Many liberals were rooting for a Tea Party triumph in the four-way Wisconsin Republican Senate primary last Tuesday night. After all, polls showed that progressive heroine Tammy Baldwin, the Democratic Senate nominee, would fare best against one of the more right-wing candidates in the race. Instead, bucking national trends, Wisconsin voters chose an establishment figure, former three-term governor Tommy Thompson, who was consistently elected with wide majorities. Baldwin’s bid for the Senate just got a lot harder.

Even if she’s now the underdog, though, Baldwin, a congresswoman from Madison, still has a chance to make history. “Republicans would minimize her strength as a candidate at their peril,” says Charles Franklin, director of the Marquette Law School Poll. “She has resources, very good resources, and in her first House races she’s proven herself to be an effective campaigner.” Many polls show Thompson ahead, but just barely, and he’s far better known than she is. Should she win, she’ll be America’s first openly gay senator and the first woman Wisconsin has ever sent to the chamber. Should she lose, the Senate as a whole could fall into Republican hands, making the race one of the country’s most dramatic.

The last couple of years haven’t been kind to Wisconsin liberals. Obama won the state by 14 points, but in 2010 Sen. Russ Feingold, a progressive icon, was defeated by Tea Partier Ron Johnson. This year’s effort to recall anti-union Gov. Scott Walker ended in failure. (Wisconsin conservatives, meanwhile, now have one of their own, Paul Ryan, on the presidential ticket, which might motivate them even more in November.) Baldwin, however, insists that recent history doesn’t bode ill for her campaign.

“I do think it’s going to be a close race and a hard-fought race, don’t get me wrong,” she says. “But wherever I travel in Wisconsin, people are so frustrated with the disconnect between what they see debated in Washington, the gridlock and partisan games, and their real lives. What I bring to this campaign is a focus on precisely what Wisconsin families are challenged with and struggling with.”

So far, her campaign has focused overwhelmingly on jobs. Her first ad called for tariffs on paper imports from China, which Baldwin said “leads the world in cheating.” That’s a big issue in Wisconsin, which has more paper-industry jobs than any other state. Another ad, filmed in a factory, criticizes the use of engines manufactured overseas in American Coast Guard cutters, “even though you can’t buy a better engine than the ones made right here in Wisconsin.” That, she says, “is why I led the fight to require the Coast Guard to buy their engines from us, not foreign companies.” Per capita Wisconsin has the second-highest number of manufacturing jobs in the country. These are ads aimed right at voters’ livelihoods.

“In Wisconsin, our middle class is shrinking,” she says. “You hear it both anecdotally, because people open up all the time about what they’re struggling with, but also the statistics bear it out.” Last year, she says, Wisconsin’s median income was down 14.5 percent over the last decade. “That’s a huge hit. And it means that the things that you take for granted as being a part of the middle class are in jeopardy, whether its home ownership with the mortgage crisis, whether it’s the security of retirement. For parents, it’s not being able to help their kids go through college.”

We’re sitting in the shade on the outskirts of the Sheboygan, Wis., Brat Days celebration—a sausage festival in the literal sense. Baldwin, dressed in white pants, a white tank top, a blue jacket, and faux-pearl earrings, looks remarkably crisp despite have marched through the infernal morning heat in the city’s Brat Days parade. One thing she has going for her is that, like Thompson, she seems genuinely energized by the relentless smiling and small talk of retail campaigning. After Brat Days, she’ll head to an afternoon bratwurst fry at the home of a local supporter and then drive an hour south to Milwaukee to plunge into the teeming crowds at the Wisconsin state fair. Everywhere she goes, she speaks the anodyne inspirational language of the professional politician with what seems like utter sincerity.

“There is an element about her that you have to live here to appreciate,” says Paul Maslin, a Democratic pollster from Madison working for a coalition of progressive groups that are supporting Baldwin. “She’s soft-spoken; she has that classic blonde Wisconsin look; her name is Tammy. Tammy is more Wisconsin in many ways than Ryan is. She never went off to D.C. until she got elected to Congress.”

That election, in 1998, was in a left-leaning district, but one represented by a moderate Republican who was retiring. Baldwin’s victory made her Congress’s first out lesbian. She became one of the House’s progressive stalwarts—indeed, in a 2010 National Journal ranking, she and six other congressmen tied for most liberal member. Naturally Thompson will be using that designation against her. When she announced her Senate run last year, a Thompson consultant put out a statement calling her “a classic tax-and-spend liberal, and her ranking as the most liberal member of the House puts her clearly out of the mainstream of Wisconsin voters.”

Refreshingly, though, her sexual orientation has, so far, been a nonissue, at least inside the state. On the trail, says Baldwin, it rarely comes up. “Republicans are going to say, well, she’s too liberal, and she’s from Madison,” says Maslin. “They’re going to try for a cultural wedge between her and a fair amount of Wisconsin. But if they’re dumb enough to put the lesbian card way up there, I think it may backfire.”

Meanwhile, the possibility of electing a lesbian to the Senate has electrified gay and feminist donors nationwide. Conservative groups are expected to pour money into the campaign—outside organizations have already spent almost $850,000 attacking Baldwin—but liberal funders will likely match them. Baldwin has raised over $7 million so far, and more is on the way. Both EMILY’s List and the Victory Fund, which backs gay and lesbian candidates, are major supporters, and the groups are collaborating on a super PAC to get further involved in the race. LPAC, the lesbian super PAC launched last month, is hoping to raise $100,000 for Baldwin.

“I think it would be a historic step forward for the LGBT community,” says Sean Eldridge, a marriage-equality activist who has raised money for Baldwin with his husband, Facebook cofounder Chris Hughes. “We’ve never had an openly gay member of the United States Senate, and everyone is incredibly excited about the prospect of having Tammy Baldwin be that openly gay senator.”

If Baldwin doesn’t talk about gay issues much on the campaign trail, she’s still very much aware of her campaign’s significance. “I think it will make a difference symbolically for young people who are coming out and might think that their future is somehow limited,” she says. “Let me give you my own example of that. I had graduated from college in 1984 and was in my first apartment watching the Democratic National Convention. It’s a one-room efficiency with a mattress on the floor, the pan that my aunt and uncle gave me for graduation on the stove, and my little TV. And I watched Geraldine Ferraro cross the floor to accept the nomination as vice president. I can tell you I got so choked up, because I really believed, seeing that image, I could do anything.”