Obama's role in Md. governor's race remains unclear as O'Malley visits White House

By Aaron C. Davis
Washington Post Staff Writer
Monday, September 27, 2010; 10:21 AM

Maryland Gov. Martin O'Malley (D) on Monday will stand alongside President Obama as he signs the Small Business Jobs Act, his office says. The White House invitation appears to be a nod to O'Malley's role in helping to craft a slice of the $30 billion bill and in lobbying other governors to support it.

It offers a high-profile opportunity for O'Malley to counter Robert L. Ehrlich Jr.'s (R) campaign message that he would do more for small businesses if returned to power in Annapolis. But it might be an even bigger chance for O'Malley to appear with Obama - who remains far more popular in Maryland than nationally.

Monday's O'Malley-Obama encounter, however brief, raises anew a question of how involved the president might become in Washington's back yard to try to secure a win for O'Malley in Maryland's gubernatorial race.

After becoming the first Democratic presidential candidate to win Virginia in 44 years, Obama's motorcade crisscrossed the Potomac repeatedly last year to campaign for the party's gubernatorial hopeful, Creigh Deeds. The president even attended a rally in the Norfolk area after the White House suggested Deeds had ignored campaign advice and polls predicted he would lose badly to Gov. Robert F. McDonnell (R).

This year, however, demands for Obama's time have multiplied. Virginia was one of only a handful of significant races last year. But scores of unsettled contests will determine the balance of power in Congress as well as control of a majority of state capitals. Obama is heading to the Midwest on Tuesday, where all but one Democratic gubernatorial incumbent is on the ropes and his travel log in recent weeks shows he has spent little time in areas where the party considers its candidates to be relatively safe bets.

Maryland still falls into that category for Democrats, according to most analysts. The race could be closer than O'Malley's six-percentage-point victory over Ehrlich four years ago. But the broader fundamentals remain stacked in the Democratic incumbent's favor. Democrats have a commanding a 2-to-1 majority among registered voters and O'Malley finished the primary with a near 3-to-1 money advantage that could allow him to buy far more air time and message more effectively in the election's closing weeks.

The upper hand hasn't stopped O'Malley from casting the race in increasingly hostile terms, and as an extension of the battle for Washington. At a unity breakfast Saturday in Prince George's County, he drew comparisons to last year's Republican victory in Virginia and the need to keep Obama from being flanked by insurgent Republicans on both sides of the Potomac.

"Our president is leading us and doing the right American thing of harnessing that change to make it our own for a better future for our kids. But the forces of fear, the forces of division, the forces of reaction, the forces of retreat are rising up and they want to surround our president with hostile governors, not only throughout the country, but boy, would they love - just like they did in the Civil War - to surround the nation's capital and our president with hostile governors on both sides of the Potomac," O'Malley said.

"Think about it, on the other side of the Potomac, when we finally, for the first time pulled behind our president to pass health care, and expand health care for all, what does the other side of the Potomac, the Republican side of the Potomac do? Their governor lines up, their lieutenant governor lines up, their attorney general sues, takes the lead in suing, and trying to pull our country back. What happens on your side of the Potomac? The governor applauds health care."

Taking a page from Deeds's message in the final weeks last year, O'Malley also has begun casting his race increasingly as a fight for Obama.

House Majority Whip Steny H. Hoyer (D-Md.) Saturday also framed the state's governorship as a critical stronghold that Democrats cannot afford to lose heading into 2012 and the party's effort to reelect Obama.

One national Democratic strategist who spoke on condition of anonymity, to freely discuss the party's chances in November, painted Maryland with a different war analogy.

With Democratic incumbent governors in Iowa, Illinois, Ohio, Wisconsin and elsewhere facing tough reelection bids, the strategist said, Maryland could be the difference between Democrats waking up on Nov. 3 and having retained or lost a majority of governorships held by incumbents.

"It's the Alamo," the strategist said. "If Maryland goes, it would be an incredibly bad night for Democrats."

The first infusions last week of national money from the Republican Governors Association - and a quick answer from the Democratic Governors Association - suggests both parties consider Maryland to be that, and potentially more.

Unseating O'Malley would be a coup for Republicans. With the exception of Ehrlich's first term, Democrats have controlled the governor's mansion for the past four decades.

More than that, it could also be an opportunity for the right to take out O'Malley before he can assume a larger role next year heading into 2012. If reelected, O'Malley is next in line to become chairman of the Democratic Governors Association, where he has been vice chairman and fundraiser for two years.

If nothing else, O'Malley's trip to the White House will set the stage for a statewide tour this week to talk up his administration's efforts in helping to pass the small business-lending bill.

Programs created or expanded under O'Malley in Maryland, and under outgoing Gov. Jennifer Granholm (D) in Michigan, served as models for parts of the small business-lending bill.

The $1.5 billion State Small Business Credit Initiative expands a measure O'Malley and Maryland's Democratically controlled legislature funded in the spring. That measure uses a modest pot of $10 million to build on long-standing loan guarantee programs that exist in most states. Maryland's expansion allows the state to guarantee fractions of loans for small-business owners who don't have enough collateral to qualify for the full amount they seek.

A half-dozen loans worth about $3.5 million have been settled since the spring in Maryland with help of the guarantees. One for $400,000 to renovate a mini-mart was approved in Prince George's County.

Maryland state business Secretary Christian S. Johansson testified before Congress in support of the measure, saying it would help additional small business owners get over the finish line in securing loans that have become harder to qualify for.

According to his office, O'Malley also personally lobbied the White House and Treasury Secretary Timothy F. Geithner to include the state guarantees, and Johansson's staff worked directly with the administration to draft the portion of the bill. In Maryland, it could add about $23 million to the $10 million the governor and legislature already set aside.

But the modest number of loans the guarantees have helped and skepticism from many in the banking industry might limit the effectiveness of the program. Bank executives say their customers don't want loans, even at low interest rates, because the sluggish economy has chilled expansion plans. Some say the federal money isn't worth it because they fear it will come with too much regulatory oversight.

Also, 91 percent of small-business owners surveyed in August by the National Federation of Independent Business (NFIB) said all their credit needs were being met. Only 4 percent cited a lack of financing as their top business problem. Plans for capital spending are at a 35-year low, according to the survey.

The Associated Press contributed to this report.

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