— New York Gov. Andrew M. Cuomo (D), at a news conference, March 24
As covid-19 cases continue to rise in the United States, some officials say President Trump is dropping the ball by not using the strongest powers he has under the Defense Production Act of 1950.
The law was enacted after the Korean War to ensure that the United States has enough supplies for its defense. Today, the underlying issue is a shortage of ventilators for patients and protective equipment for health-care professionals on the front lines. Ventilators can save lives because they allow patients to breathe when they cannot do so on their own.
Cuomo, members of Congress from both parties and former vice president Joe Biden, the likely Democratic nominee in the November presidential election, have called on Trump to activate the strongest provisions in the law immediately so that private industries ramp up production of ventilators, masks, gloves, gowns and other supplies before coronavirus cases reach a tipping point that could overwhelm the U.S. health-care system.
The Trump administration has given mixed messages on whether it’s using the law. Trump himself says that he’s saving it for a “worst-case scenario,” that the threat of using the law is enough to spur voluntary cooperation from private companies and that he doesn’t want to “nationalize” industries. (The law does no such thing.) But he also signed two executive orders invoking some powers in the Defense Production Act.
Adding to the confusion, FEMA said Tuesday morning that it was using the Defense Production Act for the first time since the covid-19 pandemic began, but later in the day backtracked and said it was able to procure test kits without the law.
We figured readers would have many questions about the Defense Production Act, how it works and which companies are doing what. So here’s an explainer.
Update (March 27): Trump on Friday said he was using the Defense Production Act to compel GM to produce ventilators, saying the automaker was “wasting time” in negotiations with the government. The president in a memorandum directed Health and Human Services Secretary Alex Azar to “use any and all authority available under the Act to require General Motors Company to accept, perform, and prioritize contracts or orders for the number of ventilators that the Secretary determines to be appropriate.”
What does the law do?
The Defense Production Act gives the president several powers to ensure that supplies for national defense are produced by U.S. industries and distributed to places that need them. The act has been reauthorized by Congress more than 50 times since it passed in 1950, most recently in 2018.
Although the law was geared initially toward U.S. military capabilities, its provisions in more recent decades also have been used for natural hazards or terrorist attacks, among other emergency scenarios.
“The Federal Emergency Management Agency used the authority extensively during the 2017 disaster season, including prioritizing contracts for manufactured housing units, food and bottled water, and the restoration of electrical transmission and distribution systems in Puerto Rico,” according to the nonpartisan Congressional Research Service (CRS).
How does it work?
The act has different parts, and sometimes it’s hard to keep track of which one public officials are discussing. Here’s a breakdown of the main provisions:
- Directing industrial production: The president may require private businesses to accept and prioritize contracts for goods and services. In starker terms, the president can compel companies to produce needed supplies in an emergency, by forcing them to accept work orders and prioritize those contracts before others. The Defense Department “routinely” uses the power to prioritize contracts, according to CRS. Examples include Air Force One planes, the Integrated Ballistic Missile Defense System and the B-2 bomber. “The government can also prioritize the performance of contracts between two private parties, such as a contract between a prime contractor and a subcontractor, if needed to fulfill a priority contract and promote the national defense,” according to the CRS report.
- Allocating goods, services and facilities: The president may decide who gets which supplies and how many. One of the issues Cuomo complains about is that states have to compete and outbid each other for the supplies currently on the market. He says the federal government should intervene with the Defense Production Act and allocate these resources.
- Providing incentives to industries: The president may sweeten the deal for private businesses by authorizing direct purchases or purchase commitments, loans or loan guarantees, or by placing equipment in private industrial facilities.
- Voluntary agreements, blocking foreign corporate mergers, and enlisting industry experts into government: Among other provisions, the president may allow two or more private companies to cooperate on a defense project without running afoul of antitrust laws (these are known as “voluntary agreements” under the act). The law also allows the president to block foreign corporate mergers and acquisitions and to enlist industry experts into government in some circumstances, though none of that has been part of the covid-19 discussion.
Which parts of the law is Trump using and not using?
In response to the pandemic, Trump has signed two executive orders citing provisions of the Defense Production Act. The first delegates the president’s powers to prioritize contracts and allocate resources to Health and Human Services Secretary Alex Azar. The second includes measures to prevent people from hoarding health and medical resources.
But Azar and the Trump administration have not used the Defense Production Act to direct industries. FEMA Administrator Peter T. Gaynor said Tuesday on CNN that the administration was using the law for the first time since the outbreak to commission 60,000 testing kits, but an agency spokeswoman later in the day said that “at the last minute we were able to procure the test kits from the private market” without relying on the law.
Spokespeople for the Department of Health and Human Services referred us to Trump’s comments on the issue and to a March 18 statement from Azar, which does not mention (or rule out) the possibility of directing private-sector manufacturing. “HHS has been working since January with American manufacturers to prepare for responding to the COVID-19 outbreak,” Azar said. “We are coordinating closely with private suppliers, healthcare purchasers, and our federal partners like the Commerce Department to ensure that resources are going where they’re needed. President Trump’s bold invocation of the Defense Production Act gives his administration the necessary power to allocate healthcare supplies in the event that such a step is necessary.”
What is the underlying issue?
A shortage of ventilators and personal protective gear poses a challenge for the places hit by covid-19. In theory, Trump could use the Defense Production Act to compel manufacturers to fill the gaps. But the window of opportunity may be closing too quickly. In practice, repurposing an auto factory, for example, into a medical-respirator facility could take months, longer than the two to three weeks Cuomo says he has before New York hits the apex.
“All of this should have started months ago, so we are behind,” Bill Greenwalt, a defense consultant who led acquisition policy in the George W. Bush administration, previously told The Washington Post. “On production, I think we will find out that our base is not capable of producing what we need as I expect much of it has been outsourced to China and elsewhere.”
A ventilator shortage could pose a grim dilemma once U.S. coronavirus cases reach a tipping point. In Italy, which has been battered by the disease, doctors have had to make difficult decisions about rationing ventilators to the patients most likely to survive.
How big is the shortage?
To get an idea, let’s look at what two governors have said.
In New York, one of the hardest-hit states, Cuomo says there are 7,000 ventilators available, while 30,000 are needed. (FEMA has sent 400, Cuomo said dismissively Tuesday.)
Gov. J.B. Pritzker (D-Ill.) tweeted Monday that his state had received none of the 4,000 ventilators and about 10 percent of the 3.5 million masks it requested from the federal government.
Since the beginning I’ve promised you transparency and honesty on all aspects of our response.— Governor JB Pritzker (@GovPritzker) March 23, 2020
To that end, I want to take a moment now to run you through our PPE requests with the federal government, and what we’ve received from them. pic.twitter.com/SsOw1l4UKF
Sen. Ted Cruz, a conservative Republican from Texas, says that compelling private companies to produce needed medical equipment could save lives. In a letter to Azar, Cruz wrote that the United States “could expect as many as 810,000 infected patients to require a ventilator,” yet the country as of last week had fewer than 200,000 available.
Why is Trump hesitant to direct industrial production?
The president and members of his team say private companies are stepping up voluntarily to meet production demands. Anthony S. Fauci, director of the National Institute of Allergy and Infectious Diseases, said Sunday on CBS: “They’re stepping forward. They’re making not only masks, but [personal protective equipment] and now ventilators.”
Some examples: Ford said it is working with GE Healthcare and 3M to produce respirators, ventilators and masks, as CNN reported. General Motors and Ventec Life Systems announced Monday that they are planning “exponentially higher ventilator production as fast as possible.” ResMed, one of the biggest ventilator makers, announced plans to ramp up worldwide production. “We are looking to double or triple the output of ventilators, and scale up ventilation mask production more than tenfold,” chief executive Mick Farrell said in a statement.
Trump also describes the industry-commandeering parts of the Defense Production Act as akin to socialism. “We’re a country not based on nationalizing our business,” he said Sunday. “Call a person over in Venezuela; ask them how did nationalization of their businesses work out. Not too well. The concept of nationalizing our business is not a good concept.”
It’s a false comparison because any private companies enlisted to produce supplies would remain private and be paid.
The New York Times reported that lobbying from the U.S. Chamber of Commerce and major corporate chiefs dissuaded Trump from using the full powers of the Defense Production Act.
“It can’t produce highly specialized manufacturing equipment overnight. It can’t convert a refrigerator factory into a ventilator factory,” Neil Bradley, the chamber’s executive vice president and chief policy officer, said in a statement. “A variety of manufacturers have risen to the task and suggested that their equipment can be reconfigured to produce medical equipment. The real challenge is that we need to produce sophisticated products that can’t easily be made without the right specialty equipment, which may not be readily available.”
What are the counterarguments?
“Yes, it is an assertion of government power on private-sector companies,” Cuomo said at a briefing Tuesday. “But so what? This is a national emergency — and you’re paying the private-sector company.”
“Ensuring that our nation’s health care facilities have sufficient ventilators must be a top priority,” Cruz wrote in the letter to Azar. “In this moment you should not hesitate to use the significant powers of the Defense Production Act delegated to you by the President to do what is necessary to ensure that Americans who contract this virus are not denied life-saving care because hospitals lack the appropriate machinery. Time is of the essence.”
Cuomo suggested that using the full powers of the Defense Production Act would shorten production timelines.
“The only way we could obtain these ventilators is from the federal government, period,” he said. “There’s a federal law, where the federal government can say to manufacturers, ‘You must produce this product.’ I understand the federal government’s point that many companies have come forward and said, ‘We want to help.’ And General Motors and Ford and people are willing to get into the ventilator business.
“It does us no good if they start to create a ventilator in three weeks or four weeks or five weeks. We’re looking at an apex of 14 days. If we don’t have the ventilators in 14 days, it does us no good. The federal Defense [Production] Act can actually help companies because the federal government can say: ‘Look, I need you to go into this business. I will contract with you today for X number of ventilators. Here is the start-up capital you need. Here’s the start-up capital you need to hire workers who’ll do it around the clock, but I need the ventilators in 14 days.’ Only the federal government has that power, and not to exercise that power is inexplicable to me. Volunteerism is nice, and it is a beautiful thing, and it’s nice that these companies are coming forward and saying they want to help. That is not going to get us there.”
A Biden health-care adviser said using the full force of the Defense Production Act would yield more visibility into manufacturing and supply-chain capabilities. “We need the U.S. government to be able to have insight into that supply chain and insight into the distribution of those supplies to where they are most needed, and only the U.S. government, HHS and FEMA can do that,” the adviser said. “It’s not just the simple production that you need from the DPA, [it’s] the extraordinary variety of the things we need: everything from sophisticated equipment like ventilators to nonsophisticated equipment like swabs and millions of tests.”
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