The Defense Production Act and Central Pandemic Planning

|The Volokh Conspiracy |

President Trump yesterday invoked the Defense Production Act, without actually issuing any orders pursuant to the statute. Part of the goal of this statute is to ensure that there is sufficient domestic capacity to meet national needs in times of emergency. For example, "the United States Government should encourage the geographic dispersal of industrial facilities in the United States to discourage the concentration of such productive facilities within limited geographic areas that are vulnerable to attack by an enemy of the United States." In the wake of the COVID-19 pandemic, such concerns seems sensible. Many countries have restricted exports of critical goods, making it imperative that we have a domestic supply chain for those goods.

It's too late for advanced planning. The statute, however, also empowers the government during an emergency. As explained in an excellent history of the statute prepared by the Congressional Research Service:

Containing seven separate titles, the DPA allowed the President, among other powers, to demand that manufacturers give priority to defense production, to requisition materials and property, to expand government and private defense production capacity, ration consumer goods, fix wage and price ceilings, force settlement of some labor disputes, control consumer credit and regulate real estate construction credit and loans, provide certain antitrust protections to industry, and establish a voluntary reserve of private sector executives who would be available for emergency federal employment.

Some of these, such as the power to "give priority to defense production" and to "fix wage and price ceilings," amount at least in some measure to switching from a market economy to a command economy. The wage and price controls and some other powers have lapsed and are no longer in force, but some remain. For example, under 50 U.S.C. § 4511(a),

The President is hereby authorized (1) to require that performance under contracts or orders (other than contracts of employment) which he deems necessary or appropriate to promote the national defense shall take priority over performance under any other contract or order, and, for the purpose of assuring such priority, to require acceptance and performance of such contracts or orders in preference to other contracts or orders by any person he finds to be capable of their performance, and (2) to allocate materials, services, and facilities in such manner, upon such conditions, and to such extent as he shall deem necessary or appropriate to promote the national defense.

Meanwhile, Onur Ozgode offers an interesting tweetstorm with some relevant history. He argues that we are not capable of activating Defense Production Act emergency powers, because "we got rid of the mobilizers" and therefore no longer have the relevant expertise. It is plausible that running a command economy is a skill and that a government might improve with practice. What is less plausible is the claim that the emergency requires that the government switch to a command economy for certain kinds of purchasing. Indeed, Ozgode notes that when the government decided it needed to control critical materials during World War II, it ultimately used a relatively free-market method involving tokens, which he terms a "critical material backed money system."

But of course there is no need even for such half-way measures. The government can purchase commodities that it needs using dollars, offering more dollars if necessary to compete with alternative private uses of commodities. Indeed, the use of ordinary currency helps make the trade-offs that government faces more transparent.

Why might one think that the government should switch to a command economy during the current pandemic? Or, differently stated, why wouldn't companies that have the ability and incentive to produce needed goods and services (such as ventilators or hand sanitizer) do so on their own? Perhaps one reason is price controls from anti-price-gouging statutes. The camel's nose at work: once the government starts enacting some restrictions, suddenly more government action is needed to offset the reduced incentives provided by the market. A different but related explanation is that we might be ethically uncomfortable with the results of market allocation. At least in the short term, production capacity may be limited, and we might not want billionaires buying their own personal hospital-grade ventilators and ICU beds. The power to prioritize government purchasing may be responsive to this concern. But one can imagine other powers might accomplish the same thing. For example, the government could enact a temporary ban on private individuals' purchasing medical equipment currently in shortage for their own personal use, allowing such a ban to lapse in a time frame that would allow the market to adjust over the long-term to greater demand for ventilators.

The danger is that once the government increases its involvement, it will be tempted to increase production capacity by interfering in markets rather than by offering more money. There is no reason that the government should be in talks to prod car manufacturers to produce more ventilators. If pushed to switch production by anything other than economic incentives, manufacturers may not put as much effort into the task as necessary. For example, they might simply wait patiently for parts manufacturers to increase their supply, rather than offering them large incentives for production. Sure, the government can then try to persuade other companies to start producing more parts, but if the government must get involved in each link of the supply chain, fast production will not occur. If, on the other hand, manufacturers believe that the government will pay a sufficient amount for ventilators (an amount much higher than the typical cost), they will have incentives to overcome problems. I have previously described one approach for the government to stimulate ventilator production, but the more general point is that if we want more ventilators, the government or hospitals will need to offer more money, not interventions in the supply chain.

NEXT: Coronavirus Testing Finally Ramps Up, No Thanks to the Federal Government

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  1. As with 9/11, we have a situation requiring emergency powers but a President who is not competent to exercise them, only it’s even worse this time.

    1. What a stupid comment! This President is no more competent than any other president to be dictator, and no less competent. Gratuitous stupid comment, when the real problem is central planning itself — no one, not President Drumpf or President Light Bringer, is competent to direct central planning, because central planning is incompetent itself.

      TDS really got you. You were hoping Hillary or Bernie could be the incompetent one directing central planning, and it really chuffs your goat.

    2. Restrain in exercising emergency powers is not a bad thing.

  2. As I understand it, what this did are things like allowing 3-M (which makes “95-N” masks for both hospitals and industry) to sell the industrial masks (which they have a lot of) to hospitals.

    They’re the exact same thing, made out of the exact same materials — except they are rated to protect the user from asbestos fibers and lead paint dust, instead of cough droplets. (The Wuhan Virus itself is about 1/10th of the diameter these masks can filter for.)

    What this essentially does is remove 3-M’s potential liability for selling masks not rated for medical use, even though they are identical to the ones which are — I’m not quite sure how it does this, nor if it is civil or criminal liability that 3-M is avoiding here, but essentially the government is giving them permission to call “Mask A” “Mask B.”

    It also helps should 3-M have a contract with the ACME Construction Company to supply 100,000 masks a month. 3-M can instead ship those masks to hospitals without being sued by ACME because the Federal Government has superseded its contract with ACME.

    1. There is a disconnect here.

      If the masks are truly identical why can’t 3M simply relabel them or better yet label them for both uses?

      1. They’re not identical. Here’s a good review. But an industrial n95 is good for 95% of the needs of most medical staff.

        https://multimedia.3m.com/mws/media/1794572O/surgical-n95-vs-standard-n95-which-to-consider.pdf

      2. One word: Lawyers….

        There may be cosmetic differences (e.g. color) differences between the two, along with packaging differences, but the big difference is that they are certified by different governmental agencies to do different things — the industrial ones by NIOSH and I don’t know who certifies hospital stuff, but so, me bureaucracy does.

        Realistically, it’s different production lines in different factories — one factory has been certified by NIOSH and the other by whatever H&HS bureaucracy certifies hospital stuff — and 3-M charges more for the hospital stuff. It’s like when GM got sued by various state AGs for putting Chevy engines in Cadillacs — it was actually a better engine, just made in a factory with a different nameplate on the building.

        And don’t dismiss the other aspect of this — 3-M’s ability to breach the contract with ACME Construction and to instead ship to hospitals. I doubt that either 3-M or ACME are going to disagree with doing this, it just gives both an excuse to pass on to upper management (and the lawyers)…

        1. There are more than cosmetic differences. The main difference is surgical masks (and surgical N95s) are designed to withstand liquid impact, both from the inside (IE a someone coughing droplets) and from the outside (IE, someone cuts into an artery and stream of blood sprays towards the mouth of the surgeon). Industrial N95s aren’t designed for that.

          That being said, 90% of medical staff aren’t going to be going around cutting into patients, and they are wearing masks to prevent infection of the medical staff. So industrial N95s will serve pretty well for 90% of them.

          1. Even the non-certified ones that homeowners buy are a whole lot better than nothing…

            1. They are much better than nothing. They’re not identical.

    2. I don’t think they are the same thing.

      The surgical version, called a “respirator” is more complex, uncomfortable restrictive than the kind of face masks you see people wearing. The amount of protection the masks offer is unclear, but they certainly help the wearer avoid spreading the virus by sneezes or coughs.

      1. Don’t confuse “masks” with “respirators” — while the terms are often co-mingled, a “respirator” is closer to what most people would call a “gas mask” — usually with external filters to filter out *something*. This can include toxic gases, not just particles — and such a respirator is needed when using certain high-VOC paints and sealers. And respirators can be rated for both particles and gases.

        It all comes down to what the device is rated for — although you can always use something rated higher than what you need. In other words, you *can* use a respirator when regs only call for a mask, and while the mask is all that is really necessary, some people feel more comfortable with the added (unnecessary) level of protection.

        N95 is filtering out 95% of particles that are 0.3 Microns or larger. A virus is about 1/10th that size, and hence can go through such a mask, although it’s usually in a cough droplet that is much MUCH larger and a N95 mask will catch it.

  3. The Democrats and the press (but I repeat myself) may soon regret hyping up the Coronavirus into a panic.

    1. Your Clinger-in-Chief just called it “war.” Are you saying (finally recognizing) he is a reckless liar?

      Otherwise, the more right-wingers talk during this circumstance, the more their failure in the culture war is likely to be expedited. (Do you guys really think many Americans are likely to join fringe anti-government cranks anytime soon?)

      So keep talking, guys . . . maybe throw in a few comments about race and gender to alienate most Americans even more.

      1. Every President, every Presidential candidate, and every politician, elected or running, is a reckless liar. Did you have an actual point? Kuckland does better than you.

        1. Trump was already a completely incompetent failure with a dozen domestic cases ans zero deaths. There is no rationalizing with a rhetoric industy that’s achieved contrarian status to savage everything Trump does.

          I didn’t even vote for him and this is obvious to me.

          Were Obama in charge and nothing at all different, we’d be hearing an endless stream of praise and warm fuzzies.

          1. When you need to dip into counterfactuals to prove you case, you’re just arguing your feelings.

            1. So you’re saying he proved his case then?

              1. No. He didn’t prove anything. He just spewed some made-up BS.

                1. Counterfactuals never prove anything. But what they do is allow legitimate comparisons, which in this case you reject, but still it’s a valid method of debate and use of logic. For instance, some say that the Civil War was inevitable due to slave owners not wanting to lose their property. I would say as a counterfactual, what would have happened if the federal government paid a fair market value for the slaves, because England did just that. See what I mean? it’s okay to say the comparisons are invalid, but not that counterfactuals descend in to feelings over fact.

                  But Sarc’s problem is that he has a limited grasp on debate and logic, but a high opinion of the value of his throwing of rhetorical rotten fruit, that he doesn’t understand these things.

                  1. But what they do is allow legitimate comparisons, which in this case you reject,

                    I reject it because there is no basis for comparison. We can talk about your Civil War comparison, because your counterfactual is a specific hypothetical policy that can be evaluated in certain ways: How much would it have cost? What would happen to the freed slaves? etc.

                    There’s none of that in Krayt’s comment, just a Trumpian blast at the media, mostly for accurate reporting of what Trump has done.

        2. Every President, every Presidential candidate, and every politician, elected or running, is a reckless liar.

          You know, I’m tired of hearing that excuse. Sure, all politicians lie from time to time, but Trump is orders oif magnitude worse than that. He lies constantly, non-stop, even about things that don’t matter and just make him look foolish. Just look at his latest claims that he always knew it was going to be a pandemic.

          It really does reach disgusting levels, and the apologists for it ought to be ashamed of themselves.

          You know, I get that there are those who like things Trump has done, and are willing to overlook the fact that he is an absolutely horrible individual for that reason. But I don’t get the constant apologies and rationalizations for his loathesome behavior.

          1. You mean how Obama murdered Americans without due process? “If you like your doctor …”

            If you think the differences in lying matter, you are another TDS victim.

            1. Don’t change the subject, lest you look like you have no argument.

              1. pot meet kettle, kettle meet pot.

              2. And if you weren’t such a goof, you’d have realized that those were examples of Obama lying and/or being incompetent, similar to (if not exceeding) the admittedly legit accusations against Trump for lying and being incompetent.

                1. Which does not absolve Trump of lying and being incompetent. It is, in fact, changing the subject.

                  Additionally, as bernard11 pointed out, there is not a great comparison between Obama and Trump in quantity or quality, which is why you guys switch to anecdotes every time. Like clockwork.

                  1. Not a great comparison, says you, sorry ’bout that.

                    And it’s not changing the subject, when the comment thread was about “every” president does this/that bad thing X, and how some people feel Trump is the worse, and then it’s pointed out that Obama was just as bad. Do you just comment snarkily without knowing the big picture all the time?

                    1. it’s pointed out that Obama was just as bad,/i>

                      No. It wasn’t “pointed out.” It was claimed – without support of any kind. And it’s a BS claim. We got the usual “If you like..” nonsense, which btw was true for most people. Come on. Trump is seemingly incapable of telling the truth about anything.

            2. Why don’t you just tattoo “If you like your doctor..” on your forehead, since that’s all you have to say. And how did ACA “murder Americans?” Here’s a hint: it didn’t.

              And yeah the differences matter. You don’t want to believe it, because you like Trump, but the endless stream of crap he mouths, about absolutely everything – “It’s contained” – is toxic.

              1. Charitably, I would say that he wasn’t talking about the ACA murdering Americans, but rather Obama’s extra-judicial droning of your fellow citizens overseas. You do know about that, right?

                1. I do indeed. And I didn’t like it then and don’t like it now. You won’t find me apologizing for it.

      2. “War” is an overused euphemism, as we have a war on drugs, cancer, poverty, terrorism, Wuhan Coronavirus, etc. etc.

        It’s hardly unprecedented, and just as dumb as those other uses. What it does, though, is hype up the public that we are all in this together, and so on, so it does work (making it not so dumb), for a short time at least.

        1. So you’re saying it’s OK for the President to “hype” but not Dems/press?!?

          1. No, I’m saying that the dems/press will regret the Coronavirus hype and simultaneously that the war euphemism is overused. I honestly don’t see how one statement contradicts the other.

          2. “So you’re saying it’s OK for the President to “hype” but not Dems/press?!?”

            Trump is only hyping in response to the Dem hype. Maybe if the Dems and media would stop parroting the ChiCom government line, he wouldn’t have to hype in response.

        2. “War” is an overused euphemism, as we have a war on drugs, cancer, poverty, terrorism, Wuhan Coronavirus, etc. etc.

          I agree with this. One aspect of war, to me, is that in a war it is morally legitimate to actively kill people to achieve the country’s objectives.

          With the possible exception of some anti-terrorism activity this is not the case in the examples you cite.

          1. Thanks. Even the war on terror comparison is iffy, when there is no territory to conquer and army to defeat and victory ultimately to be won.

            1. Yeah. It may be right to classify anti-terrorism as self-defense, more like police work than war.

        3. You’re ignoring the childish and vainglorious lies, the ridiculous and counterproductive statements, and substandard decisions that have marked Pres. Trump’s conduct with respect to the pandemic. His “leadership” has been pathetic.

          Mainly, I expect, because you’re a hopeless clinger who can’t bring himself to acknowledge reality in this context, but I can’t dismiss the prospect that you are unable to apprehend that reality.

    2. I hope you’re right this isn’t a real crisis, but I don’t see any evidence of that.

      But I hope you may someday regret being such a cocksure dick about it.

      1. It has the potential to be a real crisis, but so far the only *known* crisis part of this has been the panic and economic fallout. Even you must be humble enough to admit, that traffic deaths are a bigger problem at the moment when we are talking about deaths.

        I will only call it a crisis when someplace entirely unprepared and taking no precautions, like Mexico and South America, get Coronavirus spread willy-nilly and have 1918 pandemic level deaths, which will show that our over the top response was actually called for. Alas, that’s not how the world works, so given the panic button pressed overseas, and the press hype here in an effort to get Trump, he responded quite rationally.

        1. So he went from one irrational response – “No problem at all,” “well-contained,” “tests for everyone,” to what you consider another irrational response, this one being panic-driven.

          1. Trump went from “hoax” to “war,” and people like mad-kalak took the lesson that it’s time to bash Democrats and liberals.

            Resentment toward their betters is just about all that some clingers have left, it seems.

            1. Trump never called it a hoax, silly. Democrats were/are using the response to the Chinese Coronavirus like their other hoaxes (Russia and Ukraine etc.). He always took it seriously, having banned travel to/from China back in January when the Dems were suffering from another fever, impeachment fever.

              But now that he was convinced to over react than under react (harder to politically be accountable for an over reaction here) we are in for a penny, in for a pound.

              Here is the response, from SNOPES of all places.

              “In context, Trump did not say in the passage above that the virus itself was a hoax. He instead said that Democrats’ criticism of his administration’s response to it was a hoax. He muddied the waters a few minutes later, however, by comparing the number of coronavirus fatalities in the U.S. (none, at that point in time) to the number of fatalities during an average flu season, and accusing the press of being in “hysteria mode”:”

              1. Here you go:

                Jan. 22: “We have it totally under control. It’s one person coming in from China. We have it under control. It’s going to be just fine.” — Trump in a CNBC interview.

                Jan. 30: “We think we have it very well under control. We have very little problem in this country at this moment — five — and those people are all recuperating successfully. But we’re working very closely with China and other countries, and we think it’s going to have a very good ending for us … that I can assure you.” — Trump in a speech in Michigan.

                Feb. 10: “Now, the virus that we’re talking about having to do — you know, a lot of people think that goes away in April with the heat — as the heat comes in. Typically, that will go away in April. We’re in great shape though. We have 12 cases — 11 cases, and many of them are in good shape now.” — Trump at the White House. (See our item “Will the New Coronavirus ‘Go Away’ in April?“)

                Feb. 14: “There’s a theory that, in April, when it gets warm — historically, that has been able to kill the virus. So we don’t know yet; we’re not sure yet. But that’s around the corner.” — Trump in speaking to National Border Patrol Council members.

                Feb. 23: “We have it very much under control in this country.” — Trump in speaking to reporters.

                Feb. 24: “The Coronavirus is very much under control in the USA. We are in contact with everyone and all relevant countries. CDC & World Health have been working hard and very smart. Stock Market starting to look very good to me!” — Trump in a tweet.

                Feb. 26: “So we’re at the low level. As they get better, we take them off the list, so that we’re going to be pretty soon at only five people. And we could be at just one or two people over the next short period of time. So we’ve had very good luck.” — Trump at a White House briefing.

                Feb. 26: “And again, when you have 15 people, and the 15 within a couple of days is going to be down to close to zero, that’s a pretty good job we’ve done.” — Trump at a press conference.

                Feb. 26: “I think every aspect of our society should be prepared. I don’t think it’s going to come to that, especially with the fact that we’re going down, not up. We’re going very substantially down, not up.” — Trump at a press conference, when asked if “U.S. schools should be preparing for a coronavirus spreading.”

                Feb. 27: “It’s going to disappear. One day — it’s like a miracle — it will disappear.” — Trump at a White House meeting with African American leaders.

                Feb. 29: “And I’ve gotten to know these professionals. They’re incredible. And everything is under control. I mean, they’re very, very cool. They’ve done it, and they’ve done it well. Everything is really under control.” — Trump in a speech at the CPAC conference outside Washington, D.C.

                March 4: “[W]e have a very small number of people in this country [infected]. We have a big country. The biggest impact we had was when we took the 40-plus people [from a cruise ship]. … We brought them back. We immediately quarantined them. But you add that to the numbers. But if you don’t add that to the numbers, we’re talking about very small numbers in the United States.” — Trump at a White House meeting with airline CEOs.

                March 4: “Well, I think the 3.4% is really a false number.” — Trump in an interview on Fox News, referring to the percentage of diagnosed COVID-19 patients worldwide who had died, as reported by the World Health Organization. (See our item “Trump and the Coronavirus Death Rate.”)

                March 7: “No, I’m not concerned at all. No, we’ve done a great job with it.” — Trump, when asked by reporters if he was concerned about the arrival of the coronavirus in the Washington, D.C., area.

                March 9: “So last year 37,000 Americans died from the common Flu. It averages between 27,000 and 70,000 per year. Nothing is shut down, life & the economy go on. At this moment there are 546 confirmed cases of CoronaVirus, with 22 deaths. Think about that!” — Trump in a tweet.

                March 10: “And we’re prepared, and we’re doing a great job with it. And it will go away. Just stay calm. It will go away.” — Trump after meeting with Republican senators.

                A day later, on March 11, the WHO declared the global outbreak a pandemic.

                All these are on the video at the link.

  4. “without actually issuing any orders pursuant to the statute”

    That is why you should take a deep breath about the “command economy”.

    Its a PR move. Biden called for it shortly after Trump already did it.

    Maybe he might issue a limited order or two later but its mainly for political purposes.

  5. Basic ventilators can be manufactured quickly. What is not discussed is who is going to run them? A patient on a ventilator is very manpower intensive, requiring trained nurses, physicians, and respiratory therapists. These people are much more difficult and time consuming to produce than the machines. You can’t repurpose a pediatric nurse into an ICU nurse, nor an orthopedist into a critical care pulmonologist. If you try to force it, mistakes will be made, much to the delight of the trial lawyers.

  6. The poster assumes that in our society, people simply aren’t willing to go out of their way for their society, even in a life or death crisis, unless there’s something in it for them. This appears to be an ideological belief.

    If that’s the case, wouldn’t the logical conclusion be that our society isn’t likely to survive a conflict with other societies with a different ideology that have an ethic of sacrifice In times of crisis?

    Whatever one thinks of the Islamic Republic, or the United States in WW2 for that matter, it shows that people are willing to give their lives for a cause. It totally refutes any claim the poster might give that extreme selfishness is inherent in human nature or in any way universal, as opposed to being a mere ideological view limited to a class not fit to rule.

    This is one of the areas where libertarianism and classical economics are based on assumptions about human nature that are demonstrably false, or at least far from universally true.

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