Forget the old saw, "All politics is local." There is a kettle's worth of tea leaves to read in Wisconsin Governor Scott Walker's triumph over Democratic challenger Tom Barrett. The acrimonious 5 June recall election is a perilous omen for President Barack Obama's re-election bid and a faltering labor movement.

Upon taking office in January 2011, Walker went gunning for public sector unions and social programs. He inadvertently ignited six weeks of animated protests as hundreds of thousands of people flooded the Capitol of Madison, eager to stick a wrench in Walker's plans to turn the clock back on public healthcare, education and labor organizing.

Since the "Wisconsin uprising" began, the Tea Party movement and organized labor have clashed in three separate state-wide elections. Republicans snagged a critical state supreme court post in April 2011. That August, the GOP clung to a razor-thin majority in the state senate by holding four of six seats up for recall. Having pummeled the Democrats again, by a 53-46% margin, Walker and the right are riding high. The only bright spot for Democrats is that they appear to have captured one of four state senate seats, giving them a 17-16 majority.

Walker's win could turn out to be another Scott Brown. In 2010, Brown nabbed Ted Kennedy's former Massachusetts senate seat out of the blue, signaling the arrival of the Tea Party movement and the inability of the Democrats to counter the right's agenda of drowning government in a bathtub.

Matt Rothschild, editor of the Madison-based Progressive magazine, ticked off the ramifications of Walker's win.

"It will be psychologically devastating to tens of thousands of people in Wisconsin and materially devastating to people who've already seen a 10% cut in their pay and no longer have collective bargaining in any real sense."

As for national implications, Rothschild says Walker's victory "will hurt Obama's chances in Wisconsin and maybe nationwide:

"And the message to every Republican governor and legislature is you can put your boot on the throat of labor and get away with it."

Finally, Walker's cakewalk indicates how energized the right is. That will demoralize liberals and labor going into the presidential contest.

The race shows that Republicans have embraced their shock troops in the drive to transform national politics, and the Democrats have abandoned their forces and cause. While Bill Clinton barnstormed with Barrett in the home stretch, Obama barely mustered a tweet on the topic. One reason the Democrats kept their distance is because they had a finger to the wind. Charles Franklin, director of Wisconsin's Marquette Law School poll, notes that of 18 surveys conducted in the gubernatorial race since April, "Walker led in 17 in those and one was a tie."

At the same time, the Democratic party has shunned the "Wisconsin uprising" from its inception, because it was a threat to its own corporate and Wall Street benefactors, not just the right's. Rothschild says during nonstop protests in February and March of 2011:

"We thought we're fighting alone while the snow is falling and our ears are getting cold and red. Where is this president who said he would get his marching shoes on when labor rights were under attack?"

In fact, Obama had vowed in 2007:

"If American workers are being denied their right to organize and collectively bargain when I'm in the White House … I'll walk on that picket line with you."

The right, in contrast, had no qualms about going all-in. Says Rothschild:

"The Republican National Committee understands what's at stake. They said whatever Scott Walker wants we are going to give him. Fox News understands it. The rightwing corporate sector totally understands what's at stake."

Billionaire industrialist David Koch, patron of Americans for Prosperity and the Republican Governors Association – which, combined, pumped a staggering $20m into Walker's campaign – said in February:

"What Scott Walker is doing with the public unions in Wisconsin is critically important. … If the unions win the recall, there will be no stopping union power."

Mike McCabe, director of the Wisconsin Democracy Campaign, a nonpartisan group that tracks money in state politics, says:

"No national Democratic party group took a front and center role in the race the way the Republican Governors Association did."

McCabe adds that one striking aspect of the more than $30m in direct donations Walker netted is "the tremendous amount of money from wealthy advocates of school privatization around the country." Many post-mortems will claim that it was the avalanche of outside dollars that buried Barrett, who raised barely $4m. Pollster Charles Franklin says the "TV air war was largely shock-and-awe because the Republican advantage in advertising has been substantial." But he adds that Walker used his war chest to frame his policies in an appealing manner:

"Walker began a heavy positive advertising campaign of how the reforms worked, and there was no opposition television campaign from the other side for months."

Walker touted balancing the budget, increasing jobs, shrinking government and bringing unions to heel. The claims may have been thin to voters – in exit polls, twice as many Wisconsinites said their financial situation had worsened rather than improved over the last year – but Walker had a vision to sell. McCabe argues the secret behind Walker and decades of Republican success nationwide is "a rich-poor alliance of affluent suburbs and poor rural counties." In the recall election, Walker swept Milwaukee's suburbs by huge margins and dominated the countryside. McCabe says in 2010, "Walker carried the 10 poorest counties in the state by a 13% margin"; these counties used to be reliably Democratic. He elaborates:

"Republicans use powerful economic wedge issues to great impact. They go into rural counties and say, do you have pensions? 'No.' Well, you're paying for theirs, referring to public sector workers. Do you have healthcare? 'No.' Well, you're paying for theirs? Do you get wage increases? 'No.' Well, you're paying for theirs."

The scenario was far different 50 years ago, explains McCabe:

"The Democrats were identified with programs like Social Security, the G.I. Bill and rural electrification. People could see tangible benefits. Today, they ask, 'Is government working for us?' And often their answer is no. They see government as crooked and corrupt. They figure if the government is not working for us, let's keep it as small as possible."

This is the dilemma facing Obama. He came into office preaching the gospel of the New Deal, but punted on the home foreclosure crisis even when he had the banks over a barrel, opted for an economic stimulus that was far too weak and flubbed healthcare reform. The lesson is: Obama did far too little.

Take the auto bailout. While deeply flawed, it saved an estimated 1.5 million jobs. Many of these jobs are in Ohio and Michigan – the two swing states where Obama is polling better than expected. So where the Democrats can point to policies that benefit people, they are more likely to notch wins in November.

The right's strategy is to cast Obama as a failed overreaching liberal – and it's working. Like Walker, Mitt Romney and the right will have a king's ransom of ad dollars to promote their vision. Sure, it may be warmed-over social Darwinism: everyone for themselves and all spoils to the victor. If you can't have healthcare or a pension, no one should, so wipe out public sector unions and the services they administer.

It's a bleak future, but some see a glimmer of hope. Charity Schmidt, a PhD student in sociology at the University of Wisconsin-Madison and co-president of the Teaching Assistants' Association, sums up:

"There are two possible effects. One is people feel utterly defeated and just drop out of the movement. Or the other effect is people realize the change they want to see is not going to happen through electoral politics. Our power is through collective action, our power to withhold our labor, our power to interrupt their work."

• Steve Horn provided additional research and reporting for this article