US President Barack Obama is an extremely intelligent man surrounded by equally intelligent advisers, many of whom have years of experience dealing with the Middle East. His continued misreading and misunderstanding of the Israeli public is, therefore, somewhat baffling.This misread was evident again in the past few days by the US objection to the Jerusalem Municipal Planning Committee's approval of a plan to build some 900 new units in Gilo - not in a far-flung settlement overlooking Nablus, nor even in one of the settlement blocs like Gush Etzion, nor even a Jewish complex in one of the Arab neighborhoods of the capital, but in Gilo, one of the large new neighborhoods built in the city following the Six Day War. If Israel cannot build in Gilo without US approval, than it cannot build in Ramot Eshkol, French Hill, Ramot, Neveh Yaakov, Pisgat Ze'ev, East Talpiot or Har Homa.White House spokesman Robert Gibbs on Tuesday expressed "dismay" at the decision. The dismay, however, cuts both ways, with many Israelis clearly dismayed that the US - like Europe - now seems to be considering as settlements the post-1967 neighborhoods in Jerusalem. The EU, clearly following Gibbs's lead and then taking it one step further, released a statement on Wednesday saying, "The European Union is dismayed by the recent decision on the expansion of the settlement of Gilo."Truth be told, this is not the first indication of US policy on this matter. Former US secretary of state Condoleezza Rice seemed to be giving the new neighborhoods settlement status in 2007 when she opposed a new project in Har Homa. She didn't clarify, however, whether other Jerusalem neighborhoods over the Green Line, such as Gilo and Ramot, were settlements in the eyes of the United States.However, the Obama team's call for a complete settlement halt also included a halt to new construction in east Jerusalem, something Prime Minister Binyamin Netanyahu refused to accept.By continuing to press the issue, Obama - who recently showed nascent signs of wanting to engage the Israeli public out of an understanding that if you want to get Israel to make concessions, Israel will need to trust the US president - risks further alienating the Israeli public. According to a Jerusalem Post poll conducted in August, only four percent if Israelis consider him to be pro-Israel.When Obama came to power in January, he apparently did so with two basic assumptions regarding Israel.The first was that the Israeli public so cherishes its relationship with the US that it would not tolerate any daylight between Jerusalem and Washington, and that if its government was responsible for that daylight, then it would replace that government with another in order to preserve the special relationship with Washington.The second assumption was that the Israeli public hated the settlements.Based on those two assumptions, Obama immediately upon taking office pressed Israel hard on the settlement issue, calling for an unprecedented complete halt to all settlement construction, including in Jerusalem.The administration's working premise seemed to be that since the Israeli public was not enamored of the settlements in any event, if Obama pushed hard on that issue, the Israeli public would pressure its own government to give rather than risk a fissure with the Obama administration.But the assumptions were mistaken. The Israeli public does not hate the settlements. Granted, it does not like the illegal settlement outposts, or what it sees as the extremists among the ideological settlements, but the public makes a distinction between those settlements outposts and those extremists and the large settlement blocs, such as Ma'aleh Adumim and Gush Etzion, which are well within the Israeli consensus. And the public certainly doesn't view the neighborhoods of Jerusalem, as the Europeans said in their statement, as "settlements."Pressing a construction freeze in those areas was widely viewed by the public as an unreasonable demand, especially when it was not accompanied by any demands on the Arabs or Palestinians.Rather than rallying around Obama, Israelis have - according to polls that shows Netanyahu's popularity rising - rallied around Netanyahu. And no issue will make them rally even further around the prime minister than Jerusalem.Netanyahu understands this, which is why his office was behind a leak during the summer about Obama's objections to Jewish building at the Shepherd's Hotel site in Sheikh Jarrah, and was also likely behind the leak this week of US objections to the Gilo plan. In the summer, the objection to the Shepherd's Hotel plan made the administration's demands seem unreasonable to the Israeli public, as the Gilo objections have done now.The irony is that this has come at a time when it looked as if Obama understood that his much touted outreach to the Arab and Muslim world had to be accompanied by some kind of dialogue with Israel; that he needed to talk with the Israelis and the Jews. Thus he addressed the public in a video welcome aired at last month's conference in Jerusalem put on by President Shimon Peres; thus he addressed by video a rally at Kikar Rabin earlier this month on the anniversary of the Rabin assassination; and thus he had planned to address the Jewish Federation's General Assembly in Washington last week.That address was cancelled at the last minute, however, when Obama needed to fly to Texas to participate in a memorial ceremony for the 13 servicemen killed there by Maj. Nidal Hasan. And any attempt to get off on a better footing with Netanyahu was foiled by the hesitant dance surrounding whether or not there would be a meeting, and then the clandestine manner in which that meeting took place. What looked like an attempt by the administration to positively engage Israel sputtered. And now, with the Gilo issue, these efforts risk faltering altogether.