Government Motors Files for Bankruptcy Protection By KEVIN HELLIKER, Wall Street Journal

General Motors Corp. filed for Chapter 11 bankruptcy early Monday, marking the humbling of an American icon that once dominated the global car industry and setting up a high-stakes gamble for U.S. taxpayers. (See the Chapter 11 filing.) The bankruptcy filing, made in the U.S. Bankruptcy Court in Manhattan, marks the climax of a lengthy debate over the auto maker's future after it sought a bailout from the U.S. government in December to stay alive.

In the end, GM couldn't complete its restructuring out of court and filed for bankruptcy-court protection to get billions more in aid from U.S. taxpayers. The question now facing 56,000 auto workers, 3,600 GM dealers and the Obama administration: Will it work?

The U.S. government has agreed to provide GM with another $30 billion in aid, in addition to the $20 billion the auto maker has already borrowed, to see it through its restructuring and exit from bankruptcy protection. In return, the government will get a controlling stake in the company. The Canadian and Ontario governments are putting in $9.5 billion for a 12.5% stake.

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Obama & Gates Gut the Military By Donnelly & Schmitt, Wall Street Journal

APRIL 7, 2009, 11:06 P.M.

The secretary's new budget will leave us weaker to pay for the president's domestic programs.


By THOMAS DONNELLY and GARY SCHMITT

On Monday, Defense Secretary Robert Gates announced a significant reordering of U.S. defense programs. His recommendations should not go unchallenged.

In the 1990s, defense cuts helped pay for increased domestic spending, and that is true today. Though Mr. Gates said that his decisions were "almost exclusively influenced by factors other than simply finding a way to balance the books," the broad list of program reductions and terminations suggest otherwise. In fact, he tacitly acknowledged as much by saying the budget plan represented "one of those rare chances to match virtue to necessity" -- the "necessity" of course being the administration's decision to reorder the government's spending priorities.

However, warfare is not a human activity that directly awards virtue. Nor is it a perfectly calculable endeavor that permits a delicate "balancing" of risk. More often it rewards those who arrive on the battlefield "the fustest with the mostest," as Civil War Gen. Nathan Bedford Forrest once put it. If Mr. Gates has his way, U.S. forces will find it increasingly hard to meet the Forrest standard. Consider a few of the details of the Gates proposals:

- The termination of the F-22 Raptor program at just 187 aircraft inevitably will call U.S. air supremacy -- the salient feature, since World War II, of the American way of war -- into question.

The need for these sophisticated, stealthy, radar-evading planes is already apparent. During Russia's invasion of Georgia, U.S. commanders wanted to fly unmanned surveillance aircraft over the region, and requested that F-22s sanitize the skies so that the slow-moving drones would be protected from Russian fighters or air defenses. When the F-22s were not made available, likely for fear of provoking Moscow, the reconnaissance flights were cancelled.

As the air-defense and air-combat capabilities of other nations, most notably China, increase, the demand for F-22s would likewise rise. And the Air Force will have to manage this small fleet of Raptors over 30 years. Compare that number with the 660 F-15s flying today, but which are literally falling apart at the seams from age and use. The F-22 is not merely a replacement for the F-15; it also performs the functions of electronic warfare and other support aircraft. Meanwhile, Mr. Gates is further postponing the already decades-long search for a replacement for the existing handful of B-2 bombers.

- The U.S. Navy will continue to shrink below the fleet size of 313 ships it set only a few years ago. Although Mr. Gates has rightly decided to end the massive and expensive DDG-1000 Zumwalt destroyer program, there will be additional reductions to the surface fleet. The number of aircraft carriers will drop eventually to 10. The next generation of cruisers will be delayed, and support-ship projects stretched out. Older Arleigh Burke destroyers will be upgraded and modernized, but at less-than-needed rates.

The good news is that Mr. Gates will not to reduce the purchases of the Littoral Combat Ship, which can be configured for missions from antipiracy to antisubmarine warfare. But neither will he buy more than the 55 planned for by the previous Bush administration. And the size and structure of the submarine fleet was studiously not mentioned. The Navy's plan to begin at last to procure two attack submarines per year -- absolutely vital considering the pace at which China is deploying new, quieter subs -- is uncertain, at best.

- Mr. Gates has promised to "restructure" the Army's Future Combat Systems (FCS) program, arguing that the lessons of Iraq and Afghanistan have called into question the need for new ground combat vehicles. The secretary noted that the Army's modernization plan does not take into account the $25 billion investment in the giant Mine Resistant Ambush-Protected (MRAP) vehicles. But it's hard to think of a more specialized and less versatile vehicle.

The MRAP was ideal for dealing with the proliferation of IEDs (improvised explosive devices) in Iraq. But the FCS vehicle -- with a lightweight yet better-protected chassis, greater fuel efficiency and superior off-road capacity -- is far more flexible and useful for irregular warfare. Further, the ability to form battlefield "networks" will make FCS units more effective than the sum of their individual parts. Delaying modernization means that future generations of soldiers will conduct mounted operations in the M1 tanks and Bradley fighting vehicles designed in the 1970s. Finally, Mr. Gates capped the size of the U.S. ground force, ignoring all evidence that it is too small to handle current and future major contingencies.

- The proposed cuts in space and missile defense programs reflect a retreat in emerging environments that are increasingly critical in modern warfare. The termination of the Airborne Laser and Transformational Satellite programs is especially discouraging.

The Airborne Laser is the most promising form of defense against ballistic missiles in the "boost phase," the moments immediately after launch when the missiles are most vulnerable. This project was also the military's first operational foray into directed energy, which will be as revolutionary in the future as "stealth" technology has been in recent decades.

The Transformational Satellite program employs laser technology for communications purposes, providing not only enhanced bandwidth -- essential to fulfill the value of all kinds of information networks -- but increased security.

Mr. Gates justifies these cuts as a matter of "hard choices" and "budget discipline," saying that

"[E]very defense dollar spent to over-insure against a remote or diminishing risk . . . is a dollar not available to take care of our
people, reset the force, win the wars we are in."

But this calculus is true only because the Obama administration has chosen to cut defense, while increasing domestic entitlements and debt so dramatically.

The budget cuts Mr. Gates is recommending are not a temporary measure to get us over a fiscal bump in the road. Rather, they are the opening bid in what, if the Obama administration has its way, will be a future U.S. military that is smaller and packs less wallop. But what is true for the wars we're in -- that numbers matter -- is also true for the wars that we aren't yet in, or that we simply wish to deter.

Mr. Donnelly is a resident fellow and Mr. Schmitt is a resident scholar at the American Enterprise Institute. They are co-editors of "Of Men and Materiel: the Crisis in Military Resources" (AEI, 2007).

Obama Abandons American Exceptionalism By Sara Murray, Wall Street Journal

The G20 turned out to be a good indicator of how different President Barack Obama's perceptions of the world are different from George W. Bush and John McCain's visions of it.

Time's Michael Scherer writes, "Like Bush, McCain believed in something called 'American exceptionalism,' which separated the U.S. from the rest of the world, in moral standing, in military power, in economic might, and in the ability to influence other nations...Obama came at the issues of foreign policy from an entirely different direction. While he said his first role as president would be to protect and improve the United States, he placed his country in a larger framework of nations, not above the framework.

While McCain spoke about U.S. leadership (what 'we did for Europe after World War II'), Obama spoke about collaboration, of a 'new era of international cooperation,' of 'rebuilding our alliances,' of rejecting 'a foreign policy that lectures without listening.'"

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Obama's 95% Illusion By Editorial, Wall Street Journal

October 13, 2008

Article Excerpt

Click here to read the entire article.

One of Barack Obama's most potent campaign claims is that he'll cut taxes for no less than 95% of "working families." He's even promising to cut taxes enough that the government's tax share of GDP will be no more than 18.2% -- which is lower than it is today.

It's a clever pitch, because it lets him pose as a middle-class tax
cutter while disguising that he's also proposing one of the largest tax
increases ever on the other 5%. But how does he conjure this miracle, especially since more than a third of all Americans already pay no income taxes at all? There are several sleights of hand, but the most creative is to redefine the meaning of "tax cut."

(PLUS: IF OBAMA IS ELECTED WITH NANCY PELOSI & A FILIBUSTER PROOF SENATE, EVERY TAXPAYER IN AMERICA WILL GET A TAX INCREASE BECAUSE THE TAX CUTS ENACTED IN 2005, WILL BE ELIMINATED BY CONGRESS LETTING THE TAX CUTS EXPIRE IN 2010!)

For the Obama Democrats, a tax cut is no longer letting you keep more of what you earn. In their lexicon, a tax cut includes tens of billions of dollars in government handouts that are disguised by the phrase "tax credit." Mr. Obama is proposing to create or expand no fewer than seven such credits for individuals:

A $500 tax credit ($1,000 a couple) to "make work pay" that phases out at income of $75,000 for individuals and $150,000 per couple.

A $4,000 tax credit for college tuition.

A 10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).

A "savings" tax credit of 50% up to $1,000.

An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.

A child care credit of 50% up to $6,000 of expenses a year.

A "clean car" tax credit of up to $7,000 on the purchase of certain vehicles.

Here's the political catch. All but the clean car credit would be "refundable," which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer -- a federal check -- from taxpayers to nontaxpayers. Once upon a time we called this "welfare," or in George McGovern's 1972 campaign a "Demogrant." Mr. Obama's genius is to call it a tax cut.

The Tax Foundation estimates that under the Obama plan 63 million
Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation's Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.

The total annual expenditures on refundable "tax credits" would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center. This means that the tax-credit welfare state would soon cost four times actual cash welfare. By redefining such income payments as "tax credits," the Obama campaign also redefines them away as a tax share of GDP. Presto, the federal tax burden looks much smaller than it really is.

The political left defends "refundability" on grounds that these payments help to offset the payroll tax. And that was at least plausible when the only major refundable credit was the earned-income tax credit. Taken together, however, these tax credit payments would exceed payroll levies for most low-income workers.

We'll Protect Taxpayers From More Bailouts By John McCain and Sarah Palin, Wall Street Journal

September 9, 2008

Article Excerpt

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The bailout of Fannie Mae and Freddie Mac is another outrageous, but sadly necessary, step for these two institutions. Given the long-term mismanagement and flawed structure of these two companies, this was the only short-term alternative for ensuring that hard-working Americans have access to affordable mortgages during this difficult economic period.

We are strong advocates for the permanent reform of Fannie and Freddie. For years, Congress failed to act and it is deeply troubling that what we are now seeing is an exercise in crisis management rather than sound planning, and at great cost to taxpayers.

We promise the American people that our administration will be
different. We have long records of standing up to special interests and providing the leadership to change government and make it more accountable to the American taxpayer. In our administration, every agency and department will undergo rigorous oversight and review. We will require the highest standards of accounting, reporting and transparency ever demanded in government.

Enduring reform of Fannie and Freddie is a key first step. We will make sure that they are permanently restructured and downsized, and no longer use taxpayer backing to serve lobbyists, management, boards and shareholders.

Treasury has broadly followed the McCain plan, outlined months ago, and gets at the short-term heart of the problem. That plan reinforces the federal commitment to meet our obligations and get this mess behind us. It replaces management and board members. It requires that shareholders take losses first. It puts taxpayers first in line for any repayments. And it terminates future lobbying, which was one of the primary contributors to this great debacle.

Along with the commitment of taxpayers' dollars, we should make market reforms to help ensure that we do not face this problem again. We will make sure the marketplace understands its obligations. Homeowners must be able to understand the terms and obligations of their mortgages. In return, they have an obligation to provide truthful financial information, and should be subject to penalty if they do not. Policies must be in place to ensure that homeowners provide a responsible down payment of equity in the initial purchase of a loan. In the future, Fannie, Freddie or any government organization should never insure a loan when the homeowner doesn't have enough of his or her own capital in the investment.

Lenders who initiate loans will be held accountable for the quality and performance of those loans, and strict standards must be required in the lending process. Every lender must be required to meet the highest standards of ethical behavior, with recourse if they do not perform.

Reforms are necessary now to make mortgage lending and banking organizations more transparent. We will require greater disclosure, so that complex derivative instruments and excessive leverage can't put the marketplace, and the financial security of your home, at risk.

We will push the nation's top mortgage lenders to provide maximum support to help cash-strapped, but credit-worthy customers. Lenders should do everything possible to keep families in their homes and business growing.

Fixing Fannie and Freddie, and reforming our mortgage and financial markets, is critical to getting the housing market and the entire economy moving again. A great deal of the savings and wealth of American families is wrapped up in the value of their homes. A house has traditionally been the wealth-building course to retirement.

The housing industry employs millions of Americans. One of us, John McCain, said over two years ago, "If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose."
Fannie and Freddie's lobbyists succeeded and Congress failed. Under our administration this will not happen again.

In the first 100 days of our administration, we will look at every
agency and department and expenditure of the federal government and ask this simple question: Is it serving the needs of the taxpayer? If it is not, we will reform it or shut it down, and we will spend money only on what is truly in the interest of the American people.