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It's an election year and the MPAA and RIAA have out-lobbied Silicon Valley by a factor of approximately 1500%. If you're the president and your approval rating is somewhere south of "Iran Hostage Crisis" Carter, it doesn't matter what whackadoos you're up against - you let this die quietly so they can't run endless clips about you killing jobs in Alabama.
Besides which, as with all young Democrats, Obama has a fascination with all things clandestine and techy. Internet blocks are the kind of Inspector Gadget stuff that always turns their crank (see: UAVs).