Forget the Defense Production Act

April 11, Michael Davis, Cox School of Business at SMU Dallas, for a piece critical of the way President Trump and the press have made a political football of the option to use the Defense Production Act. Published in the Detroit News: https://bit.ly/2V2Wad6

Here’s an important question in these days of home confinement: How do we get the kids to pick up their room?

Yelling? Sure, it feels good, but it seldom works. The kids know we’re not going to cancel Disney+ for the duration of the crisis.

Keep that domestic drama in mind as we work on a much more important problem: How do we make sure that health care providers can find enough masks and ventilators?

Some people — including almost all Democrats but many other less partisan commentators as well — want President Donald Trump to start yelling. Specifically, they want him to make greater use of the Defense Production Act. . .

Read more from Michael Davis at https://bit.ly/3e0bvTh

By Michael Davis

Here’s an important question in these days of home confinement: How do we get the kids to pick up their room?

Yelling? Sure, it feels good, but it seldom works. The kids know we’re not going to cancel Disney+ for the duration of the crisis.

Keep that domestic drama in mind as we work on a much more important problem: How do we make sure that health care providers can find enough masks and ventilators?

Some people — including almost all Democrats but many other less partisan commentators as well — want President Donald Trump to start yelling. Specifically, they want him to make greater use of the Defense Production Act.

The DPA gives the president extraordinary powers in time of crisis. By invoking DPA the president can order private firms to accept government contracts, directly control supplies of critical goods and even appropriate private property.

The DPA is the political equivalent of a primal scream.

But will yelling at businesses work? No. In fact — and parents, you know this — yelling usually makes things worse. The DPA is unlikely to get us any more masks and respirators. But even if it does make a tiny difference, it will lead to a whole range of unintended consequences.

We can see that happening already. On March 27, Trump invoked the DPA and ordered GM to produce ventilators. But GM was already eager to get started. By most accounts FEMA was slowing things down by haggling over price. It’s also clear that GM didn’t want to promise more than it could deliver.

GM could have found a thousand reasons why it couldn’t turn a car factory into a ventilator factory. But they said they’d try and then got yelled at for not trying hard enough. We can only imagine how that lesson will affect other companies that might be able to help.

It got worse earlier this month when the president used DPA authority to prevent exports of protective gear. This had a big impact on 3M, one of the only domestic producers of N95 masks, some of which are exported to Canada.

Let’s set aside the question of whether this is any way to treat your friends. Just focus on how much harder this is going to make it for Americans to get what they need.

Personal protective equipment comes from all over the world, including Canada. In fact, Canada is the leading supplier of a special type of wood pulp used in making surgical masks. So far the Canadian mills are working as hard as they can to supply the demand from America. Without this paper, the supply of American made masks would be strained even more than it already is. Maybe Canadians will just ignore our ignorant, selfish embargo and keep working — that legendary Canadian “niceness” is, after all, a real thing. But who can blame them if they don’t.

If we wanted to motivate businesses, we’d use the tools that smart parents everywhere know really work: incentives, public praise and some patriotic persuasion.

How would that work to get more essential equipment?

Start with incentivizing. Tell the companies “We need this stuff right away. Don’t rob us blind, but figure out what it’s going to cost to make, and then tack on a little extra.” (Sure, we’d pay a bit more than in ordinary times, but these are not ordinary times.)

Then go with some public praise. Invite the big shot industrialists to a White House photo op, give them medals and tell them, “You did an unbelievable job. We can’t even count the lives you saved.” (That’s not true, of course. The real heroes are the engineers and workers who got it done. But the CEOs love that sort of thing.)

And don’t forget about a dash of patriotic motivation. Every politician needs to repeat over and over, “Now more than ever, Americans are depending on Americans. We all need to do everything we can.” (I actually don’t think this is necessary. Business people know this already. But it can’t hurt.)

The Democrats have been yelling at Trump to yell at businesses. That didn’t do any good but if all they’d done is make noise, that wouldn’t be a big deal. Politicians need to be seen doing something and we all need to blow off steam. But the yelling creates an atmosphere of sullen resentment. That doesn’t just make us feel worse, it makes it harder to get things done. The politicians should put the DPA back in its cage now.

Michael Davis is an economics professor in the Cox School of Business at SMU Dallas.