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* Says retirement not due to election year concerns
* Norm Dicks next in line for chairmanship (New throughout)
By Richard Cowan
WASHINGTON, May 5 (Reuters) - David Obey, the powerful chairman of the House of Representatives committee that oversees U.S. federal spending, announced his retirement on Wednesday, saying it was unrelated to difficult political winds Democrats face in November's elections.
"Let me put it this way: I've won 25 elections. Does anybody really think I don't know how to win another one?" the 71-year-old Wisconsin Democrat told reporters. He was first elected to the House in 1969.
But Obey did acknowledge his liberalism might be out of step now, given a voter backlash against U.S. budget deficits that could reach a record $1.5 trillion this year.
"People seem to have become so focused only on the federal budget deficit," Obey said.
Obey said that record spending and deficits need to be curbed over the long term, but not when the country is struggling to overcome one of the worst recessions in decades.
Last year, House Speaker Nancy Pelosi put Obey in charge of designing the $787 billion economic stimulus bill the Obama administration wanted after the financial near-collapse in 2008.
Republicans and many independents have pointed to that massive spending measure as reason to kick Democrats out of office.
But Obey, announcing his retirement in the House Appropriations Committee hearing room where spending priorities are fought out, was typically defiant.
"My only apology is that it should have been larger, but it was the most that the system would bear at the time," he said.
The next chairman of the Appropriations Committee will be chosen after the November elections. Obey pointed out that Representative Norman Dicks is in line.
Dicks, from Washington state, has close ties to defense contractors and in the past has worked hard to promote the interests of airplane manufacturer Boeing, which has facilities in the state.
Obey was the first Democrat to represent his Wisconsin northern woods district and is the third most senior House member. Known for his explosive temper as well as his humor and integrity, he often tangled with Republicans and Democrats during House debates.
He predicted Democrats will be competitive in his district in November. "The fact is there isn't a chance of a snowball in Hades of that congressional district electing someone who is a poor imitation of George Bush's policies on a bad day," he said.
So far, 18 Democrats and 19 Republicans in the House have announced they are retiring or seeking other office ahead of the November elections.
Saying he was "bone tired," Obey gave several other reasons for his decision to retire. He said he had wanted to be in Congress long enough to see enactment of healthcare reform, which happened this year. He also said he wanted to make sure the U.S. economy was turning around before leaving.
Obey said he had considered retiring a decade ago, but stuck around to do battle with the Bush administration's spending priorities, which over the years he has called "misguided."
As a member and ultimately chairman of the appropriations panel, Obey's reach was far and wide. He said he was "especially proud" of his role in resisting "American colonialism in Central America." Since 2003 he has called the U.S. invasion of Iraq one of the biggest blunders since the War of 1812.
At the same time, Obey worked to increase funding for U.S. education and social programs.
Public outrage over "earmarks" surged during Obey's chairmanship of the appropriations committee even though those spending projects, often tailored to lawmakers' home districts, were growing during Republican control of Congress.
Obey often defended the spending as helping provide important services to constituents.
Always armed with a pocketful of pencils, Obey sometimes carries around a harmonica and plays in a band called "The Capitol Offenses."
At his Wednesday news conference, Obey resisted calls to play "God Bless America" on the harmonica but did say he has played on occasion with musical greats ranging from Peter Yarrow to Harry Belafonte and Willie Nelson.
In 2008, Obey easily won re-election to his seat with 61 percent of the vote.
But voters in his district have been deeply divided in the past, such as in 2000 and 2004, when the Democratic presidential candidates just barely beat their Republican opponents. (Additional reporting by Vicki Allen; editing by David Alexander and Mohammad Zargham)