No, hell didn’t freeze over last week, but it sure felt like it on Capitol Hill. While the presidential contests on both sides devolved into close facsimiles of an Ali-Frazier fight, House Republican and Democratic leaders and President Bush discovered the Washington equivalent of the Holy Grail. They found common ground.

[IMGCAP(1)]The House leaders’ economic stimulus package, agreed to last Thursday by Speaker Nancy Pelosi (D-Calif.), Minority Leader John Boehner (R-Ohio) and the Bush administration, may not have been Reagan and Gorbachev ending the Cold War, but for a capital that hasn’t seen a relatively friendly, bipartisan compromise on a major piece of legislation in years, it was a welcome turn of events.

When the Fed signaled the need for quick Congressional action on a slowing economy, Pelosi, Boehner and Treasury Secretary Henry Paulson on behalf of the administration were able to put aside partisan jockeying, most amazingly in the middle of a hot presidential primary season, and get the job done. Now, the onus is on the Senate to take a similar tack and resist its natural inclination to load down the $150 billion stimulus package with extraneous and unnecessary funding and programs.

Dissecting the details of this deal to keep the American economy from slipping into recession probably would make a fascinating read, but what makes it especially interestingly is the fact that the solution came from Capitol Hill, not the presidential campaign trail. Most political observers assumed once the actual primary voting began, the candidates, both Democratic and Republican, would set the national policy agenda and debate.

For most of last year, Democratic Congressional leaders, presidential candidates and media focused on the Iraq War as the top issue. More than one pundit, particularly on the Democratic side, predicted that the outcome in Iraq would determine the outcome of the 2008 election.

But a closer look at the 2006 exit polls would have shown them that, in reality, the American public already had moved on, as respondents cited the economy, not the war or scandals, as the most important issue in determining their vote. Yet, throughout most of last year, the Democratic presidential candidates’ central argument revolved around who was the most consistent opponent of the war and who would get the troops home faster.

But that was before the surge began to work and the housing crisis and stock market dive that followed changed the dynamics of the Hill and the presidential campaign. As presidential primary voting neared, the administration and Congress were seen more and more as lame ducks, tasked with keeping the government running until the next election. No one expected them to be able to get much done in the election year.

Conventional wisdom had it that when it came to developing new policy and programs, the presidential campaigns were where the action would likely be. But thanks to the new media’s ability to turn public attention to an issue practically overnight, a bipartisan economic stimulus package became a national priority in a matter of days, and the spotlight returned to Capitol Hill.

It was a surprise to many to find solutions coming from that most unlikely of places, the House, where some of the hardest-fought partisan battles have raged for the past 15 years. Instead of the presidential campaigns, Congress and the administration, at least for the moment, found themselves at the policy-setting center of gravity once again.

In the negotiations between Pelosi, Boehner and Paulson, pragmatism replaced partisanship. Democrats, stinging from criticism that they have failed, as the majority party, to get much done, were willing to put their wishes for a bigger and more expansive bill on the back burner. Republicans, who would have preferred a more targeted approach that limited rebates to taxpayers along with help for small business, accepted reality, too.

They understood that as the minority, this was the best they were going to get. And, in the case of an ailing economy, something was better than nothing. Moreover, from their perspective, putting money directly back into the pockets of working Americans rather than indirectly through expanded government programs was consistent with Republican economic philosophy even if tax cuts were their preferred approach.

For the next couple of weeks, as many of the big delegate-rich states hold their primaries, we may see Washington shaping more presidential campaign discourse because it’s clear that voters, again thanks to new media, can now focus on more than one political arena and issue at a time. Who benefits?

For Republicans, getting the political focus back on the economy gives them a slight edge. This remains a center-right country, and tax hikes are no more popular today than they ever were.

The presidential candidates will offer their solutions for what ails the economy, and voters surely will listen. But they also will watch as Congress debates economic policy, whether to keep taxes low to help the middle class afford increasing health care costs, gas prices, and local property taxes and provide help for small business or whether to raise taxes in order to expand government programs and assistance.

As they do, the fundamental differences between Republicans and Democrats when it comes to tax and spending policies will become apparent in very concrete ways.

David Winston is president of The Winston Group, a Republican polling firm.