Unsanitized: The Gaping Hole in the Defense Production Act

Plus Trump’s potential reversal on social distancing, and Nancy Pelosi’s big swing. This is The COVID-19 Daily Report for March 24, 2020.

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First Response

The biggest crisis in the pandemic right now remains the lack of equipment needed to keep people safe and alive. The so-called richest country on Earth is reduced to relying on donations of hospital masks from Taiwan, and its top public health agency has recommended its doctors use bandanas in a pinch.

Throughout the supply shortages, people from across the political spectrum—AOC, Elizabeth Warren, Andrew Cuomo, investor David Tepper, Ted Cruz—have urged the president, with increasing desperation, to invoke the Defense Production Act, compelling domestic industry to produce necessary supplies like masks, gowns, respirators, and ventilators. If hospitals run out of these items, they put their personnel at risk and will have to make grisly decisions about who to save and who to let die. It’s absolutely vital.

Yet President Trump has resisted this step; his FEMA director admitted that no orders have been placed, despite Trump claiming twice in press conferences that he’d begun to use the Defense Production Act. The explanations why have shifted: first it was that companies have filled the gap already, like Hanes, which is producing masks (though not the highest-quality N95 models). Then, when that alibi fell apart—without federal coordination, states are competing for critical supplies and overpaying, and businesses struggle to secure materials and retool factories—Trump decided that the Defense Production Act constituted socialism. (In truth, lobbying from the U.S. Chamber of Commerce against invoking the act, and a reluctance to take responsibility for anything, is probably driving the response.)

If the Defense Production Act is socialism, then so is ordering catering for a White House state dinner. The law simply enables the government to make orders with private business, and have those orders get to the front of the line. There’s certainly central planning and coordination involved, but the government writes a contract and compensates businesses for their efforts at reasonable rates, much like someone whose property is expropriated under eminent domain receives just compensation. The law simply reorients business priorities during a national emergency.

But that last part—the compensation—is key. As Matthew Cunningham-Cook, a writer who works for a nurses union, explained in The Intercept, the Defense Production Act limits how much money it can appropriate to the purpose of securing needed supplies: the fund is capped at $750 million. Remember that it was written in 1950, when that number must have seemed much larger. But that wouldn’t get you a week’s worth of masks (we need 3.5 billion, which would cost $7 billion) or a handful of ventilators (as much as $50,000 each) today. Each individual contract with a business also has a cap of $50 million, but the president can waive that in an emergency. However, the $750 million limit would make the Defense Production Act meager relative to national needs.

Representative Ro Khanna (D-CA) has called for that fund to be raised to $75 billion. But in House Speaker Nancy Pelosi’s $2.5 trillion emergency legislation (more on that later), we get her number on page 643: $3 billion, for fiscal years 2020 and 2021. That’s simply not enough either, and if you give the money directly to the hospitals, it will fatten the profit margins of the few producers, who can play each buyer off the other.

It’s one thing to yell about invoking the law to produce medical equipment, it’s another thing to actually be serious about it.

Vital Stats

New York Times: 43,499 U.S. cases (33,018), 537 deaths (428). That’s an increase of 10,461 cases and 111 deaths from yesterday (by some counts, the first day with more than 100 deaths). Johns Hopkins University: 46,481 cases (35,225), 593 deaths (471), so that’s up 11,256 cases and 122 deaths from yesterday. The COVID-19 Tracker shows 43,630 cases (32,617) and 535 deaths (411), and 303,014 tests completed (238,632). That’s 64,383 tests since yesterday. We are getting closer to South Korea’s testing level on a per capita basis (roughly 75,000-100,000 per day). But hotspots are overwhelmed and limiting testing; the states at the beginning need to not only test but isolate the positive cases and trace their movements, and there’s little sign of that so far.

Whatever You’re Thinking of Doing, Don’t

It took all of a week for Donald Trump to get bored with social distancing measures, antsy about a collapsing economy, and perturbed by epidemiologists and scientists telling him what to do. He’s considering lifting the recommendations to stay at home within a week, sending the public out to contract a highly contagious and deadly disease. “I’m not looking at months,” Trump said in his daily briefing.

This is absolutely terrifying for so many reasons. With lockdown measures, countries like China and Italy appear to be able to bend the curve of new cases and deaths within two weeks. We’ve had a soft lockdown in some of the country and even fewer measures elsewhere. So long as the virus proliferates, you cannot bring back the economy, and you cannot get a handle on the outbreak. You’re just have unending flare-ups for 18 months, prolonging the agony until a vaccine is secured. Only truly harsh measures can arrest the damage; Trump’s reversal, if it happens, would give us both an unrestrained pandemic AND a depression.

Its clear to me why he’s doing this; he wants to return to the politics of resentment. The big cities would be holdouts on this order to go back to work, and Trump could blame them for mishandling the crisis. When it spreads to red America, that would also be the fault of the big cities. This would re-run the coastal elites v. “real America” strategy that makes him the most comfortable.

Trump will run into one problem with any “back to work” order, however: people won’t be marched to their deaths so easily. I would expect significant labor unrest, perhaps even that elusive general strike, in reaction to Trump asking people back. #NotDying4WallStreet is already a trending hashtag. Maybe the lieutenant governor of Texas would rather die to save the economy, but he can go first.

Our Coronavirus Coverage

Here’s a sampling of what we’ve been writing at the Prospect:

  • Bob Kuttner on the end of American exceptionalism.
  • Marcia Brown on life in a time of COVID-19 in an immigrant detention center.
  • Andrew Koppelman on why free-marketeers should support central planning.
  • David Dayen on the lack of institutional trust, in government and private enterprise.
  • Stacy Mitchell on the collapse of small business.

You can find all of our coverage at prospect.org/coronavirus. Also, I want to hear your stories of dealing with the COVID-19 crisis. Tell me about your experiences. Email me at ddayen-at-prospect-dot-org.

Nancy Take the Wheel

I previously alluded to Nancy Pelosi’s Senate bill, which she released right after the Senate proved incapable of passing an emergency bill for the second day. The Senate bill is a joke, with its $500 billion slush fund for corporate America and meager crumbs for individuals. The Pelosi bill is better in many respects, and would definitely help people. The moratorium on evictions and suspension of mortgage and consumer loan payments is precisely what’s needed to stop financial time; the direct payments are universal and clawed back based on 2020 earned income; the unemployment boost replaces 100 percent of earnings for the median worker. Airlines must put a worker representative on their board, COVID-19 treatment would be free, state and local governments get money, and most important, the overall appropriation, at $2.5 trillion, comes close to the level needed.

When you write a bill this fast, there are bound to be bad items and pet projects and kitchen sink-type stuff in there. But in a normal world, the House and the Senate could negotiate between these poles. We are running out of time; the rent’s due April 1.

Today I Learned

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