In his first major education speech as a presidential candidate, Senator Barack Obama affirmed his support of teachers unions. Less than two years later, in his first major education address as president, delivered to the Hispanic Chamber of Commerce in March 2009, Obama explicitly backed paying teachers for performance, a reform the unions vehemently oppose. Behind this seeming contradiction on performance pay is a complex set of political and policy strategies. Obama and his team are caught in the narrow channel between two important Democratic constituencies: (1) establishment organizations that are opposed to performance pay; and (2) the increasingly prominent education-reform crowd that generally supports it. And while the administration appreciates the merits of differentiated teacher pay, this is but one of many teacher-quality policies it hopes to change. The administration's handling of two prominent federal programs, the Teacher Incentive Fund (TIF) and the Race to the Top (RTT), offers important clues to the strategic thinking at work. This article discusses how the administration has laid the foundation for performance-pay plans in the future by encouraging states to measure student growth, embed student learning in annual teacher evaluations, and use evaluations to inform a range of personnel decisions. The author contends that performance pay and the new teacher framework--not turnarounds, a reauthorized ESEA, or another higher profile issue--may be the Obama administration's most important education legacy. (Contains 2 figures.)