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AP Explains: How is the Defense Production Act relevant?

Friday, January 22, 2021 | Andrew Selsky, Associated Press


President Joe Biden delivers remarks on the economy in the State Dining Room of the White House, Friday, Jan. 22, 2021, in Washington. (AP Photo/Evan Vucci)

Like his predecessor, President Joe Biden is invoking a 1950 law to boost production of supplies needed to confront the coronavirus pandemic.

The Defense Production Act was signed by President Harry S. Truman during the Korean War. It gives the president broad authority to mobilize the resources and production of private companies to meet the needs of the national defense.

A look at the Defense Production Act:

WHAT IT DOES

The act gives the federal government broad authority to direct private companies to meet the needs of the national defense.

Over the decades, the law’s powers have been understood to encompass not only times of war but also domestic emergency preparedness and recovery from terrorist attacks and natural disasters.

The act authorizes the president to require companies to prioritize government contracts and orders seen as necessary for the national defense, with the goal of ensuring that the private sector is producing enough goods needed to meet a war effort or other national emergency.

It also authorizes the president to use loans, direct purchases and other incentives to increase production of critical goods and essential materials.

Other provisions authorize the federal government to establish voluntary agreements with private industry and to block foreign mergers and acquisitions seen as harmful to national security.

HOW IT WAS USED BEFORE

When former President Donald Trump invoked the authority of the Defense Production Act in 2020, the primary focus was on masks for health care workers, ventilators, gloves and eye protectors.

The government acknowledged a significant gap between the number of masks it needed for health care workers and the number of masks it had actually stockpiled.

Two decades ago, the administrations of both President Bill Clinton and George W. Bush invoked it to ensure that electricity and natural gas shippers continued supplying California utilities to cope with an energy crisis there, according to a 2009 Congressional Research Service report.

It was used again during the Iraq War to prioritize the supply of certain military equipment to British forces serving there, the CRS report said.

It was also used after Hurricane Maria struck Puerto Rico in 2017, when the Federal Emergency Management Agency sought to prioritize contracts for food, bottled water, manufactured housing units and the restoration of electrical systems.

WHAT IS THE FOCUS THIS TIME?

White House spokeswoman Jen Psaki said processes are “ongoing” to use the Cold War-era provision to boost vaccine supplies.

Biden’s national strategy for combatting the pandemic, released on Thursday during his first full day in office, puts the effort into context.

“The national vaccination effort will be one of the greatest operational challenges America has ever faced," the document says. "To ensure all Americans can be vaccinated quickly, the president has developed a plan for expanding vaccine manufacturing and purchasing COVID-19 vaccine doses for the U.S. population by fully leveraging contract authorities, including the Defense Production Act.”

Psaki told reporters the president "absolutely remains committed to invoking the Defense Production Act in order to get the supply and the materials needed to get the vaccine out to Americans across the country.”

Acquisition of specialized syringes is also on the White House's mind.

Psaki said these “low dead volume” syringes allow pharmacists and vaccinators to ensure more of the vaccine is used in a shot, “making more doses available, of course.” More ordinary syringes can leave fluid in the needle and in the space between the plunger and the syringe hub.

As of Friday, just under 5% had received one dose and fewer than 1% of the American population had been fully vaccinated.

MORE ON THE VIRUS

For most people, the new coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia.

The vast majority of people recover from the new virus. According to the World Health Organization, people with mild illness recover in about two weeks, while those with more severe illness may take three to six weeks to recover


7 Semiconductor Stocks Set to Gain From the Chip Shortage

Who knew that something so tiny could create such a big problem? However, that’s the case with the semiconductor industry. Chip manufacturers are facing supply chain disruptions due to the Covid-19 pandemic.

Semiconductors are in high demand for the big tech companies who need the chips to power the servers for their data centers. But they are also needed for much of the technology we take for granted including laptops, tablets, mobile phones, gaming consoles, and automobiles – a sector that seems to be at the root of the current crisis.

Any weekend mechanic knows that even traditional internal combustion cars are heavily reliant on electronics. In fact, electronic parts and components account for 40% of a new, internal combustion vehicle. That’s more than doubled since 2000.

However as it turns out, some manufacturers may have overestimated how soon consumers would be ready for an “all-electric” future. And that meant that they didn’t forecast how much demand there would be for the kind of chips needed to do the mundane, but vital tasks of steering, braking, and even powering windows up and down.

Part of the problem is that U.S. businesses are heavily reliant on countries like China and Taiwan for their semiconductors. In fact, only about 12.5% of semiconductor manufacturing is done in the United States.

Of course, this creates a tremendous opportunity for the companies that manufacture these chips. And it comes at a good time. The semiconductor sector is notoriously cyclical and was coming down from the elevated demand for the 5G buildout.

In this special presentation, we’ll give you a list of seven semiconductor companies that you can invest in to take advantage of this opportunity.

View the "7 Semiconductor Stocks Set to Gain From the Chip Shortage".

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