I have two major reactions to the President’s speech. First, he set out, in clear, simple terms, the strongest case I’ve seen from him for the key elements of health insurance reforms, all of which are in the House and HELP Committee bills.

It was an excellent statement, made even stronger by his public putdown of all the lies and distortions of the last two months. When he threatened to call out the liars and demagogues, and recalled the fiscal irresponsibility of Bush’s wars and tax cuts, the Democrats rose to cheer, but the Republicans indicted themselves by sitting on their guilty butts. It was a self-defining moment and the nation saw it.

Second, he addressed the idea of including a viable public option as a choice on the exchange.

President Obama kept the public option alive tonight, but probably only enough to pretend it has some negotiating value with those who oppose it. He said nothing he hasn’t said before, and the fact that he still won’t nail this down will only feed the impression by progressives that they’re being played.

Here are the portions of Obama’s speech relevant to the public option:

Now, I have no interest in putting insurance companies out of business. They provide a legitimate service, and employ a lot of our friends and neighbors. I just want to hold them accountable. The insurance reforms that I’ve already mentioned would do just that. But an additional step we can take to keep insurance companies honest is by making a not-for-profit public option available in the insurance exchange. Let me be clear – it would only be an option for those who don’t have insurance. No one would be forced to choose it, and it would not impact those of you who already have insurance. In fact, based on Congressional Budget Office estimates, we believe that less than 5% of Americans would sign up.

Despite all this, the insurance companies and their allies don’t like this idea. They argue that these private companies can’t fairly compete with the government. And they’d be right if taxpayers were subsidizing this public insurance option. But they won’t be. I have insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects. But by avoiding some of the overhead that gets eaten up at private companies by profits, excessive administrative costs and executive salaries, it could provide a good deal for consumers. It would also keep pressure on private insurers to keep their policies affordable and treat their customers better, the same way public colleges and universities provide additional choice and competition to students without in any way inhibiting a vibrant system of private colleges and universities.

It’s worth noting that a strong majority of Americans still favor a public insurance option of the sort I’ve proposed tonight. But its impact shouldn’t be exaggerated – by the left, the right, or the media. It is only one part of my plan, and should not be used as a handy excuse for the usual Washington ideological battles. To my progressive friends, I would remind you that for decades, the driving idea behind reform has been to end insurance company abuses and make coverage affordable for those without it. The public option is only a means to that end – and we should remain open to other ideas that accomplish our ultimate goal. And to my Republican friends, I say that rather than making wild claims about a government takeover of health care, we should work together to address any legitimate concerns you may have.

For example, some have suggested that that the public option go into effect only in those markets where insurance companies are not providing affordable policies. Others propose a co-op or another non-profit entity to administer the plan. These are all constructive ideas worth exploring. But I will not back down on the basic principle that if Americans can’t find affordable coverage, we will provide you with a choice. And I will make sure that no government bureaucrat or insurance company bureaucrat gets between you and the care that you need.

The concluding sentence — "I will not back down on the basic principle that if Americans can’t find affordable coverage, we will provide you with a choice" — is vague enough to allow a public-option-killing trigger, a state-based co-op or a severely hobbled public option with little chance of providing a meaningful alternative to a better system. Everyone will read what they want to read.

I don’t know how others will read this, but I was looking for something to show the President understood his credibility with Democrats has been badly damaged by precisely this kind of ambiguity. The fact that he continues this mode means he and those around him don’t get it or they don’t think it matters.