By Edith Honan and Gabriel Debenedetti
NEW YORK/WASHINGTON (Reuters) - The scandal over a made-up study that badly disrupted traffic at the George Washington Bridge may not be New Jersey Governor Chris Christie's biggest problem after all.
Less than a year after the charismatic governor was the toast of the Republican Party and a leading contender to run for the White House in 2016, the story was supposed to be about a New Jersey economy that he had managed to turn around and budget problems he had been able to solve. That narrative appears to be unraveling.
Almost six months into his second term as governor, Christie faces a more than $800 million budget gap. The state's credit rating - already downgraded twice by each of the three main rating agencies - could be hit again, while the state's public unions are suing over Christie's decision to slash mandatory payments to the pension fund by 60 percent.
At the same time, New Jersey's economy is less than buoyant - its jobless rate is 6.9 percent, higher than the national rate of 6.3 percent.
Christie had built up a picture of a savvy politician and efficient administrator who could reach out to his Democratic opponents and get them to help him solve the state's problems, as he did in getting the support of President Barack Obama when Superstorm Sandy devastated the Jersey Shore in 2012. Now, that image is tarnished.
Known as a tough-talking executive whose in-your-face style has become his political brand, Christie's popularity has tumbled since the start of the year when it came out that several of his top aides helped orchestrate traffic jams in the borough of Fort Lee as an act of political revenge. The aides had claimed a traffic study at one end of the bridge, which is one of the main links between New Jersey and Manhattan, was behind the snarl, but that was later discredited.
His failures on the fiscal front, though, could haunt him more than the investigations into the scandal, widely known as Bridgegate, political strategists said. Christie already faced an uphill struggle against conservative Republicans because he has not taken aggressive stances on some social issues, such as gun control and gay marriage. He can now also be attacked by Republican opponents over his ability to run New Jersey in a fiscally sound way.
"This has the potential to be a much bigger problem for Christie's 2016 prospects than Bridgegate," said Ford O'Connell, a Republican strategist. "The best he can do to boost his chances in 2016 is to get New Jersey's fiscal state in order."
Nationally, high-profile potential donors have been taking a wait-and-see approach, looking more seriously at former Florida governor Jeb Bush, but not uniformly losing hope in a potential Christie presidential candidacy.
"Every gathering of Republican major donors or conversations with them that turns to 2016 politics begins with a discussion of whether Jeb Bush is going to run, and then proceeds to - if Governor Bush isn't running, is Chris Christie viable? And there is a feeling that he has to weather multiple storms, and that's going to be very difficult for him to do," said a person familiar with Republican fundraising and active in the 2012 presidential election who spoke on the condition of anonymity.
GIULIANI PROMOTES BUSH
For now, at least, Christie has struggled to line up donors behind his bid, the person said.
It is still early for major political contributors to commit to any one presidential candidate, but even top Christie supporter Rudolph Giuliani, the former New York City mayor and presidential candidate, promoted the idea of a Bush presidency at a dinner with New York donors on May 12.
Christie has shown no sign he is backing away.
As head of the Republican Governors Association (RGA) - a post he took on in November 2013 - Christie has been a fundraising powerhouse, touring the country for candidates and meeting with wealthy donors to bring in campaign cash.
The group broke its own first-quarter fundraising record with a $23.5 million haul in the first three months of 2014 under Christie, a sign of the governor's fundraising prowess.
To Christie's critics, the notion that his staff would order up lane closures on a busy bridge to get back at a Democrat who refused to endorse Christie during last year's elections both undermined his claim to being post-partisan and fed into their caricature of him as a bully.
Those same critics have greeted this week's economic news as proof that Christie's brand of moderate fiscal conservatism is not the salve he had promised it was.
Governors' presidential bids tend to rely on their in-state records, so Christie's White House hopes may depend on New Jersey's economic performance in the coming months.
"Ahead of Bridgegate, none of us were really focusing on things that were actually going on in New Jersey that weren't so good - like budgets," said David Redlawsk, director of the Eagleton poll at Rutgers University. "The narrative of Christie is now potentially quite different. Instead of being a guy who solved problems, he's a guy who really hasn't dealt with New Jersey's budget problems."
Christie, who had resisted the calls of many Republican powerbrokers and decided against challenging Obama in 2012, instead campaigning for Mitt Romney, emerged as a leading 2016 contender with his re-election as New Jersey Governor in 2013.
While there is little doubt that the bad news has harmed Christie's brand, political watchers cautioned against counting out Christie just yet.
"There's still room for him to re-emerge. It's a lot harder now, and he's a much more fragile candidate then he was before. But he can still get into this," said Julian Zelizer, a professor of public affairs at Princeton University in New Jersey who has followed Christie's rise. "He has not been locked out by any stretch of the imagination."
(Reporting by Edith Honan and Gabriel Debenedetti; Editing by Martin Howell)