Democrats in Washington have a problem, and not because polls indicate they will be swept from power in Congress in November. They acknowledge that rapidly rising inflation combined with a broken supply chain keeps the economy sluggish. And yet, the only solutions they seem to be able to come up with are to use the Defense Production Act and antitrust.
The Defense Production Act (DPA), first approved in 1950, states that it is essential for the domestic industrial base to “supply materials and services to the national defense.” It specifically mentions military conflicts, domestic terrorism and national or man-made disaster preparedness. The president can use the DPA to control domestic distribution if it involves “scarce and critical material that is crucial to national defense.”[ads1]; It also allows the White House to provide incentives for private companies to come up with expanded production capacity if it is for “the implementation of the United States’ national security strategy.” It is clear that this law is intended to benefit the Pentagon above all else.
President Joe Biden called on the DPA for the first time in March 2021 regarding precious metals. The White House said the order helps “strengthen our clean energy economy by reducing our dependence on China and other countries” for metals and minerals used for clean energy. It seems that relying on Canada, Brazil and Australia failed as a policy for the administration. Whether that means the federal government will approve or reauthorize two precious metal projects in Minnesota remains to be seen.
Biden’s next Defense Production Act goal involved baby replacement. The White House became concerned months after Abbott Nutrition issued a voluntary recall due to five cases involving possible Salmonella Newport and / or Cronobacter sakazakii contamination. Nothing was found in Abbott’s tests, except for traces of Cronobacter sakazakii in “non-product contact areas.” However, since two babies died, the Food and Drug Administration (FDA) temporarily closed the facility for an investigation despite the fact that they did not know the source of the contamination.. (Health and Human Services (HHS) is considering the FDA’s decision to close the facility.)
The president seemed outraged weeks later that putting the DPA into action did not immediately solve the problem. Baby replacement manufacturers told the White House that they knew the recall and closure of the facility would lead to shortages and empty shelves. The Biden administration accused Abbott Nutrition of spending too much time accepting a plan to reopen the facility. But the administration also sent mixed messages about exactly when the White House began working on the formula shortage.
Biden’s last three DPA statements came this month involving green energy. He said the future of the United States depended on their ability to make solar panels, insulation, electrolysers and batteries. The order includes several projects for clean energy on public land and artificially stimulating demand for solar panels for about a “gigawatt of domestically produced solar modules in the short term.”
The White House can now use DPA on oil prices. Democratic Representative Raja Krishnamoorthi told CNN that “we refine about a million barrels of oil less per day compared to before the pandemic.” He wants DPA to be used to reopen eleven closed refineries in the United States, and Biden is apparently considering it.
Why did the closures happen?
Stricter federal and global regulations were the culprits, according to a report by credit rating agency and economic forecaster Fitch Solutions Country Risk & Industry Research sent to Rigzone, a website covering the oil and gas industry. Fitch analysts said that these moves made Big Oil turn more towards clean energy to stay in business. This transition exacerbated petrol prices, which have risen since May 2020, combined with sharp inflation.
“And infant formula? How the hell is it like national defense? It is not the case that the Ministry of Defense suddenly starts hiring baby soldiers to fight wars.”
It is doubtful whether any of these DPA declarations fall under national defense. Biden’s order for precious metals and green energy does not mention how the military benefits from the use of electric vehicles, solar panels and charging stations. They can benefit from the stationary storage sector, but a study by the Dutch financial institution Rabobank found that lithium-ion batteries only last for four hours. It can take a decade before large-scale energy storage works from a cost and feasibility point of view. The Pentagon admitted last year that it will take time to develop more clean energy technology.
And infant formula? How the hell is it like national defense? It is not the case that the Ministry of Defense suddenly starts hiring baby soldiers to fight wars.
“DPA is primarily a tool to tell certain manufacturers to prioritize public contracts or to get certain simpler favorable terms on things to get things done quickly,” Eric Gomez, director of defense policy studies at the Cato Institute’s Libertarian, said when asked on the use of DPA in the production of infant formula. “The connection to defense is often weak … things like that the baby compensation tax has nothing to do with the national defense” the baby compensation charge has nothing to do with the national defense.
Gomez’s concern is that the DPA will be a short-term crutch for the federal government. “It allows us to ask bigger questions about what can either fix this in a more sustainable way, or get us to make some major changes that we should make to our policies,” Gomez said. He also notes that the government tends to ignore problems when there is no crisis. Republican Senator Pat Toomey raised his own concerns about DPA abuse, suggests it was time for Congress to step in to limit its missionary insects.
Biden’s use of the DPA is also linked to the administration and the Congress Democrats’ desire for more antitrust as a tool against inflation. Democrats – and many Republicans – want to use antitrust used to break up Big Tech, reduce shipping costs and target drug manufacturers against what the Federal Trade Commission (FTC) has called illegal rebate schemes. This includes the Democratic sensations Elizabeth Warren and Tammy Baldwin’s law on price control, which insists that corporate greed is the reason prices jumped. The Consumer Financial Protection Bureau (CFPB) also uses antitrust, although critics call their move vague.
It is a theory that Joshua Withrow, a fellow at the free market-supporting R Street Institute, sees as another ridiculous example of politicians getting involved in the so-called “do something” game. “It’s just a squirrel they want the public to chase,” Withrow told The Daily Beast, adding responsibility for the federal government’s spending round in 2021. He added: “Not that some lawmakers sincerely want to use antitrust because they is afraid of the corporate “greatness” for its own sake, but I think that [administration] will mostly just have distraction. ”
What is particularly remarkable is that left-wing economists also view this antitrust pressure as ridiculous.
Former Obama administration official Austan Goolsbee said, “How are we going to do this again?” in a recent study from The Initiative on Global Markets that looks at gas price controls. Former Clinton Secretary of the Treasury Larry Summers Narrow The Biden administration’s antitrust push as counterproductive, tweeting that the policy “can reduce efficiency and, by extending supply chains, reduce resilience.” Washington PostCatherine Rampell wrote that the use of antitrust to deal with what Biden, Warren and others call “greed” gives a conspiracy theory because of how much money is currently on the market.
Perhaps most frustrating is that there are solutions to reduce inflation and increase supply, but they are ignored for policy. The administration may lower some of the Trump administration tariffs. It’s a good start, but not enough. The more tariffs have to go, the sooner the better. The Federal Reserve must continue to raise interest rates and sell off the balance sheet. Congress and the White House cannot continue to spend money at exorbitant rates because it further centralizes power in the federal government.
Weaker government, not stronger, fixes this mess.