Feb. 27 (Bloomberg) -- Lost in the pointless debate about Asia decoupling itself from the U.S. is a discussion about how the region is really going to do it.

The way in which markets rocked back and forth in recent months dispelled any hope Asia could stand independent from events a world away. How can anyone keep spinning that myth when Asian markets are getting slammed by news from the U.S. municipal bond market? The muni market!

Asia's failure to decouple reflects a lack of political will. Plans following the 1997 Asian crisis to create thriving domestic markets and rely less on exports were shelved once growth returned. With the U.S. booming in the 1990s and holding its own in the 2000s, Asia opted against messing with success.

Now, the U.S. is on the verge of recession and sending financial contagion Asia's way -- just as Asia sent it to the West a decade ago. The U.S. is even resorting to the kinds of easy money, bailouts, government largess and denial it long told Asia to avoid.

Enter the U.S. election, which will toss a new wrinkle into the decoupling issue.

Whoever wins in November will either usher in a change in U.S. policies that have made the global economy a riskier place -- or offer more of the same. Economic continuity is the last thing many Asians want, and that's what they may get if Senator John McCain, the Republican frontrunner, becomes president.

Cutting the Cord

A victory by Senate Democrats Barack Obama or Hillary Clinton hardly means smooth sailing for Asia. Yet a McCain White House might continue policies that have the U.S. living perilously beyond its means and Asia hanging in the balance. That specter should have officials in Asian capitals wishing they really had cut the U.S. cord.

Japan's economy is losing altitude along with the U.S. That belies months of reassurances by Prime Minister Yasuo Fukuda and Bank of Japan Governor Toshihiko Fukui that Asia's biggest economy doesn't rely on the U.S. so much anymore.

From Seoul to Jakarta, there are signs that waning U.S. demand is crimping growth. China's 11 percent-plus growth is a long way from offsetting slowing U.S. demand. Besides, China needs to slow down to tame inflation.

Economic uncertainty is spreading to the point where challenges seem to be coalescing. ``What do the U.S., Saudi Arabia and China have in common?'' asks Brad Setser, a fellow at the Council on Foreign Relations. ``One answer: All have a significant population worried about how to make ends meet.''

Economic Concerns

China exports lots of goods, but imports oil and grain, which are rising in cost. The Saudis are net exporters of oil, yet not everyone is sharing in the oil windfall. Those living on a constant salary are facing ever rising prices and a currency pegged to the sliding U.S. dollar.

In the U.S., polls show rising prices of basic necessities are households' biggest economic concern, Setser points out. Not the credit crunch, not the budget deficit, not falling housing prices. Rather, it's the rising price of things like takeaway pizza and basic groceries.

Accelerating inflation is complicating global turmoil that began in the U.S. subprime market. None of this will change if the U.S. doesn't rein in its deficits and learn to rely less on foreign capital. That also means avoiding a Japan-like funk caused by government denial and a compliant central bank that cuts interest rates to paper over economic cracks.

Greenspan

It's raising eyebrows in Asia that the man who helped get the U.S. into this bind, former Federal Reserve Chairman Alan Greenspan, favors McCain's economic policies, while criticizing Obama for taking ``anti-competitive'' policy positions.

So let's get this straight. Voters are supposed to care what the man who helped create the bubbles wreaking havoc in global markets and essentially gave the Bush administration the green light to push through massive tax cuts the U.S. couldn't afford says about the election? By putting his weight behind McCain, Greenspan is merely supporting more of the same debt-and bubble- fueled excesses behind today's problems.

Few policy makers would welcome a situation where wages lag behind productivity gains. In their efforts to boost demand, the temptation will be great to keep interest rates excessively low, enabling households to spend more. That's just treating the symptoms of the U.S.'s problems -- with gimmicks like tax rebates - - not the underlying sickness.

Clinton, McCain or Obama may also be tempted to cave in to pressure for a trade war with China. Its undervalued currency, tainted goods and worsening pollution are valid complaints. Yet the bigger issue is American complacency.

The U.S. needs to work harder to prepare its workforce for a global economy in which developing nations are now competing with the West. That's the best way to narrow the widening gap between the haves and have-nots, not slapping tariffs on China.

With investors turning sour on the dollar, oil prices surging, and markets in turmoil, the U.S. should get its economic house in order. Whether it does or not, Asia needs to get serious about distancing itself from the fallout.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

Last Updated: February 26, 2008 16:27 EST