With more than nine months down since coming to the White House, the Obama administration is facing the first real test of its ability to fundamentally alter certain cardinal rules in US domestic and foreign policy.

Domestically, the administration is devoting the bulk of its energies to three issues: reform of the healthcare system, readjusting the rules of the financial and banking sector, and developing a serious strategy for confronting environmental challenges. Unlike the situation in Canada, the EU countries, Japan and the advanced industrial countries in Asia, more than 45 million US citizens, primarily the poor, of limited income and unemployed, have no healthcare coverage. They are joined by more than 11 million illegal immigrants. Simultaneously, the healthcare market in the US is tightly controlled by private insurance firms that extend coverage only to those who can afford their various packages for short and long term medical treatment. Although previous Democratic administrations have fought to reform public healthcare, a cause energetically championed by the Clinton administration under the auspices of then first lady and current Secretary of State Hillary Clinton, their efforts inevitably ran up against a wall of Republicans that dominated Congress throughout most of the 1990s, backed by the powerful insurance firms and large segments of the American right. Obama's scheme, as laid out before Congress in September, proceeds from the premise that healthcare is a fundamental right of all citizens. Accordingly, insurance firms should put a stop to their rapaciousness and develop policies for the poor and of limited income that would be administered, if not necessarily funded, by the federal government. The so-called "public option" would not replace but compete with private insurance policies.

The healthcare issue has sharply polarised American public opinion, with the left and centre enthusiastically in favour of the president's scheme (with some, moreover, urging that it be extended at least to the children of illegal immigrants) while conservatives and the ultra right stand vehemently opposed on the grounds that it would drain the federal budget and place an additional burden on taxpayers. In addition to the large pro- and anti-reform demonstrations that have taken to the streets, the climate had been further charged by vitriolic rightwing rhetoric targeting Obama for adopting a "leftist" agenda and propelling the US towards "socialist" style state interventionism that characterises the approach of many European countries to vital social issues -- an approach that the American right maintains is unsuccessful and violates the American free market creed. The rightwing vitriol has extended into the halls of Congress, itself, with one southern congressman going so far as to call Obama a liar in front of the joint session of Congress. As vicious as the assault from the right has been, Obama nevertheless retains the strategic initiative in steering the public debate on healthcare, confident that the Democrats control the majority in both houses of Congress. He could most likely push his health plan bill through Congress before the year is up and boost his moral credibility ratings among the majority of the American public that supports him.

The Obama administration is facing almost equally tough opposition from the right and powerful economic interests on fiscal and environmental reforms. At a time when the national unemployment level has climbed to 9.7 per cent and recession in some vital economic sectors topped 20 per cent, Obama is keen to tighten control on the riskier practices of banking and financial institutions (his address on this issue marked a year since the collapse of Lehman Brothers) and to focus attention on environment-friendly industries and technologies as a major driving force of economic growth. At least support for his positions on these issues transcend the divide between left and right, to which testify the results of the Time magazine opinion poll published on 21 September. Nevertheless, change will not come easily, quickly and certainly not as completely as desired from the first round (the financial sector and environmental bills that Congress is currently reviewing fall far short of the radical reforms many had envisioned). What is clear, however, is that the Obama administration is serious in its determination to press forward towards the implementation of the items on his electoral campaign platform and that it will not shrink from broaching several sensitive domestic issues at the same time. But it could well be that policy issues are not the only source of political tension. Some Democrats, notably former president Jimmy Carter, have charged the Republicans with harbouring a racist bias against Obama and acting on the premise that as an African American he could not make a competent president. The Republicans countered that the accusation was a Democratic Party ploy to intimidate opponents to the president's policies. The Obama administration, meanwhile, has sustained a remarkable cool against the electrified backdrop, as was underscored when the official spokesman for the White House championed the values of true political competition and debate, saying that the president did not think that people who had reservations about his plans were motivated by hostility to the colour of his skin.

On the foreign policy front, the Obama administration set into motion the process of withdrawal from Iraq, tightened up the legal oversight on its fight against terrorism, and embarked on oratorical overtures to China and Russia, on the one hand, and the Arab and Islamic worlds on the other. In this general direction of reversing the Bush administration foreign policy approach, recent weeks have brought two critical developments. The first is to agree to engage in direct multilateral talks with the Islamic Republic of Iran (the West being represented by the five Security Council members plus Germany) to begin this month, and the second is to abolish the missile defence shield that was to be installed in Eastern Europe.

By agreeing to take part in negotiations with Iran, despite the reservations it as well as Britain, France and Germany have voiced on Tehran's latest proposal, which contains nothing new with regards to its nuclear programme, Washington has translated into practice its declared preference for dialogue, shelving for the time being recourse to military force in the handling of the Iranian question. This latter option is not lacking for some powerful supporters in the US, notably among them pro-Israeli forces and the hawkish American right whose pressures to use force to stop the Iranian nuclear programme recently gained new impetus following the doubts aired by International Atomic Energy Agency officials regarding the peaceful intent of Tehran's nuclear ambitions and following the widespread anger among the American public stirred by images of the violent suppression of pro-Mousawi protesters in the aftermath of the Iranian presidential elections. The decision on the missile shield, meanwhile, signifies both a reassessment of the potential danger posed by Iranian missiles and a desire to secure Russian support on this issue in advance of negotiations. However, the more important strategic signification is that it extricates the US-Russian relationship from the tug-of-war that the Bush administration set into motion over the regions adjacent to Russia and that had precipitated the highest levels of tension between the two powers since the end of the Cold War. On this issue, too, the Obama administration clashed with the powerful economic and military interests that had been vested in the missile shield and doggedly pushed its implementation under the Bush administration.

Yes, Washington is still facing considerable difficulties in Afghanistan, which is assuming a greater share in the public debate on foreign policy issues, and on the Arab-Israeli conflict with regards to which the Obama administration is still feeling its way as it fends off accusations of pressuring Israel. Nevertheless, with the decisions to negotiate directly with Iran and to abandon the missile shield it has demonstrated its ability to introduce major foreign policy changes despite some powerful opposition at home. These inroads, moreover, mark a victory for the Obama administration's advocacy of diplomacy in form and substance, which had been glaringly lacking throughout the Bush era.