The Wall Street Journal leads its world-wide newsbox with the Israeli mortar shells that were fired at a U.N.-run school in the Gaza Strip and killed around 30 or 40 Palestinians. Gaza residents have been seeking refuge at these U.N. facilities, and many of those killed were women and children. As the Palestinian death toll reached 640, Israeli, European, and American officials expressed support for an Egyptian-led initiative to broker a cease-fire. The Washington Postleads with, and the Los Angeles Timesdevotes its top nonlocal story to, the fallout from President-elect Barack Obama's choice of Leon Panetta as CIA director. Current and former intelligence officials are angry about the selection of someone with scant intelligence experience, and several Democratic senators on the intelligence committee remain resentful that they weren't consulted about the choice before it was leaked to the press.

USA Todayleads with a look at a number of last-minute security policies that the Department of Homeland Security will implement before President Bush leaves Washington. Businesses aren't happy about these new policies—which will involve collecting millions of new electronic records about private planes, cargo, foreign visitors, and contractors—and say their concerns have been ignored. Implementing the new policies won't only be costly but could lead to the release of sensitive information if there's a problem with the electronic records. The New York Timesleads with Obama warning that the American economy could face "trillion-dollar deficits for years to come" as the government takes in less tax money and spends more. Obama made it clear that he understands it's dangerous to have such huge deficits for several years and emphasized that he's committed to cutting back on unnecessary expenditures, although he didn't go into any details. "We're going to have to stop talking about budget reform," the president-elect said. "We're going to have to totally embrace it."

Israeli officials insist that Hamas militants had infiltrated the U.N.-run school and fired mortars at Israeli soldiers from inside. Israel released the names of two known Hamas gunmen it claims were killed at the school and said this was just another example of how the terrorist organization uses civilians as shields. The NYT talks to a 16-year-old witness who says he saw one of the Hamas operatives around the school right before the attack. The United Nations called for an independent investigation to look into the accuracy of Israel's claims. "Anyone on either side of the confrontation lines found to have violated international humanitarian law must be brought to justice," a U.N. spokesman said.

Hamas continued to fire rockets into Israel, and, significantly, one reached farther than ever before into Israeli territory, striking a town that is about 20 miles south of Tel Aviv. The LAT cites an Israeli police spokesman saying that the distance means that about 1 million Israelis are within range of the rockets fired from Gaza. One Israeli soldier was killed yesterday in clashes with Hamas gunmen. That brings the total number of Israeli soldiers killed since the ground invasion to six, four of whom were apparently the victims of friendly fire.

While the U.N. Security Council continued to discuss the conflict, the WSJ points out that Israeli officials would rather have a cease-fire plan that doesn't initiate in the United Nations out of fear that it would lend legitimacy to Hamas. That is part of the reason they seem more open to the idea of an Egyptian-brokered cease-fire that would have Egyptian officials negotiate directly with Hamas. Israeli Prime Minister Ehud Olmert is expected to travel to Egypt as early as today to discuss the initiative. Regardless of the outcome of those talks, the Israeli government said it would establish a "humanitarian corridor" to transport supplies to Gaza Strip residents. The United Nations says that about one-third of Gaza's residents do not have access to running water.

The strikes on the U.N.-run facilities have made a desperate situation even worse for Palestinians, who are finding themselves trapped between Israeli forces and Hamas militants with absolutely nowhere to go. The U.N. shelters were seen as a safe haven, but now that they have come under fire, Gaza residents are coming to the realization that there is no safe place to hide.

Obama finally broke his silence on the Gaza situation yesterday but didn't say much beyond stay tuned. Saying that the "loss of civilian life in Gaza and Israel is a source of deep concern," the president-elect promised he'll have "plenty to say about the issue" after the inauguration. He best tread carefully, warns the WP's Glenn Kessler. In a must-read piece, Kessler illustrates how, in the Middle East, "today's battles often can be traced to choices made by the Israeli government or the Bush administration that ended up backfiring." In an effort to reach quick solutions, leaders often find that their decisions of the past come back to haunt them later.

In a front-page analysis piece, the NYT says that while Israel has seemingly picked up many lessons from the failed war against Hezbollah in 2006, there is still one critical piece missing. Israel's leaders seem unable to outline, or even decide, what the ultimate goal of the Gaza incursion is and how they will decide when victory has been achieved. Yes, it's true that Israel's politicians are not talking in ambitious terms, but many say there is strong disagreement and confusion among the country's leaders, "which promotes poor coordination of military action and diplomatic aims," says the NYT.

One lesson Israel has clearly learned from 2006 is to control the media. In a piece inside, the NYT notes that journalists are still being denied entrance into Gaza. For the first time in Israel's history, "the government is seeking to entirely control the message and narrative for reasons both of politics and military strategy."

Obama defended his choice of Panetta, and his team started a lobbying campaign to convince lawmakers that the man who was once President Clinton's chief of staff is right for the job. But, as the LAT points out, Panetta was certainly not Obama's first choice. A number of people declined the post, partly because of the widely held view that recent changes in the intelligence bureaucracy have made the CIA position less influential. Former U.S. counterterrorism official Richard Clarke, who claims to have been offered several national-security jobs in the Obama White House, said that the only surprise about the Panetta pick "is that he's willing to take it."