A more confident US posture in the Arab world will face a huge setback soon: 'Veto Palestine!'

In the very quiet week before the final summer holiday of Labor Day on September 5th, President Obama faces yet another crisis of his presidency. The latest employment statistics, which showed a virtual standstill in job creation, have created a challenging backdrop for his September 8th address to Congress on the economy. This renewed evidence of a faltering economy has, as we expected, dulled much of the public relations boost that the Administration was receiving for its success in Libya. Preparations for the speech are, we hear, proceeding awkwardly. Obama’s advisers are split between those who advocate bold measures designed to have national appeal and those who favor a more modest package that might gain Republican support. Either way, the policy instruments available to the Administration to stimulate the economy are few and far between. The likelihood is that Obama will enter the final election cycle against the background of a weak economy.  Even if the field of Republican challengers still strikes many observers as thin, the President will find himself in serious jeopardy. Additionally, he has angered many of his core supporters by canceling clean air measures designed by his own Administration. On foreign policy, the most significant event on the horizon is Obama’s address to the UN General Assembly on September 20th. His problem is twofold: last year he promised progress on the Middle East peace process; this year he faces a likely General Assembly vote in favor of Palestinian statehood at a time when the peace process is moribund. While the US is now feeling more confident about its posture in relation to the reform movement inside the Arab lands – with Libya adding significant component of self-confidence – it knows that a US veto of Palestinian statehood – a foregone conclusion – will set back these efforts. As we mentioned last week, two other areas that merit continued watching are renewed concern about Iran's nuclear program and naval movements in the South China Sea, in which India, with the full support of the US, is now engaged. The Administration is not actively seeking to dramatize either issue, but officials do acknowledge that the combustible material is building.