What Is the Defense Production Act?
The Defense Production Act, an act passed during the Korean war, gives the President the power to order private sectors to produce certain goods.
History of the Defense Production Act
In 1950, in the midst of the cold war, North Korea, backed by the Soviet Union, invaded South Korea, a U.S. ally. As a response, President Truman addressed Congress requesting the authority to oversee the economic mobilization of resources as a means to prepare for the inevitable war with North Korea.
This resulted in Congress passing the Defense Production Act in September 1950. The Act has been amended over 50 times since its enactment and has been used to address other emergencies like terrorist attacks and natural hazards.
Now, when invoked, the Act allows the President to force private companies to prioritize government contracts.
Was It Ever Used After the Korean War?
Yes, a number of times. Although the Defense Production Act was initially enacted as a response to the Korean War, it has since been invoked during peace times as well. Some of the instances where a President used the Defense Production Act include:
- President Bill Clinton and then President George W. Bush invoked the Act to respond to blackouts in California in January 2001.
- President Donald Trump invoked the Act following the 2017 hurricane in Puerto Rico. He allowed the Federal Emergency Management Agency to prioritize contracts for basic necessities like food, water, and housing.
- President Trump invoked the law in 2017 to mobilize the industrial base for the Space Force.
- President Trump also invoked the Act as a response to the COVID-19 pandemic.
What Does the Defense Production Act Do?
Some of the most pertinent sections of the Act are:
1) Priorities and Allocations (Title I)
This section gives the President the power to:
- Force corporations to accept and prioritize production considered necessary to aid the U.S. in an emergency
- Decide on allocation or control the general distribution of supplies
2) Expansion of Productive Capacity and Supply (Title III)
This section gives the President the power to create incentives for industries such as manufacturers.
These may include:
- Getting the required equipment
- Providing loans
- Waiving restrictions
3) General Provisions (Title VII)
Here, the government gets the ability to strike agreements with private sectors and to stop mergers that threaten national security. Specifically, under this title, the president has powers to:
- Block corporate mergers, takeovers, or acquisitions with foreign companies
- Create agreements with private industries
- Employ people with the required experience or call on executives to government service
Companies and individuals who fail to comply with this Act may face imprisonment or fines. Also note, Congress needs to approve any projects that cost more than 50 million dollars.
The Defense Production Act Fund
The Defense Production Act, in title III, establishes a treasury account called the Defense Production Act Fund. This fund is allocated to allow the government to make purchases and provide loans. It is capped at $750 million in any given year, and in most cases, Congress will exercise its oversight powers over these funds.
What Is Congress's Role?
Congress, as a legislative branch of the government, has an oversight role in the Defense Production Act:
- The President can use the Act to control wages and prices if Congress approves. (50 U.S.C 4514)
- Congress needs to pass an appropriation act for direct loans and guarantees. (50 U.S.C. 4531)
- Projects that cumulatively cost more than $50 million must be authorized by an act of Congress. (50 U.S.C 4533)
Defense Production Act and COVID-19
The United States faced a massive shortage of drugs and medical equipment during the COVID-19 pandemic. Accordingly, governors from multiple states asked President Trump to invoke the Defense Production Act to allow them to respond adequately to this pandemic.
As a response to their request, President Trump invoked the Defense Production Act with an executive order.
The order aimed to force companies like General Motors to prioritize the production of health and medical equipment like ventilators to respond to the spread of COVID-19. In the order, the President:
- Delegated his powers of distributing resources and prioritizing government contracts to the Health and Human Services Secretary.
- Set forth measures that prevent people from taking the needed resources.
President Trump also used the Defense Production Act to require meat production plants to remain open after some had temporarily closed due to the spread of COVID-19 in their plants.
- The Defense Production Act of 1950: History, Authorities, and Considerations for Congress
- Understanding Government Actions During a Pandemic
- Protecting My Small Business During a Pandemic
Need More Information? Speak to an Attorney
The Defense Production Act gives the President a broad range of powers. These powers, when exercised, may directly or indirectly affect you or your business. Speak to an experienced attorney if you are impacted by the Act or if you want more information.