President Trump last week invoked the Defense Production Act, a law enacted during the Korean War that allows the federal government to direct American industry to produce products required for the national defense. The president has since declined to use the rights given him under the DPA. He shouldn’t. It’s time to act.
While I appreciate governmental restraint and his hesitancy to use what Peter Navarro called, “the heavy hand of government” to direct private businesses, we are not currently in a period of limited government action.
Government has ordered something like a quarter of the country into lockdown, all “nonessential” businesses are closed in many states, travel is banned between the United States and more than 30 countries, the Congress is on the cusp of passing a $2 trillion emergency spending bill, and the Federal Reserve has committed to unlimited trillions of dollars of quantitative easing in the form of bond market purchases.
Yet, somehow speeding the production and acquisition of medical equipment has been deemed a bridge too far. This makes no sense.
At present there are shortages of critical equipment used by healthcare providers, including N95 respirators, surgical gowns, the ventilators required to keep critically ill COVID patients breathing, along with certain pharmaceuticals, including hydroxychloroquine. That drug has been used in apparently successful small trials in both France and the United States to treat coronavirus both alone and in combination with azithromycin.
Additional trials are underway, and let’s hope they are successful. Both drugs are available off-patent—meaning they are relatively inexpensive—and there are existing manufacturers for both of them. A drug therapy for coronavirus that combines two well-known, widely available drugs would be a blessing. But it would also mean that we would need dramatically more of both drugs than their manufacturers were planning to produce. And because of the promise shown, there are already spot shortages of hydroxychloroquine—some hospitals are reportedly stockpiling the drug, which is also used as a treatment for Lupus and rheumatoid arthritis, putting existing users in potential peril.
Action is required to provide adequate—even abundant—supplies of all of these products where they are needed and it should be done quickly. How different would the reaction to coronavirus be if there were adequate supplies available on-demand where they were needed? Over the weekend we learned that the nation’s strategic reserve of N95 masks was substantially depleted during the 2009 swine flu outbreak and never resupplied. That’s a government-created shortage that they have an obligation to correct as quickly as possible.
Conservatives have longstanding and well-founded concerns about government overreach and accompanying unintended consequences. I share them. But conservatives should also recognize that there are certain essential roles that government plays and that in its proper sphere it should act decisively and hold itself to the highest moral and professional standards.
If there is one thing that government exists to do, it is to defend the lives and property of its citizens from threats which they are ill-suited to defend against on their own. External enemies and criminals are obvious examples. But new, dangerous, poorly understood pathogens meet the definition, too.
Conservatives in the White House backing trillions in spending and bailouts to corporations, but refusing to use the DPA to provide critical healthcare supplies where they are needed are sorely misguided. The Heritage Foundation, in a 2019 report advocating some reform of the DPA, wrote that the law “has been used successfully over the years. In many respects, the act is well suited to addressing key weaknesses in the industrial base. Prioritizing contracts for materials to prevent breaks in the supply chain, and providing funding for items that would not be produced by the commercial market in a timely manner, are invaluable tools for national security.”
The threat from coronavirus and its economic fallout is clearly a national security threat. We have millions of people out of school, out or work, and idly quarantined at home. We have a stock market that is down over 30 percent in the past few weeks, and an economy that Goldman Sachs predicts will shrink by 6 percent this quarter and 24 percent next quarter—a decline not seen since the Great Depression. That leaves America weaker.
Yet, we have a lack of equipment to fight the virus where it’s needed. Yes, markets work. But they take time to adjust. What DPA action does is compress the time it takes market signals to set changes in motion into days rather than weeks or months. That would be a great boon to the country, because the sooner we get people out of hospitals, out of their houses, back to school, and back to work, the better off we will all be. And it also moves the country away from multi-trillion dollar bailouts and allows the Federal Reserve to unwind its market interventions.
The 2020 bailouts are likely to reinforce some of the most politically and culturally destabilizing aspects of the 2009 bailouts. Conservatives beware. There is an unattractive trend in Washington to privatize profits and socialize losses.
But worse is that the economic fallout from the attempts to flatten the coronavirus curve is going to hit small business and the middle class hard. Amazon and Costco, for example, will emerge stronger and more dominant while local businesses take it on the chin. Similarly, the Cantillon Effect will virtually guarantee that the benefits of the Fed’s quantitative easing regime accrue to those closest to the new money supply: banks, other financial companies, big businesses. Reinforcing this trend is socially and politically destructive.
A conservative solution would focus on getting people back to work and that means, in part being able to get the supplies necessary for frontline healthcare workers to treat them effectively. The objection from Trump’s advisers can’t be the cost. The total cost of purchasing massive supplies of PPE, ventilators, and certain drugs could amount to no more than $10-$20 billion. That’s a lot of money, but in the context of the trillions being spent in Washington right now, it’s nothing.
The best way for those concerned about government overreach to get what they want is to see this crisis end quickly. And that means in part, putting the right tools in the hands of those who need them. Using the Defense Production Act, President Trump can see that this happens quickly.