“The Administration remains on a post-health care reform “high”. In terms of politics, President Obama has clearly decided that the best form of defense is offence. In the course of an active program of domestic travel to champion the reform benefits, he is challenging the Republicans to maintain their united front against him.
He is now moving ahead on financial and energy legislation. As yet, we see few signs of Republican defections from their opposition front, but there is little doubt that the Administration feels that it has a better story to tell in the November mid-term elections. We still believe that the Democrats face significant losses.
On foreign policy, Obama is also forcing the pace. On China, as we reported last week, there are signs that tensions are easing. President Hu Jintao will attend the April 12th-13th Nuclear Security Summit in Washington. Further, intense exchanges are in progress between the US and Chinese financial authorities which, Treasury officials believe, will enable them to avoid naming China as a “currency manipulator” in its report scheduled to be presented to Congress on about April 15th. A modest appreciation in the value of the Chinese Yuan is likely to be part of the package.
Obama is also engaging himself in the search for international support for tougher sanctions against Iran. NSC officials tell us that they feel that China is now close to accepting the need for such sanction. Although the Administration has scaled down its original positions which would have involved broad sanctions against Iran, senior officials are also privately and despite public denials drawing a link to a link between a more helpful Chinese line on sanctions and a less aggressive US insistence on the currency issue. Now, they will be more narrowly targeted against the Iranian government and military leadership.
Less positively, White House officials are dismayed by Afghan President Karzai’s anti-UN outburst just days after Obama’s March 28th visit to Kabul. With the US military surge now in full flow, they are fearful that, as one official confided to us, “the political and military tracks are diverging.” Similar concerns are evident relating to Iraq where the US is still hoping for a sufficiently stable government situation to allow US combat troops to adhere to their summer withdrawal schedule.”