For Obama, a Handsome Payoff in Political Gambles

"Alice Palmer and her supporters will never forgive him," she said.

Obama headed to Springfield, where he built alliances with senior Democrats and often worked across party lines. Soon restless, however, he saw a fresh chance when Rush lost a 1999 race for mayor.

By Obama's reckoning, the weakness Rush showed in the citywide race would carry over to his congressional reelection bid. Colleagues and observers say Obama badly misjudged the South Side strength of Rush, a former Black Panther and political veteran.

The contest was never close enough to be tense or tactical. Obama lost by 31 points.

Rush fared especially well in poor and working-class African American precincts. Obama's strength tended to come from upper-middle-class whites and blacks in the tonier neighborhoods of Hyde Park and Kenwood.

"Barack was utterly unable to penetrate the black community," recalled Mikva, an early supporter. "He was still the black professor at the University of Chicago from Harvard."

"It was just a foolish miscalculation. One could call it amateur," said Chicago consultant Don Rose. "What Barack had done over the years, to his credit if not calculation, was make himself known to a wide range of liberal and progressive elements in the city and outside the city. Of course, he's a dazzling kind of guy, and they were dazzled, rightfully so, but all were making the same miscalculation."

For all of Obama's frustration, the race significantly expanded his fundraising network. Although Rush pulled in $804,000 to Obama's $508,000, the challenger raised 23 percent more from individual contributors than Rush, who collected $414,000 from political action committees to Obama's $15,000, according to MoneyLine.

Obama ended the race defeated, dejected and broke, with a personal debt to the campaign of $9,500.

"He didn't seem to get bitter. He didn't turn on people. He engaged people more, and worked it," said Bill Daley, the mayor's brother. He said the loss prompted Obama to retool his game and just might have been the best thing that could have happened. "Then he decided to throw the bomb, and rightly so."

The bomb was Obama's unlikely 2002 decision to shoot even higher -- the U.S. Senate -- against a crowded field of better-known and better-funded candidates. He faced one Democratic rival who vowed to spend tens of millions of his own money and one from a prominent Chicago political family who had already won statewide.

Valerie Jarrett remembers hosting a gathering where Michelle Obama and a few close friends told him he was nuts.