How Trump Could Order Industry to Lift Virus Response
President Donald Trump has a law at his disposal that could speed up production of items needed by hospitals during the coronavirus pandemic. Though he’s dusted off the Defense Production Act, he’s expressed resistance to use it.
1. What is the Defense Production Act?
It’s a U.S. law enacted under President Harry Truman in 1950 to help the U.S. with the Korean War. Inspired by similar laws passed during World War II, the DPAgranted broad authority to the executive branch to intervene in private industry by demanding that manufacturers give priority to defense production. In addition to national defense, it can be used for products related to critical infrastructure, homeland security, stockpiling, and space. Trumanused the DPA to cap wages and impose price controls on the steel industry. Other powers granted to him by the law — to requisition materials, ration consumer goods and control consumer credit — were allowed to lapse in 1953.
2. Has it been used since then?
Yes, and without making headlines. The Department of Defense, for instance, “routinely” uses the law to make sure military-related ordersare given priority within the U.S. supply chain, according to the Congressional Research Service. The Federal Emergency Management Agency has used it after natural disasters to prioritize contracts for manufactured housing, food and bottled water, and other supplies. Two decades ago, President Bill Clintonwas criticized for using the law to order suppliers to sell natural gas to California — at prices some senators said were far below market — to help energy utilities facing credit crunches. Trump himself has employed elements of the law to boostproduction ofrare earth elements,small drones andsensors to detect submarines, among other products. His administration has also considered using it to help the coal and nuclear industries.
3. Is the law being used in the coronavirus fight?
Governors facing shortages ofventilators andpersonal protective equipment used by doctors and nurses have urged the Trump administration to use the law to ramp up production. On March 18, Trump formally invoked the law with anexecutive order “prioritizing and allocating health and medical resources to respond to the spread of Covid-19.” But four days later, on March 22, Trump said action under the law wasn’t needed because “tremendous numbers of companies,” including 3M Co. and General Electric Co., had stepped forward voluntarily to make needed equipment. “The federal government stands ready to compel cooperation if need be. We haven’t found that to be the case,” he said. But he also suggested that using the law means “nationalizing our business” as a socialist country like Venezuela might do. (In fact, the lawdoesn’t mean the government taking ownership of any companies, which is what nationalization implies.)
4. What could the government do under the law?
In addition to requiring that its orders be given priority, the government can create incentives for manufacturers, such as providing them with direct loans or loan guarantees; buy equipment for them; and waive antitrust restrictions that could discourage industry cooperation. The law allows the governmentto control the use of scarce resources, such as by requiring companies to reserve materials to fulfill federal orders. Hoarding and price gouging are barred for materials the president designates as scarce. Failing to comply with the law can lead to financial penalties or imprisonment.
5. Would the U.S. Congress have to sign off?
Normally, Congress would have to pass legislation to approve the law for certain projects that cost more than $50 million. But lawmakers have discussed temporarily waive a variety of notification and approval requirements so the administration could act more quickly.
The Reference Shelf
- Congressional Research Service reports onthe law andusing it for Covid-19.
- From the American Presidency Project,how President Truman described the Defense Production Act in 1950.
- A doctor on the front linesexplained the need for ventilators in a New York Times op-ed.
- Using the law to fight Covid-19 is simple common sense, Joe Nocerawrites in Bloomberg Opinion.
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