Economy already looming large for 2010

WASHINGTON (Reuters) - The weak state of the U.S. economy and government spending to prop it up are already looming as major issues for 2010 congressional elections that will render a judgment on President Barack Obama.

Republicans, Democrats and an analyst interviewed at this week's Reuters Summit, a series of editorial round-tables with major Washington players, all agreed that the economy is issue No. 1 at this stage for next November's elections.

While the stock market has recovered to around the 10,000 mark, the U.S. unemployment rate remains stubbornly high at 9.8 percent, despite a much-ballyhooed $787 billion economic stimulus that Obama and his Democrats in control of the U.S. Congress pushed through last February.

"This is an economy election. It is about three issues. Jobs. Jobs. Jobs," said Ethan Siegal of The Washington Exchange, a private firm that tracks Congress and the White House for institutional investors.

Republican Senator John McCain, who is running for re-election in Arizona, said Americans are in an angry mood because they see little evidence that Washington's policies are having an impact.

"If you drive down Central Avenue in Phoenix all you see are closed storefronts, empty office buildings and the worst economic times that we've ever had in the history of my state," he said.

Historically, the party that controls the White House loses seats in the first election after a new president takes office.

CONTROL OF CONGRESS

Democrats have large majorities in both the House of Representatives and the Senate, and various experts have predicted they will lose seats in 2010 but probably will not lose control of Congress.

Democrats hope to limit losses or even pick up seats by working to restore economic growth and steering a U.S. healthcare overhaul through Congress that is relevant to most Americans.

"Keep focusing on the economy. Keep focusing on taking steps to promote job creation," said veteran Democratic Senator Carl Levin. "Have a healthcare bill which the average person who has health insurance sees as a plus."

Republicans have been trying to ride a tidal wave of anger at Washington by focusing on high levels of government spending and the record $1.4 trillion deficit it produced.

But they realize they have some work to do to regain credibility on fiscal matters after spending soared when they controlled Congress.

"If things look better for Republicans now than they did six months ago, it is not because we have established credibility with the American people," said Republican Senator Charles Grassley. "It is because the Democrats have screwed up or got people raising questions about the future of this country."

Administration officials are talking up plans for launching a deficit-reduction plan early next year because of concerns that high deficits could weigh down the economy in the long run.

"I take very seriously longer term concerns about federal indebtedness," said Larry Summers, one of Obama's top economic advisers.

MIDTERM REPORT CARD

The White House is resisting the idea that the 2010 elections are a judgment on Obama -- "No, absolutely not," said senior adviser Valerie Jarrett -- while promising Obama will be active on the campaign trail.

But other Democrats say Obama and his policies will be on the ballot.

"I see it as a midterm report card on President Obama, clearly a report card on how Congress is doing. I do believe that it is going to be important to have the president engaged in these elections," said Representative Chris Van Hollen, who heads the Democratic Congressional Campaign Committee that works to elect Democrats to the House of Representatives.

Battle lines are already being drawn and both sides are wary, uncertain whether the American people will reward Obama for trying to fix the economy or punish him for spreading himself too thin and not getting enough done.

Democrats charge Republicans are standing in the way of progress, while Republicans charge Democrats are spending too much and trying to do too many things at once.

Obama, at a campaign event for New Jersey's Democratic governor, Jon Corzine, on Wednesday, said Republicans are not helping fix the problems left by his Republican predecessor, George W. Bush.

"I'm telling you, these folks, they got a lot of nerve. They leave this big mess and suddenly they're complaining about how fast we're cleaning it up," he said.

But Republican Senator Lamar Alexander sees it differently, that Obama has made a mistake by tackling many issues at the same time rather than focusing primarily on the economy.

"He has focused the country's attention on many issues, and not much has happened," he said.

(Additional reporting by Thomas Ferraro, Caren Bohan and Jeff Mason; editing by Anthony Boadle)