By Matt Spetalnick
WASHINGTON (Reuters) - President Barack Obama on Wednesday faced a fight to save his legislative agenda and keep his healthcare overhaul alive after Democrats lost a key Senate seat, underscoring the challenges confronting him at the one-year mark of his presidency.
The White House scrambled to control political fallout after Republican Scott Brown won a bitter election battle in Massachusetts seen by some analysts as a sign of voter anxiety over the president's policies amid double-digit unemployment and a sluggish economy.
"We'll have to think through this next year from the standpoint of tactics, but in substance the mission can't change," Obama senior adviser David Axelrod told reporters after Tuesday's election upset.
Brown's win deprived Democrats of a crucial 60th Senate vote they need to pass the healthcare bill -- Obama's top legislative priority -- and push through other big measures on climate change and financial regulatory reform.
It also sent shudders of fear through Democrats facing tough races in November's midterm elections, when Republicans hope weaknesses exposed in Massachusetts, a liberal stronghold, will help erode Democratic control of Congress.
The election upset in Massachusetts compounded the problems confronting Obama as he reached the one-year anniversary of the day he took office with soaring rhetoric and hopes for change.
Since then, Obama's public approval rating has fallen from 70 percent-plus at his inauguration to around 50 percent now, among the lowest of recent presidents at this stage in their tenure.
The morning after the special election to fill the Senate seat left vacant by the death of liberal Democratic icon Edward Kennedy, the mood among White House staff was gloomy.
In Obama's only scheduled public appearance, he stuck to his script and focussed on the populist theme of cracking down on corporate tax cheats. He ignored a reporter's shouted question about the lessons of the Massachusetts vote.
But Axelrod told MSNBC that while the administration would "take into account" what voters were saying about healthcare, he said "it's not an option simply to walk away from a problem that's only going to get worse."
U.S. House of Representatives Speaker Nancy Pelosi also vowed Democrats would "move forward" with healthcare reform. But several other Democrats urged a more cautious rethink.
PIVOTAL SENATE SEAT
What once seemed an easy Democratic victory turned into a desperate scramble in the last few weeks as Brown surged ahead of Democratic state Attorney General Martha Coakley on voter fears over the economy, healthcare and Obama's agenda.
After his victory, Brown, a Massachusetts state senator, said he would be the pivotal 41st Republican vote against the healthcare overhaul in the 100-member Senate.
"People don't want this trillion-dollar healthcare plan that is being forced on the American people," Brown told cheering supporters in Boston. Republicans have called Obama's reform effort a government takeover of healthcare
Brown's upset, with 52 percent of the vote in heavily Democratic Massachusetts, raised the spectre of large losses for Democrats across the country in November and left the party rushing to find answers.
Obama, who won almost 62 percent of the state's vote in the 2008 presidential election, made a last-minute appeal in Massachusetts on Sunday to try to ignite enthusiasm for Coakley's campaign to replace Kennedy, a longtime champion of healthcare reform.
But mindful of the threat of a Democratic defeat in the state, the White House has steadfastly denied it would be a referendum on Obama's first year or that a loss there would represent a repudiation of his policies.
Asked whether voters had rendered a verdict on Obama, Brown told NBC's Today Show, "It's bigger than that. People are angry."
White House officials acknowledged voter discontent but insisted it was aimed not at Obama but at the economy and Washington infighting that predated his election.
"That's why we were elected," Axelrod told MSNBC. "We are committed to doing something about it.
U.S. Senate Democratic leader Harry Reid said he would welcome Brown to the Senate as soon as he received the paperwork from Massachusetts officials.
Massachusetts last elected a Republican to the Senate in 1972, but the shift could not have come at a worse time for Obama. Democrats control 60 Senate votes to 40 for Republicans but the loss of one Democrat could allow Republicans to throw up procedural hurdles to the healthcare bill.
HEALTHCARE PUSH
Democratic leaders pledged to push healthcare reform through Congress despite the results, but several Democrats cautioned the party to reconsider its stance.
Republicans said the results confirmed the public's distaste for Obama's healthcare overhaul and their anger at being ignored by Democratic lawmakers.
"The voters in Massachusetts, like Americans everywhere, have made it abundantly clear where they stand on healthcare. They don't want this bill and want Washington to listen to them," said Republican Senate leader Mitch McConnell.
(Additional reporting by Jeff Mason and Susan Heavey in Washington, Ros Krasny and Scott Malone in Boston, Dan Trotta in New York; writing by John Whitesides and Matt Spetalnick; editing by Todd Eastham)
