Mr. Goodwrench

President Obama has unilaterally guaranteed the warranties on the autos sold by General Motors and Chrysler. See U.S. Auto Warranties. Now this is a pretty far-reaching commitment of taxpayer dollars for not having any public or Congressional input. To see how profound this might be consider the following: these two U.S. automakers sell roughly eight million cars a year (some years more, some years less) and I estimate the effective cost of a three-year warranty on a new car to be about $1,000 per car. So Obama has committed the U.S. taxpayer to $8 billion of cost per year in the first year and accumulating up to $24 billion per year in year three (after layering each new model year). Once these two car companies went under, this guarantee would theoretically last for at least three years after they disappeared under the waves. Now this is just problem one. There are two more serious issues:

1) What about Ford Motor? How can they compete with GM and Chrysler when these latter two companies have free access to the U.S. taxpayer’s wallet from which to extract even larger amounts of pelf.

2) What about foreign auto makers? Can they not now claim unfair trading practices for this U.S. warranty backstop? In fact, just the current Obama loan guarantees to GM and Chrysler could also be construed to be the start of an auto-industry world trade war. We know that the degeneration of world trade was a major contributing factor to the great depression. Have we just let this genie out of the bottle once again?

The Obama administration is moving so fast in its attempts to improve our economy that I am concerned that it has not spent enough time worrying about unintended consequences. Maybe they need to follow that oft-used phrase from the Clinton administration and "stop and take a deep breath".