Truth and Consequences

Gabrielle Giffords and Jesse Kelly make the play for CD 8 voters

Republican congressional candidate Jesse Kelly has a long list of grievances.

He's had it with a tax system that takes from the rich to give to the poor. He's sick of government workers who just "suck off the system." He wants to scrap Medicare in order to get seniors "off the public dole." He would "love to eliminate" Social Security. He's looking for a "day of reckoning for liberals in both parties," because "liberalism is destroying America."

At first glance, Kelly appears to be an ill fit for the moderate Republican bent of Southern Arizona's Congressional District 8, which is now represented by Democratic Congresswoman Gabrielle Giffords.

Kelly opposes abortions even for women who have been the victims of rape or incest. He doesn't believe gays could serve openly in the military without destroying morale. He believes Wall Street needs less regulation, not more. He's outraged that the Obama administration engaged in a "shakedown" to require oil giant BP to set aside $20 billion to aid victims of the Gulf of Mexico oil spill. He's called for every federal department, with the exception of the military, to be cut by at least 20 percent—and is ready to do away with some of them altogether, including the Department of Education and the Environmental Protection Agency.

Republican Jim Kolbe, who represented the area for more than two decades, routinely swatted down right-wing challengers in Kelly's mold.

Kelly—who has received no endorsement from Kolbe this year—is easily to the right of even Randy Graf, the former state lawmaker who captured the support of GOP conservatives in 2006, when Kolbe retired. Graf went on to lose to Giffords by 12 percentage points in a year that saw Democrats take over Congress.

But 2010 is no 2006. As Graf puts it: "This is a whole different environment. The dynamics are night and day. The resistance we met won't be here this go-round. Nothing from 2006 applies to 2010. This is virgin territory."

Jesse Kelly is a newcomer to Southern Arizona politics. Until a month ago, when his own name was on the ballot, he'd never even voted in a GOP primary or a special election, casting ballots only in the general elections of 2004, 2006 and 2008.

Kelly grew up in Montana and attended Montana State University for a year before dropping out—he says he "absolutely hated it"—and joining the Marine Corps; he was part of the 2003 invasion of Iraq. After four years, he left the service in 2004, moved to Tucson and took a job with Don Kelly Construction, a regional construction company owned by his father. Last year, according to a financial disclosure filed with the Federal Election Commission, Kelly earned more than $88,000 in his management job with the company.

Kelly maintains on the campaign trail that the "government doesn't create jobs; government crushes jobs." But Don Kelly Construction has found that government contracts can be very lucrative. By Kelly's own estimate, 90 percent of the firm's work comes from the government. The Tucson Weekly has reported that the company has received contracts worth tens of millions of dollars for projects funded with stimulus and earmark dollars, even though Kelly says he opposes the stimulus and would never seek earmarks for his Southern Arizona constituents if he were elected in November.

Giffords, who supported the stimulus, says it's "very hypocritical" for Kelly to badmouth the program at the same time that he has his hand out to take stimulus dollars.

"If he doesn't like it, then don't take the stimulus funds," she says.

Kelly credits the stimulus bill as "the final straw" that pushed him into the race.

"This president and this Congress and this Senate have taken over, and they're expanding government," Kelly says. "They're expanding spending; they're going to raise taxes; they want to tell you what kind of light bulbs you can keep in your house and what kind of health care you have to buy, and that's simply not America."

It's the kind of message that Republicans across the country are pushing as the unemployment rate remains in or near double-digits: Government has grown too large and is spending too much money.

So far, it appears to be an effective strategy. National pundits say Republicans look increasingly likely to win the 39 seats they need to take control of the House after losing it four years ago.

Congressional District 8 is one of those targeted districts. It leans slightly Republican, with 37 percent of the voters identifying with the GOP, and 33 percent identifying as Democrats. But the key to victory is winning over the 30 percent that identify as independent.

Charlie Cook of the Cook Political Report says the district is leaning Democratic, while Stuart Rothenberg of the Rothenberg Political Report calls the race a toss-up. Nate Silver, the stats wizard behind political prognostication website and a New York Times contributor, says Giffords has a 56 percent chance of hanging on in November.

Margaret Kenski, who has polled Southern Arizona voters for more than a quarter-century, says that Giffords' votes for health-care reform, the stimulus and cap-and-trade legislation are out of step with the voters in the district.

But she adds that Kelly's far-right views are "no more in step with them than she is."

Kenski says the central question in the race is "whether the general unhappiness with the Obama administration is going to be enough" to carry Kelly to victory.

Kelly has successfully "cultivated people who are terribly upset," but Kenski says he runs a risk in the general election if he continues to denounce moderate voters as Republicans in Name Only.

"He has to do something to appeal to RINOs," Kenski says. "He can't win without them. Whether he thinks he can, I don't know."

It's the same problem that Republicans are facing with U.S. Senate candidates Sharron Angle in Nevada and Christine O'Donnell in Delaware: A far-right candidate might have what it takes to win the primary, but have less appeal to general-election voters.

The goal, as always, is getting the most votes in November.

"Fifty percent plus one does not agree with what's happened in the last two years," Kenski says about voters, "but 50 percent plus one doesn't agree with Mr. Kelly, either."

Team Giffords is well aware that the political environment does not favor the incumbent.

"It's a tough race," says campaign manager Rodd McLeod, who also ran Giffords' 2006 campaign against Randy Graf.

While no nonpartisan polls have been released, a survey by a GOP-leaning group in the days following the August primary showed a neck-and-neck race, with both Giffords and Kelly capturing the support of 44 percent of the surveyed voters.

Giffords, who didn't have a primary fight, has a big cash advantage over Kelly. While new FEC reports aren't due until the middle of next month, reports showing activity through early August revealed that Giffords had nearly $1.9 million on hand, while Kelly was down to less than $79,000.

While the National Republican Congressional Committee has not yet announced plans to spend money in CD 8, Kelly has been getting a boost from third-party groups that have been hammering Giffords. These groups—including Conservatives for Congress, the 60 Plus Association and Americans for Prosperity—have combined to spend about $300,000 on televised attack ads.

But Giffords has had plenty of money to launch her own air war in recent weeks. In addition to testimonial spots featuring Cochise County ranchers—designed to inoculate her against attacks that she has not done enough to secure the border—Giffords has gone on the attack with ads that publicize the more controversial statements that Kelly made during the primary.

On the morning after Kelly won the primary, the Giffords campaign already had an ad airing that hammered Kelly for his comments that he'd "love to privatize" Social Security.

"During the primary, he'd been very vocal about saying he'd like to phase it out, and he'd like to eliminate it," Giffords says. "Now, after the election, he says he wants to protect Social Security. To now change horses midstream, he's not being truthful."

Kelly has shown little affection for Social Security. He has called it the "biggest Ponzi scheme in history" and says the nation has no choice but to privatize the retirement program.

Giffords, by contrast, calls it a vital government program that has kept seniors out of poverty.

"The system has worked for 75 years," Giffords says. "It is cherished. Without it, more than 50 percent of our seniors would fall below the poverty line."

Giffords generally favors keeping the retirement age at 67 for maximum benefits, but she says that Congress does need to tweak the system to keep it solvent, perhaps by raising the current tax cap on Social Security earnings, or by means-testing, so elderly Americans who have significant retirement assets receive a smaller benefit.

But she opposes allowing the taxes that now pay for Social Security benefits to be turned into privately owned accounts that could be invested in the stock market.

"If people want to invest their own personal dollars in the stock market, absolutely," Giffords says. "But the stock market is risky."

Kelly has a much more radical proposal. He has embraced Congressman Paul Ryan's "Roadmap for America's Future" Plan, which allows current recipients and anyone older than 55 to continue to receive Social Security. But anyone younger than 55 would have the option of putting as much as 41 percent of their Social Security taxes into private accounts that could be invested in the stock market or savings accounts.

The fundamental problem with that proposal: Diverting as much as 40 percent of the revenues into private accounts means that the system will have much less money to pay benefits now and would be driven into bankruptcy much sooner.

Kelly suggests that the money to pay benefits could come from income taxes, even though he's proposing to sharply cut income taxes as well. Nonetheless, Kelly says that his overall plan will result in "robust economic growth" that will ensure enough tax dollars are collected to support the Social Security program.

But UA economist Gerald Swanson, author of America the Broke, is skeptical that Kelly's idea could work, because there's no money available to make up that shortfall.

"Right now, all of government that is not an entitlement—all of it—is being financed by borrowing," says Swanson, who has been warning about the dangers of deficit spending since the early 1990s.

While Kelly has been telling audiences that the private accounts would be guaranteed, he said last week that he didn't think the government should step in to bail out the accounts in the event of a downturn in the stock market. He says there's no need to do so, because stock market downturns are never serious enough to require such a guarantee.

That position runs counter to the Ryan Roadmap that Kelly says he supports. The Roadmap includes this guarantee: "Individuals who choose to invest in personal accounts will be ensured every dollar they place into an account will be guaranteed, even after inflation. With the recent market downturn, individuals must be assured their retirement is secure. By guaranteeing the dollars put into an account, individuals can be assured that a large-scale market downturn will not cost them their Social Security personal accounts."

But Kelly says he doesn't plan to bail out anyone who makes a bad investment.

"The government stays out of it," Kelly says. "That's the guarantee."

While Kelly says that the Giffords campaign is lying about his plans for Social Security, he has had his own troubles with the truth regarding the program.

As recently as last week, Kelly told an audience that Giffords doesn't have to pay into the Social Security program, but can instead put her Social Security taxes into a private account.

However, Giffords pays the same Social Security taxes as other working Americans. Like all members of Congress, she can invest other retirement funds in the Thrift Savings Plan, an investment program for federal employees that's similar to private-sector 401(k) plans.

Team Giffords is also running ads going after Kelly's promise to scrap Medicare.

Kelly has said that, as with Social Security, benefits have to continue for people now in the system. However, he'd like to eliminate Medicare in the future and shift to a system in which elderly Americans purchase health insurance from private providers so they "won't be on the public dole." He said during the primary that he'd use tax credits to help people afford the program.

More recently, Kelly has adopted the Ryan Roadmap plan on this issue as well. It calls for elderly Americans to get a voucher that does not keep pace with the rate of health-care inflation costs. Anyone under 55 would be forced into the new system.

Giffords opposes moving to a voucher system that provides funding for private insurance companies to insure elderly Americans. She points out that the Ryan Roadmap has gotten little support, even from Congressional Republicans, because the proposals aren't popular with the public.

"It's outside the mainstream," Giffords says.

Kelly has responded to Giffords' ad by saying that she supported a $500 billion cut in Medicare benefits for seniors. It's the same claim made in television ads that were run by the 60 Plus Association.

The nonpartisan, a project of the Annenberg Public Policy Center, calls the claim of a $500 billion cut "misleading."'s analysis notes: "The law calls for $555 billion in cuts in future growth of the program—over 10 years. The total projected cost of Medicare over that time, according to the nonpartisan Congressional Budget Office, is $7.1 trillion, even with the cuts.

"CBO predicts that federal outlays for Medicare in fiscal year 2020 will be $929 billion, compared with projected spending of $519 billion this year," the analysis continues. "So the program isn't being cut below existing levels, or even stopped in its tracks. It will simply grow slightly less than it would have otherwise—about 7 percent less."

Kelly has also complained that Giffords has eliminated Medicare Advantage, a program that roughly one of out four Medicare recipients use. Medicare Advantage was designed to use private-sector insurance companies to improve service while lowering costs. But instead of costing less, Medicare Advantage ended up costing about 14 percent more than traditional Medicare.

"That's just not fair," Giffords says. "If Medicare is something that every American should get, you shouldn't get more than some other Medicare beneficiary if you pick a different plan."

The health-care reform bill passed by Democrats earlier this year gave the federal government more ability to negotiate with insurers, even as it required them to do more for Medicare Advantage patients.

The New York Times reported last week that private insurance companies are still contracting with the government—just at lower rates.

Giffords argues that it's a sign that Medicare Advantage is not going away, as Kelly maintains. Instead, she says, taxpayers and recipients are getting a better deal.

She points to other benefits in the health-care reform law that have now kicked in, including rebates for seniors' prescription drugs and requirements that insurance companies cover the costs of preventative check-ups.

Kelly's economic strategies are, to say the least, a work in progress. At times, they seem to slide into the delusional.

"We need robust economic growth in this country," Kelly said at an appearance last week. "We need to welcome businesses not only to expand, but to come back from all over the world. ... To get out of this debt, when you hear things like 2 percent growth in GDP or 3 percent growth in GDP—that's gross domestic product—we need 10 percent. And we need it for decades. We need 20 to 30 years of 10 percent GDP growth to get out of this."

UA economist Swanson calls that kind of growth in the Gross Domestic Product "highly unlikely."

As Swanson explains: "We're such a large economy. When you have a $14 trillion economy, 10 percent growth would be $1.4 trillion new GDP dollars each year. We haven't seen that kind of growth, to my knowledge, post-World War II ever."

Just last week, Kelly told the press for the first time that he supports a new national sales tax of 8.5 cents per dollar on goods and services.

Throughout the primary, Kelly said the country should sharply lower taxes for its wealthiest residents by establishing a 10 percent flat income tax, because "if 10 percent is good enough for Jesus Christ, it's good enough for the federal government."

At a debate in Green Valley, he said he didn't care how much money the new tax would raise: He'd set the federal budget to fit within it, whatever it was.

But last week, after once again telling voters that the country could implement a 10 percent flat income tax for all of its citizens, he admitted that the numbers wouldn't pencil out.

Instead, he said he now supports a different plan that has a 10 percent income-tax rate for up to $50,000 in income for individual filers, and 25 percent on any remaining income.

To make those numbers pencil out—and to get rid of the corporate income tax, as Kelly also wants to do—he supports creating that new 8.5 percent national sales tax on goods and services. That would come on top of the sales taxes that state residents now pay.

Giffords favors keeping the current tax system and closing a portion of the deficit by repealing the Bush tax cuts for the top 2 percent of earners. She'd leave the tax cuts in place for the rest of the country.

"I think long-term solutions to the debt are not wacky tax schemes that are going to raise taxes on the working class, the middle class and the lower class while eliminating taxes for corporations and the wealthiest Americans," Giffords says.

Jesse Kelly is facing an inquisitive senior about the recent television ad from the Giffords campaign that suggests Kelly supports a 23 percent sales tax.

"She's lying her face off about that," Kelly tells the woman.

He quickly explains his position: It's not that he thinks the 23 percent sales tax is a bad idea, as long as it's coupled with eliminating other taxes. But what he really wants to do is lower income taxes to 10 percent, straight across the board. The idea that he supports increasing the sales tax is just a smear from the Giffords' campaign.

The woman asks again about the 23 percent sales tax. "It's a consumer tax?"

"That's right," Kelly says.

"Which is what I think we should do," she says.

"There you go," says Kelly. "No income tax, no death tax, no nothing."

"Is that what you're for?" she asks.

"Yes, ma'am," he replies, affirming his support for a 23 percent sales tax—after he'd just accused Giffords' campaign of lying about his support for such a plan.

"All right, I'll volunteer for you," she says.

"Thank you, ma'am," Kelly says. "You made it easy."