In the last 10 days, President Trump has repeatedly invoked “P”—that’s his name for the Defense Production Act; everyone else calls it “DPA”—for critical supplies in the fight against COVID-19, the illness caused by the coronavirus.
First Trump issued a DPA order to General Motors to produce ventilators and appeared to threaten to do the same to Ford. Then, he made a similar order to GE Healthcare, Medtronic, ResMed, Phillips and two other firms that actually manufacture ventilators. Finally he “hit” 3M with “‘P Act’ all the way” for protective masks.
Trump isn’t alone in wanting to flex the powers of the DPA in the coronavirus crisis. Several other politicians and talking heads have called for the act to be used not just for ventilators and masks, but also for gloves, medical gowns and testing swabs.
One member of the Trump administration, Peter Navarro, is giddy the president is doing this. Navarro ordinarily helps run the administration’s protectionist trade policies, but he’s now also overseeing “its wartime powers forcing private businesses into the fight against the coronavirus pandemic.” He told the Wall Street Journal:
“Over the last several days, we ran into roadblocks with GM,” Mr. Navarro added. “We cannot afford to lose a single day, particularly over the next 30 to 60 days. So President Trump invoked the Defense Production Act as a way of enhancing and accelerating this mobilization. I salute him for doing so. It’s going to make my job so much easier.”
It’s encouraging that, after largely dismissing the virus for two months, the Trump administration is finally willing to get involved. But there’s no reason to think that invoking the DPA—er, “P”—will produce any more ventilators, masks, gloves, gowns, swabs, etc. any faster than would have been produced otherwise.
The DPA was enacted in September 1950 after the United States was caught ill-equipped by the start of the Korean War. The post–World War II U.S. economy was humming along and government officials didn’t want to bid against American consumers for output for the military. So lawmakers gave the federal government three powers: (1) it can order producers to accept and prioritize the federal government’s demands ahead of others (for both finished goods and in the supply chain), (2) it can provide producers with capital to initiate and expand production, and (3) it can take action against price gouging and hoarding.
A flood of dollars under the second power might be helpful in producing ventilators, but it’s the first power that the Trump administration cited in its order to GM. According to the White House, “The Secretary [of Health and Human Services] shall 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.”
But GM—despite not being a ventilators manufacturer—already was aggressively moving to start production. The automaker had become a subcontractor for a Seattle-area ventilator-maker called Ventec that ordinarily produces about 250 units a month. With GM’s help in both mass manufacturing and sourcing supplies, Ventec is scaling up its own plant’s output to what it hopes will be 2,000 a month. Meanwhile, GM is assembling a second production line at an electronics plant in Kokomo, IN that has a clean room and other facilities that will be needed for ventilator manufacture. The expectation is that the plant will produce 10,000 units a month by summer.
Unlike the Korean War problems that led to the DPA, there’s little concerns that, amidst the stalling U.S. economy, GM is diverting attention and materials away from ventilators to automobiles. The automaker has been idling production and is eager for work and revenue.
Similar partnerships have been forged between Medtronic and Tesla for Tesla’s “gigafactory 2” in Buffalo, and between GE Healthcare, Ford, and a tiny ventilator maker called Airon for Ford’s Rawsonville plant in Ypsilanti, MI. Those arrangements were also hashed out before Trump’s orders.
As for 3M, the firm had already doubled mask production and expects to push even higher, making as many as 2 billion masks worldwide this year. The global manufacturer is also shipping some of its overseas output to the United States to help with domestic shortages.
Whether motivated by market forces or humanitarian considerations (or perhaps some of both), these manufacturers and their lengthy supply chains were already “enhancing and accelerating” the production of life-saving and life-protecting equipment. So why the Trump DPA orders?
In 3M’s case, the administration apparently was angry to learn that the firm sent a small percentage of its U.S. mask output to other countries in the Americas. Helping health care workers battle the disease in such places as Canada and Haiti doesn't put America first, it seems. But as 3M pointed out, setting off a trade war over medical equipment isn’t a wise move when COVID infections and deaths are at the beginning of a spike and the world is facing a general supply shock.
As for GM, the administration is frustrated that it will take time for Kokomo to reach full production. However, given the need to secure inputs, create production lines and train workers, get them up to speed, and quality-test the output, this shouldn't be a revelation for an administration that prides itself on its business savvy. Marginal cost rises as demand shifts outward, and it really rises when that demand really shifts. Or, in layman’s terms, it hard to go from full-stop to full-speed.
And that may be the real explanation for the orders. The Trump administration ignored or dismissed the threat of COVID-19 until just a couple of weeks ago, and bungled the one major action it did take. Now, the White House is hoping the orders will make up for wasting two months when it could have been preparing for the disease—or, at least, distract public attention from that failure and shift blame to corporations.
That is, “P” isn’t about life support for COVID victims. It’s life support for a troubled presidency in an election year.