What is the Defense Production Act?
FEMA Administrator Peter Gaynor says the Defense Production Act is being used to address a shortage of supplies needed to fight the novel coronavirus pandemic.
Last week, President Donald Trump announced he’d invoke the Defense Production Act, which was passed in 1950 in response to production needs during the Korean War. “I view it — in a sense as a wartime president,” he said.
Trump has since come under mounting pressure to use the act as states scramble to shore up items like masks, gloves and ventilators.
Here’s what the law does and what it might mean moving forward:
What does the law do?
The 1950 law gives the government more control during emergencies to direct industrial production.
The Federal Emergency Management Agency describes the act as “the primary source of presidential authorities to expedite and expand the supply of resources from the US industrial base to support military, energy, space and homeland security programs.”
The act hands Trump “a broad set of authorities to influence domestic industry in the interest of national defense,” according to an updated Congressional Research Service report on the act released earlier this month.
“The authorities can be used across the federal government to shape the domestic industrial base so that, when called upon, it is capable of providing essential materials and goods needed for the national defense,” the report says.
The act is divided into three main sections:
- Priorities and Allocations, which allow the President to require corporations to accept and prioritize contracts for services and materials deemed necessary to aid US national defense.
- Expansion of Productive Capacity and Supply, which gives the President the authority to to create incentives for industry to produce critical materials.
- General Provisions, which broadly establishes government authority to strike agreements with private industry, to halt foreign corporate mergers that threaten national security and to create a volunteer bloc of industry executives who could be called to government service.
Has the DPA been used before?
The priorities piece of the DPA is regularly used by the Defense Department to “acquire critical military capabilities” and by the Department of Homeland Security for disaster response and preparedness. What hasn’t been used since the Cold War is the allocation provision.
What could Trump do with the law?
The authorities the President has under DPA are vast and varied.
- Trump could require businesses to “prioritize and accept government contracts.” The President can also control the distribution of how those products get to people who need them. That means that if a company that makes ventilators was about to send 100 to Italy, that supply chain can be interrupted, for example, if Trump determines those supplies need to stay in the US. This allocation authority, according to the Congressional Research Service, hasn’t been invoked since the 1970s when it was used to promote energy development during the Cold War. But, more commonly, the Department of Defense and sometimes FEMA use DPA’s prioritization provision to make sure that government contracts are prioritized when it comes to protecting national defense or ensuring the country can respond to natural disasters.
- Another section of DPA would allow Trump to “provide economic incentives” to ensure that the US has the capabilities it needs and the products it needs to deal with Covid-19. That could include things like guaranteeing the US will buy any excess ventilators a company makes in the next six months that hospitals don’t use or purchase. It could also include giving businesses loans or loan guarantees.
- The President can also establish “voluntary agreements” with industries similar to what we are seeing with agreements between automakers to help make ventilators. The President can enter into those agreements as well. And, Trump could “block proposed or pending foreign corporate mergers or takeovers” if they threaten national security or the production of goods we need right now.
We just don’t know which of these Trump would use right now. These authorities are used in the context of national security, it’s but important to note that while DPA authorities do apply to public health emergencies, prior to the coronavirus outbreak, the DPA wasn’t used for a public health crisis.
Does Congress have oversight?
Congress does have some oversight. If the President wants to invoke wage and price controls, it has to be accompanied by a joint resolution of Congress, according to the Congressional Research Service. For example, if Trump wanted to require that the cost of personal protective equipment (PPE) masks could only be $10, Congress would need to issue a joint resolution.
Congress also has to authorize loans and loan guarantees that cost more than $50 million. The Congressional Research Service is clear that Trump would have to let the relevant committees, like Banking and Finance, know what their plan was and allow for a 30-day comment period. It’s unclear if there are exceptions for an emergency.
It’s also unclear — and maybe untested — if during a national emergency congressional oversights would be waived. But Congress may still have a role here.