Having reached the midway point of this term, the Obama administration is now at a logical time to evaluate where its effort in Israeli-Palestinian mediation stand, and to look ahead at prospects for the future.The Obama administration inherited challenging conditions in 2009. The Bush administration’s effort to define the Israeli-Palestinian endgame up front (in what is known as the Annapolis Conference) had come up short. Israeli prime minister Ehud Olmert faced corruption charges and was ultimately forced to resign. During the final months of 2008, promising back-channel efforts with Palestinian president Mahmoud Abbas succeeded in narrowing territorial differences to a little over 4 percent of the West Bank. But the process was not durable. It went up in smoke with Olmert’s resignation and the Gaza War, which raged from late 2008 to just before Barack Obama’s inauguration.David Makovsky is the Ziegler distinguished fellow at the Washington Institute for Near East Policy, where he directs its Project on the Middle East Peace Process.As Obama entered office, a very different political landscape began to emerge between Israelis and Palestinians. A new Netanyahu government was formed after the February 2009 elections in Israel. The new administration was not keen on picking up the Annapolis process where Olmert and Abbas left off. Abbas, for his part, found himself cornered: He did not trust Netanyahu and he felt trapped by Obama’s call for a complete settlement freeze in the spring of 2009. As Abbas has stated both in public interviews and in a private conversation we had in Ramallah this summer, he had never insisted upon a settlement freeze being a precondition for talks during previous negotiations with Olmert. Nor had Arafat made this a precondition in negotiations with Rabin and Barak. In several public interviews over the last year, Abbas has blamed the United States for instilling a settlement freeze as his own precondition (although to be fair to the administration, it never called it a precondition). Abbas feels Obama, in his words, got him “up a tree” without a “ladder” – he could not be outflanked by appearing to be less pro-Palestinian than President Obama.While the United States was correct in pinpointing settlements as a major irritant, setting the bar as high as a complete construction freeze led to even opponents of the settlement cause in Israel to be silent. There were no rallies in Israel saying “Yes to Obama” once Netanyahu said he was already willing not to geographically expand the settlements.This was a position he did not take in the past. The administration could have instead assumed the position of non-expansion instead of a total freeze. Had the administration taken this alternate position, this issue would have been defused and final status negotiations would not have been prejudged.Instead, Arab critics would judge the settlement moratorium as falling short of a full freeze, even though the United States has done more than any of its predecessors. Neither my colleague Robert Malley or myself are huge fans of settlements.Yet I agree with what Malley told the New York Times on October 6, 2010, regarding the U.S. approach of settlements.“The original sin,” Malley wrote, “was putting so much emphasis, an issue we couldn’t resolve.” He added, “We’ve spent the whole year trying to undo the damage of that step.”Indeed, something odd would transpire.With the bar set so high, the Abbas government rejected the U.S.- endorsed settlement moratorium of November 2009 as falling short of what was truly needed. Yet, by August 2010, what was insignificant the previous fall had suddenly become indispensible.Abbas insisted that the settlement moratorium must continue. Suddenly, the inconsequential become indispensible in a remarkable turn of events. Moreover, nine of the ten months in which the moratorium was in place were utterly wasted by the Palestinians. Moreover, the Arab states did not come through with their promise of early 2009 to match Israelis steps towards the Palestinians with steps of their own towards Israel. All this, in turn, was used by the Israelis as a reason not to extend the moratorium in September 2010. The November 2009-August 2010 period was an opportunity utterly lost, a loss magnified by the fact that developments on the ground were good. Economic growth in the West Bank was 9 percent last year, according to the International Monetary Fund. (Economic growth cannot be divorced from international economic assistance, and that may come under budgetary pressure given changes in U.S. midterm elections.) There were problems on the Israeli side too, as Israeli foreign minister Avigdor Lieberman disparaged his own premier’s peacemaking efforts, saying peace will not come in this generation or the next, either. By the way, the single month of the moratorium in which the Palestinians agreed to direct talks, September 2010, lacked a bold focus on territory in the negotiations that could have forced the Palestinians to put the extension of the moratorium in a wider context.SO HOW to avoid further missed opportunities and ensure that the settlement issue no longer overshadows the issue of peace negotiations? On one hand, Netanyahu has reached some degree of success with President Obama this summer.Having never paid Netanyahu any compliments in the past, Obama came out of their July 6 meeting and said, “I think he wants peace. I think he’s willing to take risks for peace.”Having reversed course and endorsed the two state solution in a policy speech in June 2009, Netanyahu apparently confided in Obama about his specific endpoint in reaching a two-state solution.The fact that he wants to hold the peace talks directly with Abbas could be a sign of seriousness that he does not want talks ensnarled by midlevel footdragging.While Netanyahu may have successfully shared an objective with the United States and the Palestinians, he has not demonstrated a strategy to overcome his domestic constraints and reach the ultimate objective. Herein lays the Netanyahu paradox. On one hand, Netanyahu fears a premature fracturing of the Israeli right whereby Lieberman will attack his preliminary concessions, causing Netanyahu to lose his electoral base. To this end, Netanyahu hopes to conduct negotiations in such an intimate setting with Abbas that he will be forced to make major decisions only at the final moment, culminating in one big decision point. Until then, he seeks to preserve his political capital and his coalition.This presumes that the Middle East operate under laboratory-like conditions with hermetically sealed rooms and a friction-free period during the entire duration of the peace talks. Yet the Middle East does not operate under laboratory conditions, and therefore one may never reach the point where the political capital can finally be spent.The paradox of N e t a n y a h u ’ s approach of making only one massive decision at the end and avoiding all decisions along the way is that it could invite the very outcome that he seeks to avoid, which is an Obama peace plan.For if the United States is convinced the parties will not be able to reach a decision due to the political wear and tear they will experience along the way, Obama may be prompted to put forward a plan for the peace talks in order to prompt that very big decision.Indeed, traditionally U.S. plans work best as bridges over a river – not over an ocean. The Clinton Parameters of December 2000 is an example of a bridge over a river, as the parties were not far apart. A plan could also fit in a radically different context, namely as a walk-away strategy for the United States, hoping to stir public debate in each society.Those who favor an Obama plan today want a third path, viewing it as a potential instrument for breakthrough while not viewing it as an imposed solution in any way. While no U.S. decision has been taken in this direction of a U.S.plan, given American clear preference for direct negotiations between the parties, the probability of such a third path needs to be weighed very carefully.If Israel wants to avoid the United States putting forward an approach at a time that talks have hit an utter impasse, it seems to me as an individual analyst, there is a way out. This is to ensure that the Netanyahu government is broadened to include the Kadima party, which has a critical twenty-eight seats in the 120 member Knesset. With a broadened Netanyahu-led government, there will be sturdy support for a strategy to reach a two-state solution. Suddenly the idea of an objective and a strategy to reach the objective seem to be in synch. Of course, its drawback is that the United States is not positioned to advance this idea given the sensitivities of intervention of domestic politics in any country, not only Israel.Whether it is the policy of a U.S.-led approach or the politics of a broadened government in Israel, these are two possible options for the coming year.Even under the best of circumstances, it will be difficult for both peoples to solve all of their differences. There has been little conditioning of the societal landscape of both societies in dealing with the two narrative issues of this conflict: Jerusalem and refugees. Both issues cut to the self-definition of the parties given how intertwined the issues of religion and nationalism have become. Yet it is important to remember that the territorial differences between the parties were narrow during the Olmert-Abbas negotiations, and these differences are indeed bridgeable. This very day marks the fifteenth anniversary of the killing of Yitzhak Rabin, the iconic ex-general who gave his life for peace. This month is also the sixth anniversary of the death of Yasser Arafat, whose legacy will surely be debated, but who personified Palestinian nationalism. The tragedy of this conflict should not be allowed to continue for another generation. Based on twin pillars of dignity and security, we should not allow the past to bury the future in the Middle East.