S. 1677: Defense Production Act Reauthorization of 2009

S. 1677

Defense Production Act Reauthorization of 2009

Date
September 23, 2009 (111th Congress, 1st Session)

Staff Contact
Communications

Floor Situation

S. 1677 is being considered under suspension of the rules, requiring a two-thirds vote for passage. The legislation was introduced by Sen. Chris Dodd (D-CT) on September 16, 2009.

Bill Summary

S. 1677 reauthorizes the Defense Production Act of 1950 (P.L. 81-774) for five years, through September 30, 2014. Under current law, the Act will expire on September 30, 2009.

S. 1677 would also require each federal agency to issue final rules establishing standards and procedures by which they use their priority and allocation authority to promote the national defense. Agency heads would further be required to consult with each other to help develop a consistent federal priorities and allocations system.

The bill also authorizes $750 million for a manufacture loan guarantee program for U.S. manufacturers which provide products deemed critical to national security.  S. 1677 includes several requirements for such loans, including that they must be authorized by the President and would be provided by private institutions, though guaranteed by a federal agency. The cost of these loan guarantees must be provided in advance by an appropriations Act, and the bill provides a limit for the loans.

S. 1677 would establish a Defense Production Act Committee to advise the President on the effective use of the authority under the Act. This committee would have an Executive Director appointed by the President and would report to Congress.

 

Background

The Senate passed this bill by unanimous consent on September 16, 2009. The underlying Defense Production Act of 1950 (DPA) provides for a mechanism for the government to acquire materials necessary for national defense or to alleviate a natural or man-made disaster without unduly affecting the overall economy-it does not specify any particular equipment or materials to be acquired. Congress regularly reauthorizes the DPA every one to three years.

The DPA was enacted in response to the outbreak of the Korean War. During that war, the legislation was used to establish a large defense mobilization infrastructure. The Act allows the Department of Defense (DoD) and the Federal Emergency Management Agency (FEMA) to quickly procure supplies on an emergency basis. It is also intended to ensure that the domestic defense industrial base has the resources and capabilities necessary to support defense readiness. Most recently, during the war in Iraq, the Act was used to secure computer equipment, chemical warfare protective clothing, and medical supplies.

Specifically, the Act authorizes the President to require businesses to sign contracts or fulfill orders deemed necessary for the national defense. It also authorizes the President to establish mechanisms to allocate materials, services, and facilities to promote national defense. Importantly, the Act also authorizes the President to influence the civilian economy so that scarce and/or critical materials necessary to the national defense effort are available for defense needs.

Members may be concerned that the underlying Defense Production Act has been used to institute price and wage controls, as occurred under President Nixon in 1971.

Cost

The Congressional Budget Office (CBO) has not yet produced a cost estimate for S. 1677, but the legislation authorizes $750 million for the loan guarantee program.