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The Obama administration is doing the best it can to balance competing agendas. It is trying to maintain its commitment to its ally, the government of Egypt, which for close to 30 years has maintained stable peace with Israel, and has been a bulwark against extremism in the region and extremism in Iran. But the administration also realizes it must embrace the uprising and calls for democratic reform.

Thus far, the administration’s position has been fraught with contradictions. On Tuesday, White House Press Secretary Robert Gibbs described Mubarak's regime as stable, while on Thursday night, Vice President Biden said that President Mubarak is not a dictator. Yet Secretary Clinton said yesterday that the administration wants to see a transition to democracy.

This leads to three major questions. How should the U.S. respond and react to the situation in Egypt? What does this mean for American policy? And finally, what does this mean for the Obama administration?

There is no simple solution to the crisis in Egypt. Yet in the short-term, it seems pretty clear that President Mubarak has to go, as he has lost all credibility. Whether the newly appointed vice president, Omar Suleiman, and newly appointed Prime Minister Ahmad Shafiq have the credibility to serve until elections are held, is unclear. But the United States has to work to facilitate an immediate transfer of power away from Mubarak to an interim government that will hold free and fair internationally-supervised elections.

The United States cannot do what it did in Iran when it failed to support the Last Great Revolution in 1979, on the basis that engaging the opposition would destabilize the regime with whom they felt they could reach a nuclear deal. This position did not work, and it has done nothing to impede Iran’s development of nuclear weapons. In fact, the U.S.’s position may well have enhanced it.

So the stakes are very high in Egypt, and there needs to be full U.S. engagement for transition to a democratic rule. To be sure, it’s not for the Americans to say who should and who should not run in the elections. But on the other hand, if we do not engage fully and are not seen as being on the side of democracy, Muslim Brotherhood, an offshoot of an Islamic fundamentalist group with links to Hamas and Hezbollah, will likely do better rather than worse.

It is also not clear that Mohamed ElBaradei, the leader whom the opposition is temporarily united around, has the credibility and clout to win an election. But one thing is clear: If the United States is not seen as supporting an open process that allows all forces to participate, our credibility as a nation will erode.

Indeed, our position in the region is eroding, with the emergence of a Hezbollah-led government in Lebanon, and with the revolts in both Tunisia and Yemen. To be sure, it is not clear that these situations will result in hurting the United States. But it is entirely possible that in a year from now, we will have governments in each of those nations that are hostile to the United States, hostile to the Middle East peace process, and in the worst case scenario in Egypt, have a government that has abrogated the long-running peace treaty with Israel.

This is the long-term, large-scale problem for the Obama administration. If they find themselves on the wrong side of democracy in the Middle East in a year from now, having “lost” Lebanon, Egypt, and potentially Tunisia and Yemen, the president’s ability to lead could be compromised and his ability to get reelected compromised further still.

Most observers thinking about the 1980 presidential election point to the hostage crisis as being emblematic and symbolic of Jimmy Carter’s incompetence. And with an economy that remains weak despite the 3.2 percent growth rate reported Friday, with unemployment at 9.4 percent and a ballooning federal deficit, signs of incompetence and national insecurity could be a potentially fatal blow to the president’s reelection efforts.

Douglas E. Schoen is a political strategist and author of the new book "Mad as Hell: How the Tea Party Movement is Fundamentally Remaking Our Two-Party System" published by Harper, an imprint of HarperCollins.