(FORTUNE Magazine) – In the 1950s, Al Barkan, the legendary political boss of the labor movement, had a watchword whenever Washington looked as if it might lean too heavily in favor of Big Business: They've got the money, we've got the people. No one would dream of saying that anymore; today only about one American worker in eight belongs to a union.

But nobody's questioning the money and power labor can bring to politics now. In last year's election, labor pumped about $35 million into the political system--and probably got its money's worth. And labor is keeping up the pressure, advertising in lawmakers' districts, training local union officers to become political activists, girding for a new offensive next year that will pour labor money into areas where union politicos feared to tread, including small-town races for mayor and school board.

The common wisdom as recently as a decade ago was that the power of labor was played out. The warm embrace Lane Kirkland gave Walter Mondale in 1984 turned into a kiss of death, and Democrats began to keep their distance. "We lost the ability to communicate with our members," says Steven Rosenthal, the AFL-CIO's political director. Worse, the federation's leaders, maybe the sturdiest liberals in establishment Washington, also lost their ability to communicate what their members believed.

Labor learned its lesson and, in its new political incarnation, is less liberal, less heavy-handed, less strident--and less predictably Democratic. The AFL-CIO's $500,000 radio ad buy this summer on the tax bill attacked 16 Republican House members--and seven Democrats, including Gary Condit of California's Central Valley and Owen Pickett of Virginia's Tidewater, both reliable friends of labor. The ad campaign outraged House Democrats; minority leader Richard Gephardt, labor's highest-ranking ally in Washington, complained directly to AFL-CIO chief John Sweeney.

In a city that respects the comeback--and is led by two deft practitioners of the comeback arts, Bill Clinton and Newt Gingrich--labor stands out as a renewed force. But its influence is felt far from the Beltway. In Columbus, GOP Gov. George Voinovich is plotting a Senate campaign in Ohio and already is worrying about labor money. "It takes you two years to raise $3 million," he told me recently. "My opponent, without making one phone call or attending one event, can raise the same thing from labor."

Labor leaders aren't advertising it, but they've scripted their renaissance from a score written by the Christian Coalition, which built its influence by training activists and inserting them into the political system at low levels. Last year labor officials selected three Colorado union members who had never run for office, ran them through a vigorous training program, and got two of them elected to the state legislature. This year they put 30 union members through intensive candidate training and then placed more than half of them on the ballot for this fall's state legislative elections in New Jersey.

There have been snafus along the way. The AFL-CIO ran ads in Maine urging voters to pressure GOP Sen. Susan Collins to oppose plans to deny the minimum wage to welfare recipients in jobs they take as part of their work requirements; Collins, it turns out, supported the labor viewpoint. But overall, labor's payoff for its involvement in politics is clear: Washington backed away from the minimum-wage scheme and backed off trimming cost-of-living increases for Social Security.

Labor's biggest challenge comes in two years, when the next presidential campaign begins in earnest. Union leaders plainly prefer Gephardt to Vice President Albert Gore, but they have private worries about getting too close to Gephardt if it becomes clear Gore will sweep to the nomination. But in any case, labor won't be sitting out the Democratic race. Politicians above all respect numbers, and here are two to contemplate: There are 150,000 union members in Iowa. And there are 50,000 union members in New Hampshire--precisely the number of votes the pros figure it will take to win the primary.

DAVID SHRIBMAN is Washington bureau chief of the Boston Globe and a Pulitzer Prize-winning reporter.