According to former Israeli Prime Minister Ehud Olmert, Bibi Netanyahu has delivered "the worst possible slap in the face" to President Obama. Olmert was referring, of course, to Netanyahu's announcement that Israel will proceed with a settlement project that, the New York Times reported, "has long been condemned by Washington as effectively dooming any prospect of a two-state solution." (An article in the Israeli newspaper Haaretz seconds Washington's assessment--see headline above.)
Olmert may be overstating things, but not by much. Certainly Netanyahu's settlement surprise isn't the show of gratitude Obama had reason to expect after the US voted with Israel against Palestine's bid for nonmember observer status at the UN--a bid so reasonable and innocuous that Israel and the US, in opposing it, were in a minority of 9 out of 147 voting nations. And some of those 9 were on our side only because of American arm twisting. (Olmert himself thought it was a mistake for Israel to oppose the resolution.)
In a way this was more than a slap at Obama. It was a slap at the United States. Terrorism is one of America's main national security threats, and the hatred of America by some Arabs and Muslims is the most valuable asset terrorist recruiters have. So stoking that hatred by voting to thwart the legitimate aspirations of Palestinians makes America less secure. To put a finer point on it: Stoking that hatred makes our children more likely to die a violent death 5, 10, 15 years from now.
I'm not saying this UN vote alone increased the chances of terrorism by much. In fact, it increased them by only a very tiny bit. But that's more than zero, and every increment matters. And, however tiny the increment, it was only increased when Netanyahu then turned around and announced an epically indefensible settlement project; America, especially after its display of loyalty to Israel at the UN, is naturally seen as complicit in things like that. (And, no, toothless diplomatic protests by the US don't do much to change that perception.)
So Obama needs to stop this settlement project--not just to save face, but to protect Americans. He needs to show Arabs and Muslims--and everybody else--that no nation, including Israel, can take America's support completely for granted; that America won't stand by impotently as Israel embarks on a project that shows contempt for the Palestinian people and for world opinion.
Obama's leverage with Netanyahu is limited, because Congress has so much influence over purse strings. But the president has enough leverage to do what needs to be done. Here's how he should proceed:
 Write out a statement that he's willing to deliver on TV. It should criticize Netanyahu sharply and say something that will shock the Israeli people: If the prime minister is going to behave this outrageously, America can no longer guarantee that it will stand by Israel's side at the United Nations. It can no longer guarantee that it will veto Security Council resolutions that declare West Bank settlements in violation of international law. Indeed, America may now introduce such a resolution--that's how outrageous this latest settlement project is.
 Call Netanyahu, read him the statement, and tell him that if the settlement plans haven't been reversed within 48 hours, Obama will deliver the statement on TV.
And Obama has to mean it. He has to be ready to deliver the statement--because then Netanyahu will sense that he means it, in which case Obama won't have to deliver the statement.
The Israeli people care very much about their relationship with the United States--especially when so much of the world is rejecting their policies toward the Palestinians. So Netanyahu doesn't want to head into the coming election as the prime minister who has done more to jeopardize that special relationship than any Israeli leader in memory. He'll cave.
He'll hate caving, because he'll look foolish, and the whole episode will have hurt him politically. But it won't hurt him as much as something approaching an actual breach with the United States.
And if for some reason he doesn't cave, and Obama has to deliver his statement, I predict that Obama will find--to the surprise of many--that he pays no significant political price (or, at most, a price that a second-term president can easily tolerate). The reason is that pretty much everyone who's paying attention to this issue realizes how indefensible Netanyahu's behavior has been. Most people will realize, too, that Obama is acting in Israel's best interests by trying to strongarm it into limiting its alienation of the world.
Even if Netanyahu doesn't cave, Obama will have strengthened America's national security, because he will have shown the world that America will actively and forcefully oppose at least some unjust and illegal encroachments on Palestinian territory. Terrorist recruiters will be very disappointed to hear this.
I'm not suggesting that we should always do whatever minimizes hatred of America. There are principles worth fighting for, and there are principles whose defense will require increasing our exposure to terrorism. But Israel's freedom to build more settlements on occupied territory--in violation of international law and of the world's sense of decency--isn't one of those principles. Obama would be helping both Israel and America by making that clear.
[Postscript: I hope it's clear that I'm not saying Obama will take this approach; obviously, it would be out of character for him to be so bold. I'm just saying that if he did take this approach it would work. I'm also saying that if he doesn't do something to rein Netanyahu in, he's not doing his duty as president.]