I agree with my colleague Peter Feaver that the president's State of the Union address focused predominantly on domestic policy. This is unsurprising, however, given the economic and other domestic challenges faced by the United States and President Obama's preoccupation with those challenges since assuming office.

Nevertheless, I believe that the 2011 State of the Union address demonstrated an evolution in the Obama administration's foreign policy focus. The president's first State of the Union address in 2009 dealt briefly with Iraq (reaffirming the U.S. intention to depart), Afghanistan and Pakistan (announcing a review of strategy to "defeat al Qaeda and combat extremism"), and the Guantanamo Bay detention center (promising to close it). He also announced a "new era of engagement," stressing the United States' need for help in addressing the world's problems and the world's need for U.S. leadership. All in all, about 400 words were devoted to foreign policy.

The 2010 State of the Union address reprised the 2009 themes (save Gitmo), while including a fuller discussion of nuclear nonproliferation and brief references to Iran and North Korea. The discussion of Iraq and Afghanistan was also meatier. While in 2009 the president said only that he would "announce a way forward in Iraq that leaves Iraq to its people and responsibly ends [the] war," in 2010 he spoke of "partner[ing] with the Iraqi people to promote regional peace and prosperity." While in 2009 his discussion of Afghanistan was limited to mentioning the strategy review and the need to defeat al Qaeda and deny it safehavens, in 2010 he repeated those themes, but also spoke of training Afghan forces, encouraging good governance, combating corruption, and other elements of U.S. policy. And his discussion of "engagement" shifted subtly to focus more on U.S. leadership.

In 2011, these shifts continued, though the foreign policy portion of this year's State of the Union is startlingly similar -- in themes, structure, and length -- to that in 2010 speech. The 2011 version evinces a greater willingness to speak frankly about our foes: the Taliban are mentioned for the first time, and the president referred to the "Iranian Government" rather than the "Islamic Republic of Iran," the latter a phrase which in previous remarks was intended to convey respectfulness and signal our pacific intent. Other areas of the world get their first mention -- India and Brazil, for example. The president reaffirmed his support for the "democratic aspirations of all people," continuing a theme from his most recent U.N. General Assembly speech and Secretary Clinton's speech earlier this month at the Forum for the Future. Unlike in those instances, however, this time the president lent specific support to democracy activists in Tunisia. And crucially, the president strongly asserted his belief in U.S. virtues, values, and leadership, which underpin our global influence and ambitions.

So yes, the speech is short on discussion of foreign policy, contains plenty of gloss (like all State of the Union speeches), omits important issues (like long-term strategies for Iraq and Afghanistan, and Egypt and Lebanon, both gripped by crises), and falls short on defense spending. But it suggests a continued movement away from feel-good foreign-policy slogans (such as 2009's "new era of engagement") and criticism of the previous administration, toward a greater willingness to take sides, focus on vital interests rather than trendy issues, and delve into the complexities and nitty-gritty of policy.

To be sure, there is a long way to go. President Obama has yet to articulate a bold foreign policy vision, and instead continues to take an issue-by-issue approach bound together by unobjectionable, but relatively insubstantial references to "engagement." Campaign rhetoric aside, the United States has been engaged multilaterally in international affairs since at least World War II, and will be for the foreseeable future. It may be that the president believes that restoring the United States' competitive edge -- through economic growth, education, investment in R&D and infrastructure, etc. -- is itself something of a foreign-policy strategy in a globalized world. But while such measures are necessary for maintaining and enhancing U.S. prosperity and leading international role, they do not address how we utilize that role. That is the question that in my view remains unanswered, and which we see the U.S. currently shying away from in places like Egypt. It is unquestionably good that we reaffirm U.S. leadership and influence, but it is not sufficient. Eventually the president must lay out to what end and on whose behalf we will exercise our leadership and wield our influence.

By Phil Levy

In today's New York Times, we read this:

“The U.S. needs to show some proof they have a plan to get out of the fiscal problem,” said Ernesto Zedillo, the former Mexican president who helped steer his country through a financial crisis in 1994. “We, as developing countries, need to know we won’t be crowded out of the capital markets, which is already happening.”...

“People are not stupid,” Mr. Zedillo said. “They see the huge deficit, the huge spending, and wonder what comes next.”

I erred in my earlier post on the international aspects of the stimulus bill. I was excessively optimistic. I said we might get away with lots of governments borrowing lots of money all at once for a while, since the private sector isn’t doing anything with the money at the moment. In fact, as Ernesto Zedillo goes on to note in the Times, developing countries are already finding it hard to borrow, as lenders flee to the perceived safety of the U.S. bond market. I’ll stand by my prediction that trouble would eventually come; it’s just coming sooner than I had thought.

The trouble is not restricted to the developing world. The United States just had some difficulty marketing 5-year Treasury notes and 10-year bond yields have been rising sharply. These are not the very short rates that the Fed sets; they are the longer, market-determined rates that drive borrowing costs for businesses and home-buyers. As the crisis unfolded, global investors foresaw doom and piled into U.S. government bonds as a safe haven. The result was a plunge in interest rates and upward pressure on the dollar.

In the past few weeks and particularly in the last couple days, demand for Treasuries has fallen off and interest rates have been rising. There can be many causes, but one concern is how the United States will pay for all its borrowing.

There is a substantial risk here. Bloomberg today quotes a trader from China’s biggest bank as predicting that the "rout" in the Treasury market will deepen and rates will rise. Imagine, for a moment, that he believes what he’s saying. The story notes that Treasuries have lost almost 3 percent this month. The trader thinks more losses are soon to come. Unless he or his international colleagues think the dollar will appreciate, they would be safer selling their holdings and keeping their money in another currency (even if their own bonds have very low yields). If they do all sell their Treasuries, that will drive interest rates up and the dollar down, thereby validating their decision to sell (bubbles are nasty that way).  A weaker dollar might help U.S. exports, if only we weren’t launching a trade war. The higher interest rates won’t help at all in reviving the economy.

But wait, it gets worse! Cognizant of this threat from excessive borrowing, both Jeff Sachs (in his academic capacity) and Larry Summers (in his official capacity) have argued this week that the new spending means we will need tax hikes in the near future. While it is very difficult to see how spending in 2011 stimulates the economy now, it’s easy to see how raising taxes in the future could slow things in the present. From the perspective of any entrepreneur brave enough to invest and create jobs right now, high taxes could create a case of “heads, the government wins; tails, I lose.”

All of this is to say: there are some reasons besides partisan rancor why Republicans might hesitate to support the $819 billion stimulus bill.