Jim Pederson is a realist.

The chairman of the Arizona Democratic Party believes that Sen. John McCain (R-Ariz.) will be almost impossible to beat in a general election next year. And there’s some question whether Democrats even want to knock off McCain, who regularly gives GOP leaders fits.

Pederson is so close to the maverick Republican that the two met in Washington last month to discuss strategy for defeating an upcoming ballot measure that would overturn Arizona’s public financing system for state elections. Coincidentally or not, Rep. Jeff Flake — who is contemplating challenging McCain in a GOP primary next year — is leading the fight to kill public financing.

It’s Pederson’s hunch that Flake or another formidable Republican will take on McCain in the GOP primary — and possibly even defeat him — with the help of the conservative anti-tax group the Club for Growth. If that happens, Pederson believes that the Democrats can be competitive in the Senate race.

“Arizona is not the old conservative backwater that a lot of people [in Washington, D.C.] think it is,” he said.

Hence the dilemma for the Democrats. Do they merely put up a sacrificial lamb under the assumption that McCain will be the Republican nominee? Or do they recruit a top-tier candidate with the hope that McCain stumbles in the GOP primary?

This type of dilemma could turn into a rare electoral opportunity for the Democrats in what is shaping up to be a difficult election for them. And it’s being served up to them, at least in part, by the Club for Growth — one of the key organizations encouraging Republican-on-Republican battles.

At this early stage of the 2004 cycle, there are at least two Senate races where aggressive conservative challengers could take on unorthodox Republican incumbents in GOP primaries — in states where the Democrats might otherwise not be competitive. In addition to Arizona, where the club is urging Flake to enter the race, Democrats are watching Pennsylvania, where three-term Rep. Pat Toomey (R), a Club for Growth favorite, has announced that he will challenge moderate Sen. Arlen Specter (R).

Similarly, there are perhaps half a dozen House districts on the Eastern seaboard where moderate Republican incumbents may face primary challenges from conservatives, giving the Democrats a chance to compete for seats that were once thought to be unwinnable.

“I think a primary challenge to any incumbent mitigates the advantages of incumbency,” said Brad Woodhouse, communications director at the Democratic Senatorial Campaign Committee.

Woodhouse said the presence of conservative challengers to GOP incumbents has become a selling point for DSCC recruiters to use on potential Democratic candidates. “It does go into the decision making for potential recruits,” he said.

But if any top-tier Democrats are interested in running for Senate in Arizona or Pennsylvania, they have not come forward yet.

Pederson, a wealthy businessman, is the Democrat most likely to run if it appears that McCain will lose. Former state Attorney General Grant Woods, a Republican, is considering switching parties to make a statewide race.

In Pennsylvania, where Democrats are emboldened by Gov. Ed Rendell’s (D) hefty victory last year, no big-league Democrat has admitted to even thinking about running for Senate. Still, national Democrats have their eyes on a few up and comers, including Pittsburgh Mayor Tom Murphy and Allegheny County District Attorney Stephen Zappala Jr.

Complicating matters for Democrats is uncertainty over how active Rendell will be in recruiting and supporting a Senate candidate over Specter. Specter was once Rendell’s boss in the Philadelphia D.A.’s office, and the two are close.

In both Pennsylvania and Arizona, Democrats will have to calculate how strong the challenges to the Republican incumbents are going to be, and decide whether they are poised to take advantage. The filing deadline in Arizona is June 9, 2004; in Pennsylvania, it’s Feb. 17, 2004.

Ron Talley, director of the Republican Main Street Partnership, a group that supports moderate Republicans, blasts Club for Growth and other conservative organizations that take on GOP incumbents, arguing that divisive primary challenges weaken the party.

“In Pennsylvania, the Democrats are salivating over the prospect of a [GOP] primary,” he said. “We consider the primary a total waste of Republican dollars that could be well used to defeat Democrats.”

But Stephen Moore, Club for Growth’s president, defended his group’s support of Toomey and other conservative Republican challengers, and said any damage to the GOP from internecine warfare would be minimal. Moore predicted that whoever wins the Republican primary in Pennsylvania — Toomey or Specter — will win the general election.

“Toomey is just such a star in the House,” he said. “Whenever one of our stars is running for higher office, then we have to be with them, win or lose.”

Toomey disputed the argument that he is too conservative to win statewide in Pennsylvania. He noted that his Allentown-based House district leans Democratic, and that Sen. Rick Santorum (R-Pa.) is a conservative who has won two statewide elections.

“I wouldn’t be entering this race if I wasn’t convinced I can win,” he said.

Moore said that while Club for Growth is encouraging Flake to challenge McCain in Arizona, any decision is probably months away.

On the House side, the club has not selected any races to become involved with yet. But it is easy to see where conservative challengers could emerge.

In New York’s 24th district, Cayuga County Legislator David Walrath (R), who ran a seat-of-the-pants challenge to moderate Rep. Sherwood Boehlert (R) last year, is gearing up to try again. He is starting much earlier and is sure to be better funded. And in Maryland’s 1st district, where Club for Growth got behind conservative lawyer David Fischer in his unsuccessful primary challenge to Rep. Wayne Gilchrest (R) a year ago, state Sen. Richard Colburn (R) has a fundraiser scheduled for Friday and is expected to announce his plans to run against Gilchrest.

Both districts lean Republican, and in each case the moderate Republican incumbent seems to fit the district well. But both districts are competitive in presidential elections — especially Boehlert’s — and a conservative Congressional nominee could have trouble winning if the Democrats put up a strong candidate.

Similarly, moderate Republican Reps. Jeb Bradley (N.H.), Mike Castle (Del.), Amo Houghton (N.Y.), Nancy Johnson (Conn.) and Rob Simmons (Conn.) could face conservative challenges next year, and most are in competitive districts.

Moore said his organization might get behind challengers in two or three of these districts. “I don’t know how it’s going to pan out,” he said.