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Firstly, most of the State Dept rumors are just that -- rumors. I realize Obama and Hillary had a meeting in Chicago but my own hunch is that the discussion was likely fairly broad. They probably discussed ways they can effectively work together either with Hillary as a Senator and key ally in Congress or in some kind of appointive, cabinet role.
I'm sure the Obama team is considering Hillary for a high-level position, but I think any decision is very far away and they are merely scoping out the possibilities. The feverish speculation is a tad premature. Frankly, I would be *very* surprised if she gets picked to be Secretary of State, but stranger things have happened in politics.
That being said, I think the high-level position Hillary really could be in a strong position for would be Secretary of Defense. By all accounts she is very-well respected by top military brass (moreso than her husband), and she has generally won a great deal of admiration on the Armed Services Committee.
Moreover, although we've had women in the slightly higher position of State (Albright, Rice), having a woman in charge of the Pentagon could, in many ways, be far more ground-breaking. Defense is typically seen as a male-dominated environment and having Hillary in charge would be revolutionary, at least in terms of public perceptions.
Personally, I think Hillary really would do well in the Senate, where she basically has a seat for life and could well be the next Ted Kennedy. But if she's not interested in being a senator-for-life, Defense Secretary would a great position for her. It would also give her a great perch from which to run for president in 2016 should she wish, and if she opts not to, then in 2014 she could run to succeed David Paterson as governor, or should Chuck Schumer (who has gubernatorial ambitions) run for that spot, she could return to the Senate by taking his seat.
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