Last week, President Biden invoked the Defense Production Act (DPA) of 1950. But it wasn’t in response to anything related to defense.

It was because of a national shortage of baby formula.

You probably heard all about the shortage on the news. So I won’t go into it in too much detail here…

First, global supply chain issues affected the supply of baby formula.

Then, one of the key American manufacturers of infant formula recalled certain products due to fears of bacterial contamination. It also shut down one of its main plants.

This is a big deal. Nearly 98% of the baby formula that is bought in the U.S. is produced here. And just four manufacturers control the market.

If even one plant closes, it disrupts the whole baby formula supply chain. That’s why the government invoked the DPA.

Under the DPA directive, any suppliers of the main ingredients for baby formula must now prioritize them for America’s baby formula manufacturers.

Now, some might argue this is government overreach.

But it’s not the first time the DPA has been invoked for matters other than national defense. And it won’t be the last.

The DPA has been used more than 50 times since 1950. And today, the government is also using it to spur one of the five distortion profit themes on my radar: the New Energy megatrend.

I’ll get to more about what this means for you and your money shortly.

But first, let’s take a look at the history of the DPA.

The Evolving History of the DPA

The DPA stemmed from the War Powers Acts of 1941 and 1942. Those acts gave President Franklin D. Roosevelt authority to control the domestic economy during World War II.

That meant setting wages and prices. It also covered rationing consumer goods during war times.

After World War II, the Truman administration wanted stronger executive authority in the interest of national defense.

That was because of the Cold War with the Soviet Union in the late 1940s, followed by the North Korean invasion of South Korea in June 1950.

The DPA, as we know it today, was passed in September 1950. It was deployed to boost aluminum and titanium production during the Korean War.

But it also gave broader authority to the president over national economic policy.

It allowed the president to require domestic companies to prioritize defense production. That includes the manufacturing and allocation of certain goods during a crisis.

Over the years, Congress has reauthored the DPA many times. The most recent instance was the John S. McCain National Defense Authorization Act of 2019. It is set to expire in 2025.

But when Covid-19 showed up, the DPA got more powerful. In March 2020, Congress significantly expanded the term “National Defense.”

As a result, the DPA could be used for more than just military preparedness. It could enhance and support domestic preparedness in response to natural hazards, terrorist attacks, and other emergencies.

That’s why today’s DPA gives the executive branch more power.

It empowers the president to “allocate materials, services, and facilities” for national defense and other emergency purposes.

And it’s why the president can direct private companies to prioritize orders from the government.

Presidents Trump and Biden Agreed on the DPA

U.S. presidents from Harry S. Truman to Barack Obama have used the DPA.

More recently, Presidents Trump and Biden both invoked the DPA in response to the Covid-19 pandemic.

President Trump used it to increase medical resource supplies and domestic manufacturing as the Covid pandemic raged.

He invoked it to generate N-95 respirators, ventilators, and to boost testing resources, and other critical supplies.

He also deployed the DPA for meat production when many meat processing plants in the U.S. were closed due to Covid infections among the workforce.

When he took office, President Biden used the DPA to accelerate Covid vaccination and testing efforts.

He used it to provide more at-home and point-of-care virus tests, and to increase the supply of personal protective equipment (PPE) such as masks, shields, and gloves.

From Life-Saving Ventilators to EV Batteries

Recently, as the need for Covid measures receded, the New Energy transition I’ve written to you about several times has taken center stage.

In March, President Biden deployed the DPA to bolster domestic production of the raw materials used to manufacture electric vehicle (EV) batteries.

Those materials include lithium, cobalt, graphite, nickel, and manganese.

According to the White House, “Demand for such materials is projected to increase exponentially as the world transitions to a clean energy economy.”

But the U.S. “depends on unreliable foreign sources for many of the strategic and critical materials necessary for the clean energy transition.”

So this action was partly an economic plan. But it was also a means to secure national defense and preserve “domestic critical infrastructure” against competitors like China.

This use of the DPA gives U.S. mining companies access to $750 million under the DPA’s Title III fund.

That fund covers “feasibility studies, co-product and by-product production at current operations, and productivity/safety modernizations.”

And as I know from my 15 years working there, where the government issues its support, Wall Street will follow.

And that spells opportunity for investors.

But there’s another reason I believe the DPA might be invoked again soon…

Can the DPA Stretch to More New Energy Uses?

In recent months, Americans have been hit by high gas prices because of the war in Ukraine and geopolitical tensions in Europe.

Even with our own sources of oil and natural gas, prices are impacted by disruptions elsewhere. These increase the overall cost of fuel.

And as I wrote recently, the race to ramp up production from renewable energy sources is on…

The White House has allocated $100 billion to clean energy projects under the Bipartisan Infrastructure Law.

And as we head into mid-term elections, President Biden could decide to invoke the DPA to bolster various modes of clean energy production. This would be in the name of national defense or security.

It would not be a stretch for Biden to invoke the DPA beyond building EVs and batteries for energy storage.

He could use the DPA to accelerate the installation of heat pumps, solar, wind, and other clean energy technologies.

That could span the production of large-scale solar panels, wind turbines, and the buildout of tidal and geothermal plants.

Even if there is a resolution in Ukraine and oil and gas prices come down, our past two presidents have shown that using the DPA is a popular move.

I’ll be watching this space and talking to my contacts in Washington about it. And I will be sure to report back to you if I hear anything you need to know.



Nomi Prins
Editor, Inside Wall Street with Nomi Prins

P.S. The pain at the gas pump, record oil prices, runaway inflation… it’s all leading to one thing: America’s next energy crisis. And it’s going to accelerate the electrification of America. Even Big Oil companies are coming on board…

Energy transitions are often some of the most profitable times in America. And investors who recognize a total shift in the energy markets can make entire lifetimes of wealth. Remember, John D. Rockefeller was running grocery stores before he heard of something called “petroleum.”

That’s why I recorded this special update for you on America’s Energy Crisis. To find out how you can get in position to be on the right side of this dramatic shift in history and the markets, click here now.

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