11/09/2011 09:30 EST | Updated 01/09/2012 05:12 EST

As Cain scandal continues, Republican presidential candidates debate in jobs-starved Michigan

ROCHESTER, Mich. - The sexual harassment allegations engulfing Republican presidential candidate Herman Cain threatened to overshadow the economic issues that have roiled the industrial battleground state of Michigan — rampant home foreclosures, high employment and a volatile auto industry — when party hopefuls debate here on Wednesday.

Three weeks have passed since the last debate — a period marked first by Cain's surprising rise to the top of the polls and then a firestorm over allegations that he sexually harassed at least four women while he was president of the National Restaurant Association in the 1990s.

Cain had managed to remain at the top of the field through the first week of the scandal with Mitt Romney, a Michigan native and former Massachusetts governor. But there were questions about how long Cain could hold the support of conservative Republicans and their low-tax, small-government tea party members. Party operatives suggested it was only a matter of time before Cain's political standing could suffer.

At a news conference Tuesday — his first since a woman went public with explosive allegations Monday — Cain remained defiant, saying the charges were the work of the "Democrat machine in America" and would not force him to leave the race for the Republican nominee to challenge President Barack Obama next year. He denied, as he has throughout the furor over the allegations, that he had engaged in sexually inappropriate behaviour with any women.

Cain said he was the victim of a smear campaign designed to keep a businessman from gaining the White House. Romney, the favourite of the Republican establishment who has struggled to win over the party's hardline conservative voters, is also a former businessman.

Cain's campaign has also been trying to undermine the credibility of the two women who have come forward publicly.

The campaign pounced on news that the second woman to come forward, Karen Kraushaar, 55, complained three years later at her next job about unfair treatment. She claimed she should be allowed to work from home after a serious car accident and accused a manager of circulating a sexually charged email, the Associated Press has learned. She later dropped the complaint.

Kraushaar said the complaint was irrelevant to her sexual harassment settlement with Cain years earlier.

Cain's campaign spokesman called the revelations about Kraushaar's later complaint and details about another accuser's financial problems "interesting revelations."

Sharon Bialek, who once worked for the restaurant association's education foundation, accused Cain in a televised news conference Monday of groping her inside a parked car after she asked him for help getting a job. The Cain campaign has referred to media reports that she later filed for bankruptcy, and Cain claims to have no memory of her.

Bialek told a TV station Wednesday that Cain has "complete amnesia." ''Pathological liars usually do those kinds of things," she said.

Cain's troubles are certain to loom large over the Michigan debate hall — whether or not the rivals address the accusations directly during the two-hour face off. The scandal also could be harming his fellow Republican candidates who are having trouble gaining much attention with less than two months before the first nominating contests in the states of Iowa and New Hampshire.

"It is a distraction for what could be a very good press day for Michigan and Michigan Republicans," Saul Anuzis, a Michigan-based member of the National Republican Committee, said of the Cain allegations. "I think it's in every candidate's interests to stay focused on the issues."

Romney urged Cain to answer all the allegations, which he called "particularly disturbing."

The field will gather just outside Detroit, a city whose fortunes have fallen with the decline of the American auto industry. Romney, Cain and their rivals likely will have to explain their opposition to Obama's government bailout that saved Chrysler and General Motors and the tens of thousands of jobs they provide.

All eight Republicans attending Wednesday's debate at Oakland University in Rochester say they wouldn't have offered government loans to save two of the three U.S. auto giants. It's a position that may play well in a Republican primary, where a conservative electorate are calling for less federal spending.

But the stance could alienate independent voters — critical players in close general elections. Given the sharp differences between Obama and the Republicans on the issue, the auto bailouts are certain to emerge as a campaign topic in the 2012 election no matter which candidate wins the Republican nomination.

In one of his early actions as president, Obama pushed for — and secured — government bailouts for the teetering Chrysler and General Motors. The companies went through bankruptcy and now are making money and hiring again. And they've had some good months of sales, points Obama made last month during a visit to a GM small-car assembly plant.

But Michigan's economy is still bad, a victim of the auto industry's long slide. The industrial state has weathered a decade-long economic slump that pushed the jobless rate over 14 per cent after the financial meltdown hit in late 2008.

Romney, who was born in Detroit, is among the candidates who have struggled to explain their positions.

"Let Detroit Go Bankrupt," was the headline of a 2008 piece he wrote on the auto bailouts.


AP writer Kasie Hunt contributed to this report in Michigan, Brett J. Blackledge and Suzanne Gamboa reported from Washington.