Fox News is reporting that Sen. Evan Bayh (D-IN) will retire in 2010, dealing a blow to Democrats' electoral prospects for the upcoming midterms.

The Democratic retirement wave has been limited mostly to the House (where more Republicans have actually announced retirements) but Bayh's retirement follows exit announcements by Sens. Byron Dorgan (D-SD) and Chris Dodd (D-CT).

And it makes the race or Bayh's seat more competitive.

Bayh's seat has been rated as "lean Democratic" by the Cook Political Report, and Democrats had succeeded in launching a relentless attack on former Sen. Dan Coats (R) since he entered his name into race against Bayh. Bayh had led both Coats and fellow challenger John Hostettler (a former congressman) by double digits--Coats by 20 points and Hostettler by 16 points in recent polls.

Bayh had nearly $13 million in campaign cash and was in good shape for the 2010 race.

But with a Democratic exit relatively late in the cycle, it will give Coats and Hostettler a better chance at taking the Senate seat than they had yesterday. Democrats will now have to field a new candidate, and Indiana gets added to the list of states where Democrats risk losing seats in 2010, along with Delaware, Nevada, North Dakota, Arkansas, and Pennsylvania. Colorado also looks vulnerable.

It's possible that Sen. Blanche Lincoln (D-AR), who looks quite vulnerable, will follow suit. It's also reasonable that Sen. Joe Lieberman (I-CT) might decide to caucus with Republicans; if those seats are lost, Democrats would see their Senate majority shrink to a very thin margin after 2010.

Bayh's decision shows that things have changed since 2008, when the Indiana senator was rumored to have been selected as President Obama's running mate, a position he had wanted. (The Drudge Report actually displayed the image of a campaign sign with Obama/Bayh listed as the ticket.)

But Bayh had backed off the president's agenda of late, offering some of the most pointed criticism of the president's direction as voters went to the polls on Election Day in the Massachusetts Senate race.

Bayh told ABC News that the MA results would reflect the unpopularity of the Democratic agenda, and that it was time for Obama and the party to change course.

Democrats would find themselves "in even further catastrophe" if they failed to learn from the "wake-up call" of Coakley's pending defeat, Bayh said, asserting that voters "just aren't buying our message."

Bayh's retirement means one more race for Democrats to defend; it means setting up a candidate to square off against Coats and Hostettler late in the cycle, where the party didn't necessarily have a backup plan; it means more of the impression that 2010 will be a bad year for Democrats. And, given Bayh's comments about Massachusetts, it gives the appearance (whether or not this had anything to do with Bayh's decision to retire) of a centrist not being fully on board with what President Obama and the Democratic Party have offered in the way of policy and vision--an impression that big-ticket items like health care reform went a step too far for him.

Was that really a motivating factor in his decision?

A Democratic source said Bayh had come to dislike the Senate, and that his retirement had been a long time coming.

Like any former governor, Bayh was "used to results, solutions and accountability," the Democrat said. "This place is frustrating."

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