all. Brookings scholars Elaine Kamarck and Bill Galston, for instance, both veterans of the Wall Street–friendly Democratic Leadership Council, sent a clear signal to Clinton this summer when they proposed new curbs on executive compensation, stock buybacks and other forms of financialization that they argue have bled the economy of jobs.

Economists like Summers, who encouraged the banking deregulation of the 1990s as a way to increase growth, speak often now about targeted measures to rein in the “rents” accrued by the wealthy, like limits on intellectual property, stronger enforcement of antitrust laws and tax reforms to increase purchasing power at the bottom. At least in Democratic circles, the idea that economic inequality can be handled by taking steps to lift all boats no longer holds sway. “The old economic logic was you had to have growth in order to have a large middle class,” explains Reich, who now teaches at the University of California, Berkeley. Now, he says, the thinking has been reversed.

Clinton, for her part, has already adopted much of Warren’s language, attacking the idea in her campaign announcement speech that “if we let those at the top pay lower taxes and bend the rules, their success would trickle down to everyone else.” But a woman whose family finances and political fortunes have long been entangled with the biggest Wall Street firms has not yet declared how far she is willing to take the party down the populist path, or whether she is willing to pay the price of cutting ties with some of her biggest backers. That’s partly because it remains unclear how well the new populism will play in a general election, in which the electorate is expected to once again be closely divided. A recent poll by Gallup found that 50% of Americans would not support a well-qualified “socialist” candidate for President from their own party, about twice as many as those who say they would oppose a well-qualified gay or evangelical candidate.

In the meantime, Clinton is trying to get back on offense in her own party. “I take a backseat to no one when you look at my record in standing up and fighting for progressive values,” she said, after speaking to a crowd of about 800 in New Hampshire. As she spoke, Sanders was addressing a crowd three times as large in Council Bluffs, Iowa.

Warren, who clearly intends to apply as much pressure as she can on Clinton, says with some coyness that it is “too early to say” whether she will join Sanders on the campaign trail. “Bernie’s out talking about the issues that the American people want to hear about,” she said on a swing through Worcester, Mass., on June 29.

But Sanders has left the invitation open. “I would love to have Elizabeth campaign with me,” he told TIME, after drawing about 8,000 people to a rally in Portland, Maine, on July 6. Those crowds, he said, are far beyond what he expected when he launched his campaign. “They are sending a message not to Hillary Clinton, not to Jeb Bush,” he said. “They are sending a message loud and clear to the people that own America, to the Big Money interests, that enough is enough. They cannot have it all.”

Among the faithful, the two of them have already united in a virtual ticket of sorts. Doug Emerson, a local artist, showed up at the Portland rally with a Sanders T-shirt and a handmade sign that read: There are only two choices and one isn’t Elizabeth. “Any progressive wants Elizabeth Warren to run,” he explained. “But Bernie is the original Elizabeth.”

–With reporting by SAM FRIZELL/PORTLAND, MAINE, and ZEKE J. MILLER/HANOVER, N.H.

Contact us at editors@time.com.

This appears in the July 20, 2015 issue of TIME.

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