The headlines announcing Indiana Senator Evan Bayh’s surprise decision to retire after his current term declare that the loss of this particular incumbent represents "a huge blow to Democrats."

While it is true that the Democrats might lose the Indiana seat this fall, the loss of Bayh is not a huge blow.

In fact, Bayh was part of the problem for Senate Democrats, not the solution.

When I wrote The Nation’s "2010 Election Primer," which appears in the magazine’s current issue, I suggested that Democrats needed to get over their obsession with building a caucus of 60 U.S. Senators.

The argument, based on the bitter experience of 2009, went like this: Better to have 54 or 55 Democrats who might actually want to get something done than to worry about building a super-majority on the "strength" of conservative members who enthusiastically support unnecessary wars, free trade and misguided domestic economic policies. Then, hopefully, the Democrats would get real about governing by taking the necessary first step of doing away with filibuster rules that empower outliers and run the Senate on the novel notion of majority rule.

As an example of the sort of senator that progressives ought not worry about losing, I cited Bayh, a longtime leader of the pro-corporate Democratic Leadership Council, which has for the better part of a quarter century worked to turn the Democratic Party into a kinder, gentler version of the GOP.

"Don’t fret too much about the fate of Southern and border-state compromisers (Arkansas’s Blanche Lincoln, Indiana’s Evan Bayh)," the primer suggested. "Worry about re-electing progressives like California’s Barbara Boxer and Wisconsin’s Russ Feingold. Think about helping progressive, or at least mainstream, Democrats win seats vacated by GOP incumbents in Missouri, New Hampshire and Ohio. The point is not merely to elect Democrats but to forge a caucus that is less tied to the old ways of doing things and more inclined to scrap antidemocratic Senate rules and start governing."

On Monday, we got the news that Bayh is quitting.

Faced with a serious reelection contest — although not in so dire a circumstance that his retirement was expected — Bayh has put a Democratic seat in play.As with the retirement of Senator Byron Dorgan, D-North Dakota, the senator from Indiana has increased the likelihood that a seat representing a Republican-friendly state will fall to the GOP in November.

But that does not need to be the case.

Indiana has been badly battered by the current recession.

This is an angry state that is looking for change, and rightly so.

Even before the economy went south, however, Indiana was experiencing the sort of rapid deindustrialization that devastates working families and their communities. Few states in the nation have suffered more seriously as a result of a ill-thought and poorly-implemented "bailout" of the auto industry and even more ill-thought free trade arrangements with China. (Even before the current downturn, the Economic Policy Institute determined that Indiana had lost more than 45,000 jobs because of the US-China trade imbalance. That number is unquestionably worse now. The state has, as well, lost an estimated 35,000 jobs as a result of the North American Free Trade Agreement.)

Bayh, a pro-free trade Democrat, was consistently on the wrong side of economic issues that determine the fate of Great Lakes manufacturing states such as Indiana. He won office not because of his positions on the issues but because he is a affable campaigner with a magic name — his far more liberal father, Birch Bayh, was one of the great senators of the 20th century and remains an iconic figure among Indiana Democrats.

But in this volatile year, even his personality and name were not going to be enough to assure the younger Bayh a third term. He might well have won — polls put the incumbent well ahead of his likely GOP challenger, former Senator Dan Coats. (Coats is a weak contender: he has not lived in the state for years and who makes his money as a lobbyist.)

But Bayh says he has other interests and prospects: "(Running) for the sake of winning an election, just to remain in public office, is not good enough. And it has never been what motivates me," he said in announcing his decision not to seek reelection. "At this time I simply believe I can best contribute to society in another way: creating jobs by helping grow a business, helping guide an institution of higher learning or helping run a worthy charitable endeavor."

That’s good news for Democrats who would prefer that their party stand for something.

And it might even be good news for Indiana Democrats.

The question is whether they can find a candidate who is willing to run as a genuine economic populist — not a compromised centrist like Bayh or an apologist for Obama, whose policies have been at best murky (he still does not seem to get the jobs issue and he has yet to take a clear position on trade) and at worst damaging (his auto bailout has helped fund the closing of U.S. manufacturing plants in states such as Indiana).

All things being equal, Republicans will win this seat.

The key for Democrats then is to throw the balance off by finding a candidate who is capable of expressing the frustration and anger of voters in a state that has significantly higher unemployment than the rest of the country.

Because Bayh is exiting the race on the eve of the filing deadline, it is likely that the nominee will be named by Indiana Democratic Party leaders. If they are smart, they will look for a candidate who can run hard and smart as a populist critic of free trade and big-bank bailouts and a supporter of smart investments in job creation.

Unfortunately, one top Democratic prospect, Congressman Baron Hill, has voted for a number of free-trade deals, including Permanent Normal Trade Relations with China.

Congressman Brad Ellsworth, a more conservative Democrat in the Bayh mold, has also voted for free-trade pacts.

Former Congresswoman Jill Long, who lost a race for governor is 2008 and who was recently nominated by President Obama to serve on the board that oversees the federal Farm Credit Administration, actually voted against NAFTA when she served in the House. Long’s a progressive populist who has worked closely with Congresswoman Marcy Kaptur, D-Ohio, arguably the leading House critic of free trade and of the bank bailout. This might be a good year for her.

Another interesting prospect is Evansville Mayor Jonathan Weinzapfel, who has a better good track record on trade and economic issues. As a congressional candidate in the 1990s, he was an outspoken critic of NAFTA, and history has proven him right.

The bottom line is this: Bayh’s departure puts an at-risk seat even more in play for Democrats. But they won’t win Indiana by nominating a dull centrist who echoes Bayh’s wrong stances on economic policy, or who tries to run as an ally of President Obama. To win this seat, Democrats need a candidate who is angrier with Washington than the Tea Partiers.

If Democrats don’t pick a populist, then their efforts to retain the Indiana seat will be wasted. And, at this point, a party that has already wasted way too many opportunities by compromising on economic issues cannot afford to waste any more.