Specter loses, 'Tea Party' wins in U.S. voting
* Specter falls to Sestak in Pennsylvania primary
* "Tea Party" shows strength with Kentucky victory
* Voter anger fuels threats to two Senate incumbents (Adds Specter, background, details)
By John Whitesides
WASHINGTON, May 18 (Reuters) - Disenchanted U.S. voters in both parties turned against the establishment on Tuesday, choosing a conservative "Tea Party" newcomer over a handpicked Republican favorite and dumping veteran Democratic Senator Arlen Specter ahead of November's midterm elections.
Two-term Democratic Senator Blanche Lincoln also struggled and was headed to a June 8 run-off election against Lieutenant Governor Bill Halter after failing to win the necessary majority of the Senate primary vote in Arkansas.
"This is what democracy looks like -- a win for the people over the establishment, over the status quo, even over Washington D.C.," an exuberant U.S. Representative Joe Sestak told supporters in Pennsylvania after beating 80-year-old Specter.
Specter, a 30-year Senate veteran and former chairman of the Senate Judiciary Committee, was the latest incumbent to go down in a wave of anti-establishment anger fueled by distrust of Washington and worries neither party is doing enough to rescue the economy and restrain government spending.
In Kentucky, conservative Rand Paul easily won the Republican nomination over Secretary of State Trey Grayson for an open U.S. Senate seat in a race seen as an early test of the loosely organized Tea Party movement.
Paul, a doctor and son of libertarian Republican Representative Ron Paul, rode a wave of voter anger with the help of Tea Party activists who oppose runaway federal spending and favor more limited government.
"We have come to take our government back," Paul told supporters in Bowling Green, Kentucky. "This Tea Party movement is a message to Washington that we are unhappy and we want things done differently."
Paul will face state Attorney General Jack Conway, who won the Democratic primary, in November.
INCUMBENTS AT RISK
The anti-Washington mood threatens to sweep away many well-known incumbents and put Democratic control of Congress at risk in November, when all 435 House of Representatives seats, 36 of 100 Senate seats and 37 of 50 state governorships are up for election.
A dramatic upheaval could hinder President Barack Obama's legislative agenda, threaten each party's remaining moderates and increase polarization in Congress.
But Democrats got a shot of good news on Tuesday in a special House election in Pennsylvania to replace Democrat John Murtha, who died in February. Democrat Mark Critz, a longtime Murtha aide, beat Republican Tim Burns in a blue-collar Democratic district won by Republican John McCain in 2008.
It was the seventh consecutive special House election won by the Democrats since 2008.
"This was the only race in the country today where a Democrat faced off against a Republican and the results are clear," said Representative Chris Van Hollen, head of the Democratic House campaign committee.
In the Senate primaries, the anti-Washington wave swept away Specter, who switched from Republican to Democrat last year after calculating he could not win a Republican primary. But a 20-point lead over Sestak turned into a dead heat as Sestak questioned Specter's party credentials.
Sestak, a retired Navy admiral and the highest ranking former military officer ever elected to Congress, will face Republican Pat Toomey in November's Senate race in Pennsylvania.
With just more than half of the votes counted in Arkansas, Lincoln and Halter were running about even at 43 percent. A third candidate, D.C. Morrison, won enough votes to prevent either Lincoln or Halter from crossing the 50 percent threshold.
Halter has been backed by labor unions unhappy with Lincoln's failure to support a bill making it easier to organize workplaces.
During the debate on an overhaul of financial regulations, Lincoln introduced a tough bill to force investment banks to dump their derivatives businesses in what critics called an overture to the left.
Like Specter, Lincoln faces a tough general election campaign even if she beats Halter. Polls show Representative John Boozman, expected to emerge from a crowded Republican primary, currently leads her in a potential November matchup.
(Additional reporting by Joanne Allen and Jon Hurdle, Editing by Alistair Bell)