By Rachel Kapochunas, CQ Staff

Republican Sen. John E. Sununu and Democratic former Gov. Jeanne Shaheen, the contenders in this year’s key Senate race in New Hampshire, appear to subscribe to the idea that there is plenty of blame to go around for the nation’s current economic problems — because they are doing their utmost to blame each other for the critical downturn in the nation’s financial sector.

The confrontation over the economy is ratcheting up in the rematch of the candidate’s close 2002 race, which Sununu won by a 4 percentage-point margin. Based on polls and a state political trend that has run strongly in the Democrats’ favor since the 2006 election cycle, CQ Politics currently rates the race Leans Democratic. But the contest remains highly competitive, and with the economy the number one concern among voters, the battle for supremacy on economic issues could prove to be winner-take-all.

Shaheen on Monday held a conference call to offer her response to a recent ad released by Sununu claiming that the first-term incumbent played a key role in calling for heightened federal oversight of mortgage financiers Fannie Mae and Freddie Mac, quasi-governmental corporations that recently ran into severe financial problems and were taken over by the government.

“Five years ago, John Sununu wrote tough regulations for mortgage giants Fannie Mae and Freddie Mac. Democrats blocked his bill, opposing restrictions on risky investments,” a voiceover states in Sununu’s television commercial.

While touting Sununu as an economic reformer, the commercial also attacked Shaheen’s views on the economy, arguing she said she saw “no risk” six months ago as she addressed the nation’s economic circumstances.

Shaheen, on a conference call with reporters, labeled the ad “inaccurate,” pointing to a statement she made six months ago calling for “tighter regulation and independent oversight.”

“I understand why Sununu and his allies are doing this, because they want to divert attention away from Sununu’s record in Washington,” said Shaheen. She proceeded to tie Sununu to President Bush and Treasury Secretary Henry M. Paulson Jr. , arguing that they both in the recent past have pushed for reduction of oversight and accountability of financial institutions.

Neither candidate, however, has expressed a clear position for or against the $700 billion financial industry bailout plan rejected by the House Monday.

Linking Republican candidates to the Bush administration has been a strategy employed by the Democrats across the nation almost throughout Bush’s second term, as the president’s difficulties on a variety of issues pushed his job approval ratings in polls to staggering lows.

Sununu has countered by making a concerted effort to craft an image of independence from both the president and the Republican Party at large. This positioning may be crucial to his run for re-election in a state where Republicans in the 2006 elections lost control of both the state House and state Senate, and where the Republicans holding both of the state’s U.S House seats were ousted in favor of Democrats. That same year, Democratic Gov. John Lynch was re-elected to a second two-year term by a landslide margin.

Despite Sununu’s efforts to distance himself, University of New Hampshire political scientist Dante Scala speculated that the incumbent may automatically attract blame for economic difficulties. “When he’s the senator, I think things tend to fall on his watch, whether that’s fair or not,” Scala told CQ Politics.

Recent polls show that both Sununu’s and Shaheen’s approval ratings have declined since the summer. A University of New Hampshire (UNH) poll of adults in the state, released last week, showed Sununu’s favorable rating dropped 8 percentage points since their July survey and Shaheen’s dropped 6 points. Andrew Smith, Director of the UNH Survey Center attributed the decline in approval ratings to the candidates’ negative campaigning.

Sununu, who is vying for a second term, does enjoy some of the traditional advantages of incumbency even in a year in which the public is dissatisfied with Congress, and his name is sweepingly familiar to state voters who earlier elected his father, John H. Sununu, as governor for six years (1983-89). But the state political climate, combined with Shaheen’s strength as a candidate, has made her a slight favorite in the race.