Washington’s World: December 20th – December 26th, 2010

As we commented last week, President Obama is embarking on a new phase of his presidency in which he will seek to navigate between left and right. He has started with two successes – on taxation and gays in the military. Given that both these measures passed with substantial Republican and, according to opinion polls, popular support, the question under debate in Washington is whether these successes provide a template for Obama’s next two years in office and a platform for reelection in 2012. Certainly, Democrats take comfort from signs of Republican disarray over taxes and spending. Nonetheless, our assessment is that it is too early to draw conclusions. In many ways, the present successes represent ‘unfinished business’ at the end of this Congress. The incoming Republican House majority is significantly more committed – at least rhetorically – to changing ‘business as usual’ on government spending. This will present a difficult challenge for Obama to assemble a majority for the federal budget he is doe to present in April. The political energy required on this front will inevitably subtract from foreign affairs. As we have already seen, the Middle East peace process cannot sustain itself without strong and continual presidential engagement. In his first two years in office Obama has only occasionally lent his full weight to negotiations. We doubt that this pattern will change. The same is likely to be true on Afghanistan. Here, the recent policy review has confirmed the existing policy trajectory but has done little to reconcile the internal divisions within the Administration and the foreign policy community. The split between Obama’s civilian advisers (who tend to be skeptical) and his generals (who tend to be more optimistic) is now in the open. On East Asia, however, we expect to see a more consistent focus. The level of concern about China is now deeply embedded among foreign policy experts from both left and right. Chinese policy over North Korea has been the catalyst, but suspicion of China will be a hallmark of US policy for the foreseeable future.