Massachusetts Republican Scott Brown's stunning win over Democrat Martha Coakley for the U.S. Senate seat vacated by the passing of Edward M. Kennedy both reshapes the public policy landscape and puts President Barack Obama and Congressional Democrats on notice: Fix the economy and bring back job growth -- or face large seat losses in the November Congressional election.To be sure, Coakley's poor campaign performance contributed to Tuesday's shocking result. Among other problems, at times she projected the appearance of feeling "entitled" to the seat, and at other times was viewed as being insensitive to the needs of typical, working-class Bay State residents. But the bigger factor affecting vote undoubtedly was -- you guessed it -- the economy, including Massachusetts' high unemployment rate.

Voters Want Jobs

As I've noted in previous articles on DailyFinance, if unemployment is high near election time, the party in power gets the blame. Massachusetts residents, like the rest of Americans, are frustrated by the high jobless numbers and the U.S. recession. Because the Democrats are in power in Washington and Coakley was the Democratic candidate, the voters blamed her. Net result? The biggest Senate upset in the modern era, and perhaps the biggest U.S. election upset since President Harry Truman (D-Miss.) fended off challenger Gov. Thomas E. Dewey (R-N.Y.) in 1948.

Also, without question, concern over President Obama's health-care reform bill and a belief by voters that the bank bailout has "helped out the bankers without helping the typical person on Main Street much," probably influenced some voters' decisions as well, but the sense here in Massachusetts is that the election day polling data will reveal the poor economy and lack of jobs were the top issues affecting the vote, as they have been during many other elections when conditions were similar.

So the advice for President Obama and congressional Democrats is obvious enough: Implement every policy possible to create jobs, including, if necessary, a second stimulus package. The Democrats can also move forward with health care reform -- which would serve their base and the rest of the nation by lowering health care costs -- but the critical issue, from a election standpoint, remains jobs and the performance of the economy.

Further, Obama and congressional Democrats should neither look for nor wait for Republican support on job creation, health care reform, or any other issue, for that matter. Republicans didn't support Obama before regaining the filibuster power: Does anyone really think they're going to vote for health care reform or a second stimulus package now? That's also why the Democrats should use every method at their disposal -- including the "reconciliation" tactic, which bypasses the filibuster -- to pass both a second stimulus bill designed to create jobs and health care reform.

Neither should Obama and his fellow Democrats worry about being called "big government liberals" or "socialists" or even "communists": The Republicans and Tea Party partisans are going to use those labels to describe Obama and the Democrats, whether or not a jobs bill and health care reform is passed, so not acting won't help them avoid the name-calling. But not acting to create jobs or pass health care will alienate the Democrats' political base, and would leave unaddressed the No. 1 issue (unemployment) that the American people want their government to solve -- so there is a strong incentive to pass the two bills.

Republicans Will Remain the 'Party of No'

Oh, Republicans may talk about "wanting to work with the president and Democrats," but privately, they smell blood in the water, and sense a huge Republican victory in the November congressional elections if the economy is not fixed and job growth doesn't resume. Privately, like Rush Limbaugh, the Republicans in Congress are hoping Obama fails. As noted, it's unlikely that Republicans, now armed with the power to stop all Democratic legislation by normal means, will suddenly agree to work with Obama and the Democrats

Further, there's even a 50/50 chance, if the Democrats don't use the reconciliation tactic to get a jobs bill and health care reform passed, that Washington could get bogged down in gridlock on these and on other key economic issues, as the Republicans filibuster all key legislation.That wouldn't be good news for the economy, the nation or investors large and small, as important problems -- including the budget and deficit reduction -- could go unresolved. And, needless to add, the financial markets would be displeased, to say the least, with a failure by Washington policymakers to address the deficit.

There are no positives when you lose a Senate seat that your party has held for more than 50 years, in a state in which your party outnumbers the opposition by 3-to-1, and in which your party's nominee for president won just a year ago by 26 points. But if there is one ray of light for Democrats, it is this: This painful defeat occurred now, and not in November. In that sense, the voters of Massachusetts have done the majority party in Washington a little favor: They have clarified for Obama and the Democrats that they have until November to create jobs and fix the economy, or else.

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