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Op-Ed: Trump Is Using the Defense Production Act All Wrong

The White House and the Centers for Disease Control are recommending that all Americans wear cloth face masks in public to slow the spread of Covid-19. While cloth masks are an effective stopgap measure to help preserve supply of more effective medical masks for our healthcare workers, they are just that: a stopgap.

If we could rapidly increase production of medical masks, public health officials wouldn’t be forced to make this tradeoff between effectiveness and availability. There have been growing calls, from both the left and the right, to use Title I of the Defense Production Act to effectively nationalize the supply chain of critical medical supplies. This piece of Korean War-era legislation grants the president broad authority to command the production of private industry. President Trump has started using the law, commanding GM, for instance, to begin production of ventilators and preventing mask manufacturer 3M from certain types of medical exports.

But nationalization is hugely inefficient. The government doesn’t know which specific factories have the lowest costs to adapt production processes to start producing masks or ventilators. The government can’t figure out what quantity of medical goods is optimal for each specific factory to produce, given local labor supply and existing infrastructure constraints. Government officials can’t know which simple modifications to the designs of these medical goods would enable manufacturers to ramp up production more quickly.

A better idea is to harness market signals and amplify them using the purchasing power of the federal government. And it turns out that there’s another section of the DPA — Title III — that can make that happen using purchase guarantees. If paired with targeted deregulation, massive purchase guarantees can act as a multiplier on American manufacturing capacity.In other words, instead of deciding which companies or factories should take on this production, the government can provide market incentives that allow the best, most efficient companies to step up to the challenge – faster than the alternative.
Read the full piece hereCo-written by PPI’s Alec Stapp and Caleb Watney of the R Street Institute.

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