Democrats Hunt Upset in U.S. House Special Election

* Race is too close to call in heavily Republican district

* Spending, disputed Tea Party candidate in spotlight

By Neale Gulley

BUFFALO, N.Y. (Reuters) - Once predicted to be a Republican landslide, next week's special congressional election in upstate New York has turned into a tight three-way battle that has shined a spotlight on the national debate over spending and Medicare.

The election Tuesday to replace disgraced Republican Chris Lee, who resigned in February after his shirtless photo appeared on the Internet, features a struggling Republican, a disputed Tea Party candidate and an upset-minded Democrat.

Republican Jane Corwin was expected to cruise to victory in the conservative district where Republicans hold an eight-point voter registration edge and Republican John McCain easily beat Democrat Barack Obama in the 2008 White House race.

But Corwin has been under heavy attack from Democrat Kathy Hochul for backing a divisive budget plan put forth by Republicans in the House of Representatives, and has seen self-described Tea Party candidate Joe Davis siphon away support.

Political handicappers now say the race is too close to call. National parties and outside groups have poured money into the district, hoping to claim an early win in the battle over cuts in spending and the Medicare health program for seniors first proposed by House Republican Paul Ryan.

But one local political analyst said third-party candidate Davis was playing an even bigger role in the tight campaign.

"The national dialogue I've heard, which I think is wrong, is that the race is close because it's a referendum on the national budget. The only reason that it's in play is because Jack Davis is in the race," said Joshua Dyck, a political scientist at the University of Buffalo.

While special elections usually feature low voter turnout, making projections of the electorate difficult, a recent poll suggests 24 percent of likely voters -- many of them would-be Corwin supporters -- now support Davis.

The May 9 poll conducted by Public Policy Polling showed Davis drawing the most votes from Corwin, helping Hochul earn support from 35 percent of likely voters, to Corwin's 31 percent.

"This is not an election about message as much as it's about getting your supporters off the couch to vote on a Tuesday in May when they're not used to voting," Dyck said.

'TEA PARTY' BRAWL

Davis, a millionaire business owner, is a self-described Tea Party candidate and fiscal conservative. He has been condemned by the national Tea Party movement for supporting Obama and running three prior campaigns as a Democrat.

"He has no claim to the Tea Party Mantle," Tea Party Express co-founder Sal Russo said, citing in part Davis' past support for cap and trade legislation to limit greenhouse gas emissions.

At a rally last week, however, Davis said he voted for Republicans Richard Nixon and Barry Goldwater for president in the past. Davis failed to win Republican backing in the race before running as a Tea Party candidate.

"Jane Corwin has outsourced her campaign to the lobbyists and Washington insiders that have outsourced our jobs," the Davis campaign said. "The Tea Party Express is financed by these special interests."

The House Democratic campaign committee plans to spend $250,000 on ads to support Hochul, and a new independent group backing House Democrats, the House Majority PAC, has launched ads highlighting Corwin's support for Ryan's plan to cut billions from Medicare.

Hochul, who opposes Ryan's plan, has her own campaign ads attacking Corwin for backing Ryan's proposal. Democrats hope the issue will resonate into the 2012 congressional elections and help their drive to retake control of the House.

Republicans have fought back, with an independent Republican-aligned group and the House Republican campaign committee both putting money into the race. House Speaker John Boehner, a Republican, headlined a fundraiser for Corwin.

The seat was left vacant when married Republican Representative Chris Lee resigned on Feb. 9 after shirtless photos he had sent to a woman he met on Craigslist surfaced on the Internet.

Only two Democrats have represented the heavily Republican Congressional District 26, which covers a big area of Western New York near Buffalo, since World War Two. Davis narrowly lost a 2006 bid for the seat as a Democrat to former Republican Representative Tom Reynolds, giving him name recognition that Dyck said has contributed to his support.

Davis, the founder of a company that manufactures components for solar panels and television screens, has said he will invest $3 million of his own money in the race. (Writing by John Whitesides; Editing by Todd Eastham)