The magic formula to restore the U.S. economy

With all the fuss the U.S. Congress has been making over one of their members, you would think that the fate of the global economy did not hang in the balance on a completely different issue.

The member in question of course is Anthony Weiner. Or should I say Anthony Weiner's.

Yes, the Weiner joke has virtually diverted all political commentary, outrage and media attention away from the much more important but less amusing subject of the U.S. debt ceiling.

But thank goodness for the diversion. That a congressman would take pictures of himself in tight underwear and send it out onto the socialsphere for good or ill is itself amusing in its insanely bad judgment. But in the hands of journalists the great good luck of the man's name has created even greater hilarity with headlines of the "Weiner Exposed" variety. So much so, that there are now hundreds of online collections of real and imaginary Weinerheadlines.

A headline I just read on an online Reuters story: "Obama: If debt limit not raised, financial crisis possible," just doesn't hold a candle to "Mounting pressure on Weiner."

But those zany guys and gals in Congress are doing their best to keep us amused on the debt story as well.

The question is, do they all have the judgment of a Weiner, or does the Republican majority in the lower house really think that cutting off public spending is the magic formula to bring the United States back to economic health?

This is not just a question for Americans, because the whole world, especially we Canadians perched along the U.S. northern border will be affected for good or ill by what they decide.

There are many subtle details of course, but the essence of the dispute between the Republicans and the Democratic President Barrack Obama is a question of whether to spend or not to spend. As a condition for allowing the U.S. government to keep spending - the sole prerogative of congress by majority vote - the Republican majority insists that Obama slash public spending by up to $2 trillion.

I have a certain sympathy with the intellectual argument that throwing money at the problem may not have been the best solution to the current economic crisis. Back in 2008, Icompared profligate stimulus spending to a shipwrecked survivor guzzling his water near the beginning of what could wellbe (and what has turned out to be) a long dry journey. I still believe that an extended period of capital drought near the beginning of this crisis might have helped reset our value system to the new reality and made the world ready for a new period of growth.

I also believe that nearly three years of dirt-cheap money artificially created by low interest rates and the U.S. central bank's flooding of the bond market with imaginary cash (the so-called Q.E.) are creating distortions that are already coming back to bite us.

But I am afraid the current dispute is not based on such rational considerations. Rather than being a strategy for recovery, I fear the battle we are now seeing in Washington has more in common with the Weiner affair. It is instead a strategy of politics and interests. With less money to spend, the Republicans hope Obama will limp through the last year of his term in office, weakening his chance for re-election. That's the politics. And the interests? The Republican ultimatum will keep taxes low for their richer voters and contributors.

When it comes to creative thinking to solve the world's economic problems it seemsthe greatest minds have only come up with two broad strategies.Neither one is a guarantee of success.

But there is a third solution. Like all political disputes that come down between a rock and a hard place, the only way out is compromise.

As one does in political negotiations, the two sides are playing a game of chicken. But as the deadline approaches, financial markets are getting more and more nervous that neither side will give in, creating a crisis that each will try to blame on the other.

With markets going back into fear mode, with Nouriel Roubini forecasting the breakup of the Eurozone, with the whole world wondering whether the recent signs of recovery have been a false dawn, this is not the time for a manufactured financial crisis in what is still the world's biggest economic powerhouse.

So Washington, for just a little while, set aside your infatuation with that overinflated sex scandal and get to work. After that, you can have the rest of the summer for a Weiner roast.