OBAMA: FIRST MOVES

By George Friedman

Three weeks after the U.S. presidential election, we are getting

the first signs of how President-elect Barack Obama will govern. That now goes well
beyond the question of what is conventionally considered U.S. foreign
policy -- and thus beyond Stratfor's domain. At this moment in history,
however, in the face of the global financial crisis, U.S. domestic policy is
intimately bound to foreign policy. How the United States deals with its own

internal financial and economic problems will directly affect the
rest of the world.

One thing the financial crisis has demonstrated is that the world is very
much America-centric, in fact and not just in theory. When the United
States runs into trouble, so does the rest of the globe. It follows then
that the U.S. response to the problem affects the rest of the world as
well. Therefore, Obama's plans are in many ways more important to
countries around the world than whatever their own governments might be
planning.

Over the past two weeks, Obama has begun to reveal his appointments. It
will be Hillary Clinton at State and Timothy Geithner at Treasury.
According to persistent rumors, current Defense Secretary Robert Gates
might be asked to stay on. The national security adviser has not been
announced, but rumors have the post going to former Clinton administration
appointees or to former military people. Interestingly and revealingly, it
was made very public that Obama has met with Brent Scowcroft to discuss
foreign policy. Scowcro ft was national security adviser under President
George H.W. Bush, and while a critic of the younger Bush's policies in
Iraq from the beginning, he is very much part of the foreign policy
establishment and on the non-neoconservative right. That Obama met with
Scowcroft, and that this was deliberately publicized, is a signal -- and
Obama understands political signals -- that he will be conducting foreign
policy from the center.

Consider Clinton and Geithner. Clinton voted to authorize the Iraq war --
a major bone of contention between Obama and her during the primaries. She
is also a committed free trade advocate, as was her husband, and strongly
supports continuity in U.S. policy toward Israel and Iran. Geithner comes
from the Federal Reserve Bank of New York, where he participated in
crafting the strategies currently being implemented by U.S. Federal
Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson.
Everything Obama is doing with his appointments is signaling continuity in
U.S. policy.

This does not surprise us. As we have written previously, when Obama's
precise statements and position papers were examined with care, the
distance between his policies and John McCain's actually was minimal.
McCain tacked with the Bush administration's position on Iraq -- which had0
shifted, by the summer of this year, to withdrawal at the earliest
possible moment but without a public guarantee of the date. Obama's
position was a complete withdrawal by the summer of 2010, with the proviso
that unexpected changes in the situation on the ground could make that
date flexible.

Obama supporters believed that Obama's position on Iraq was profoundly at
odds with the Bush administration's. We could never clearly locate the
difference. The brilliance of Obama's presidential campaign was that he
convinced his hard-core supporters that he intended to make a radical
shift in policies across the board, without ever specifying what policies
he was planning to shift, and never locking out the possibility of a
flexible interpretation of his commitments. His supporters heard what they
wanted to hear while a careful reading of the language, written and
spoken, gave Obama extensive room for maneuver. Obama's campaign was a
master class on mobilizing support in an election without locking oneself
into specific policies.

As soon as the election results were in, Obama understood that he was in a
difficult political situation. Institutionally, the Democrats had won
substantial victories, both in Congress and the presidency. Personally,
Obama had won two very narrow victories. He had won the Democratic
nomination by a very thin margin, and then won the general election by a
fairly thin margin in the popular vote, despite a wide victory in the
electoral college.

Many people have pointed out that Obama won more decisively than any
president since George H.W. Bush in 1988. That is certainly true. Bill
Clinton always had more people voting against him than for him, because of
the presence of Ross Perot on the ballot in 1992 and 1996. George W. Bush
actually lost the popular vote by a tiny margin in 2000; he won it in 2004
with nearly 51 percent of the vote but had more than 49 percent of the
electorate voting against him. Obama did a little better than that, with
about 53 percent of voters supporting him and 47 percent opposing, but he
did not change the basic architecture of American politics. He still had
won the presidency with a deeply divided electorate, with almost as many
people opposed to him as for him.

Presidents are not as powerful as they are often imagined to be. Apart
from institutional constraints, presidents must constantly deal with
public opinion. Congress is watching the polls, as all of the
representatives and a third of the senators will be running for
re-election in two years. No matter how many Democrat s are in Congress,
their first loyalty is to their own careers, and collapsing public opinion
polls for a Democratic president can destroy them. Knowing this, they have
a strong incentive to oppose an unpopular president -- even one from their
own party -- or they might be replaced with others who will oppose him. If
Obama wants to be powerful, he must keep Congress on his side, and that
means he must keep his numbers up. He is undoubtedly getting the honeymoon
bounce now. He needs to hold that.

Obama appears to understand this problem clearly. It would take a very
small shift in public opinion polls after the election to put him on the
defensive, and any substantial mistakes could sink his approval rating
into the low 40s. George W. Bush's basic political mistake in 2004 was not
understanding how thin his margin was. He took his election as vindication
of his Iraq policy, without understanding how rapidly his mandate could
transform itself in a profound reversal of public opinion. Having very
little margin in his public opinion polls, Bush doubled down on his Iraq
policy. When that failed to pay off, he ended up with a failed presidency.

Bush was not expecting that to happen, and Obama does not expect it for
himself. Obama, however, has drawn the obvious conclusion that what he
expects and what might happen are two different things. Therefore, unlike
Bush, he appears to be trying to expand his approval ratings as his first
priority, in order to give himself room for maneuver later. Everything we
see in his first two weeks of shaping his presidency seems to be designed
two do two things: increase his standing in the Democratic Party, and try
to bring some of those who voted against him into his coalition.

In looking at Obama's supporters, we can divide them into two blocs. The
first and largest comprises those who were won over by his persona; they
supported Obama because of who he was, rather than because of any
particular policy position or because of his ideology in anything more
than a general sense. There was then a smaller group of supporters who
backed Obama for ideological reasons, built around specific policies they
believed he advocated. Obama seems to think, reasonably in our view, that
the first group will remain faithful for an extended period of time so
long as he maintains the aura he cultivated during his campaign,
regardless of his early policy moves. The second group, as is usually the
case with the ideological/policy faction in a party, will stay with Obama
because they have nowhere else to go -- or if they turn away, they will
not be able to form a faction that threatens his position.

What Obama needs to do politically, then, is protect and strengthen the
right wing of his coalition: independents and republicans who voted for
him because they had come to oppose Bush and, by extension, McCain.
Second, he needs to persuade at least 5 percent of the electorate who
voted for McCain that their fears of an Obama presidency were misplaced.
Obama needs to build a positive rating at least into the mid-to-high 50s
to give him a firm base for governing, and leave himself room to make the
mistakes that all presidents make in due course.

With the example of Bush's failure before him, as well as Bill Clinton's
disastrous experience in the 1994 mid-term election, Obama is under
significant constraints in shaping his presidency. His selection of
Hillary Clinton is meant to nail down the rightward wing of his supporters
in general, and Clinton supporters in particular. His appointment of
Geithner at the Treasury and the rumored re-appointment of Gates as
secretary of defense are designed to reassure the leftward wing of McCain
supporters that he is not going off on a radical tear. Obama's gamble is
that (to select some arbitrary numbers), for every alienated ideological
liberal, he will win over20two lukewarm McCain supporters.

To those who celebrate Obama as a conciliator, these appointments will
resonate. For those supporters who saw him as a fellow ideologue, he can
point to position papers far more moderate and nuanced than what those
supporters believed they were hearing (and were meant to hear). One of the
political uses of rhetoric is to persuade followers that you believe what
they do without locking yourself down.

His appointments match the evolving realities. On the financial bailout,
Obama has not at all challenged the general strategy of Paulson and
Bernanke, and therefore of the Bush administration. Obama's position on
Iraq has fairly well merged with the pending Status of Forces Agreement in
Iraq. On Afghanistan, Central Command chief Gen. David Petraeus has
suggested negotiations with the Taliban -- while, in moves that would not
have been made unless they were in accord with Bush administration
policies, Afghan President Hamid Karzai has offered to talk with Taliban
leader Mullah Omar, and the Saudis reportedly have offered him asylum.
Tensions with Iran have declined, and the Israelis have even said they
would not object to negotiations with Tehran. What were radical positions
in the opening days of Obama's campaign have become consensus positions.
That mean s he is not entering the White House in a combat posture, facing
a disciplined opposition waiting to bring him down. Rathe
r, his most important positions have become, if not noncontroversial,
then certainly not as controversial as they once were.

Instead, the most important issue facing Obama is one on which he really
had no position during his campaign: how to deal with the economic crisis.
His solution, which has begun to emerge over the last two weeks, is a
massive stimulus package as an addition -- not an alternative -- to the
financial bailout the Bush administration crafted. This new stimulus
package is not intended to deal with the financial crisis but with the
recession, and it is a classic Democratic strategy designed to generate
economic activity through federal programs. What is not clear is where
this leaves Obama's tax policy. We suspect, some recent suggestions by his
aides notwithstanding, that he will have a tax cut for middle- and
lower-income individuals while increasing tax rates on higher income
brackets in order to try to limit deficits.

What is fascinating to see is how the policies Obama advocated during the
campaign have become relatively unimportant, while the issues he will have
to deal with as president really were not discussed in the campaign untilA 0
September, and then without any clear insight as to his intentions. One
point we have made repeatedly is that a presidential candidate's
positions during a campaign matter relatively little, because there is
only a minimal connection between the issues a president thinks he will
face in office and the ones that he actually has to deal with. George W.
Bush thought he would be dealing primarily with domestic politics, but his
presidency turned out to be all about the U.S.-jihadist war, something he
never anticipated. Obama began his campaign by strongly opposing the Iraq
war -- something that has now become far less important than the financial
crisis, which he didn't anticipate dealing with at all.

So, regardless of what Obama might have thought his presidency would look
like, it is being shaped not by his wishes, but by his response to
external factors. He must increase his political base -- and he will do
that by reassuring skeptical Democrats that he can work with Hillary
Clinton, and by showing soft McCain supporters that he is not as radical
as they thought. Each of Obama's appointments is designed to increase his
base of political support, because he has little choice if he wants to
accomplish anything else.

As for policies, they come and go. As George W. B ush demonstrated, an
inflexible president is a failed president. He can call it principle, but
if his principles result in failure, he will be judged by his failure and
not by his principles. Obama has clearly learned this lesson. He
understands that a president can't pursue his principles if he has lost
the ability to govern. To keep that ability, he must build his coalition.
Then he must deal with the unexpected. And later, if he is lucky, he can
return to his principles, if there is time for it, and if those principles
have any relevance to what is going on around him. History makes
presidents. Presidents rarely make history.


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