By James Rowley and Julianna Goldman
Jan. 20 (Bloomberg) -- The calls for change that rallied independents to Barack Obama in 2008 and propelled him to the White House reverberated again in Massachusetts last night, now threatening the president’s agenda.
With Republican Scott Brown’s victory in a special election to fill the Senate seat that had been long held by the late Edward M. Kennedy, a Democrat, the president may have to scale back his second-year agenda, which includes overhauling immigration laws and financial regulations, analysts said.
Brown’s defeat of Democrat Martha Coakley is “a body blow to Obama and other Democrats,” said Larry Jacobs, director of the Hubert Humphrey Institute of Public Affairs at the University of Minnesota in Minneapolis. “It’s a resounding message of rejection, disappointment and the loss of hope.”
The White House is likely to focus now on salvaging health- care legislation and reclaiming populist ground on the economy and jobs. Obama’s advisers said the president is already moving to focus on those issues, along with deficit reduction, in his State of the Union address on Jan. 27 and the budget he submits to Congress Feb. 1. He will also keep up criticism of Wall Street and executive bonuses as he presses for new regulations.
“What you will really see the Democratic leadership do is to pivot to job creation and deficit control,” Arizona’s Jon Kyl, the second-ranking Republican in the Senate, said yesterday. “They can read the polls, too.”
Bigger Struggle
Even with 60 seats in the Senate and 256 seats in the House, Obama, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi struggled to steer the president’s agenda through Congress. That will become even more difficult with one less Senate vote and with lawmakers facing close re-election fights in November hearing echoes from the Massachusetts race.
Some of Obama’s most ambitious initiatives, from climate- change legislation to closing the U.S. prison camp at Guantanamo Bay, Cuba, -- already imperiled because of lukewarm support from Democrats -- may have to be shelved, analysts and lawmakers said.
“Normally, a junior senator winning doesn’t have a great effect,” said Robert Blendon, a professor of health policy and director of the Harvard Opinion Research Program. Brown’s victory will “dramatically alter President Obama’s domestic agenda for the rest of his term, or at least through 2010.”
Connecticut Democratic Representative Joe Courtney said his party’s defeat in Massachusetts is reminiscent of Republican congressional gains during Bill Clinton’s first term as president.
Curtailed Agenda
“We’ve sort of seen this movie before in the 1990s,” Courtney said. “It seems inevitable” that Obama’s “agenda will be curtailed or reduced.”
Brown’s win in a state that gave Obama 62 percent of the vote in 2008 follows Democratic losses of governorships in Virginia and New Jersey last year. Obama won both those states as well.
The Republican victories “will force moderate conservative Democrats from more competitive electoral districts to reassess their support for key ambitious items, including health care reform, climate change cap-and-trade, immigration, financial regulation, and taxes,” FBR Capital Markets wrote to investors this morning in a note titled “Obama Agenda on Life Support After Massachusetts Senate Election.”
“An off-cycle election is perceived as a ‘referendum’ on the President’s agenda,” analysts Benjamin Salisbury and Rehan Rashid wrote.
Anger and Frustration
Before the Massachusetts results were in, White House press secretary Robert Gibbs described Obama as “surprised and frustrated” that Brown was able to overcome the lead Coakley had at the start of the campaign to replace Kennedy, who died of brain cancer in August.
Gibbs yesterday declined to address questions about how the Massachusetts election would affect Obama’s agenda. He previewed how the administration would frame the results, saying the race reflected the “tremendous amount of upset and anger in this country about where we are economically.”
That sentiment predates Obama taking office and “in many ways, we’re here because of that upset and anger,” Gibbs said.
“The president understands there’s a lot of economic frustration out there,” he said.
Banks a Target
That means work on bringing down the unemployment rate, which stood at 10 percent last month, and boosting the economy, which is still pulling out from a recession that began in December 2007.
“If we are not successful in establishing job growth and economic growth soundly, we will not achieve any of our other objectives,” National Economic Council Director Lawrence Summers told reporters last week. “Priority No. 1 has to be assuring rapid job growth.”
The debate over financial regulation and Obama’s proposal to tax banks such as Citigroup Inc. and Bank of America Corp. that received government assistance after last year’s financial crisis, will give Obama a chance to focus public anger.
Obama can “go down a very, very aggressive populist route,” said Ross Baker, a political scientist at Rutgers University in New Brunswick, New Jersey. “There is a pre- existing attitude toward banking which he can tap into for sure.”
David Plouffe, who was Obama’s campaign manager in the 2008 election and still serves as an outside adviser, said Obama will remain focused on moving his agenda forward.
“That’s not going to be easy,” Plouffe said.
November Election
Democrats still retain “big majorities” in both chambers, and advancing health-care legislation will be pivotal for the party’s efforts to keep control of Congress after the November election, he said.
If Democrats step away, Plouffe said, “We’re going to have the worst of both worlds, which is you supported a bunch of stuff that has been demonized, you don’t have the opportunity to pass it and not just sell it but have voters experience the reality of it.”
That may not be an easy task. Some Democrats last night already began backing away from Obama’s top legislative priority.
New York Democratic Representative Anthony Weiner said his party should suspend its push to pass health-care legislation and come back to it later. “We’ve got to recognize we’ve got a completely different situation.”
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