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Despite Claims, Trump Rarely Uses Wartime Law in Battle Against Covid

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As schools reopen and cold weather heightens the likelihood of a spike in coronavirus cases, nurses and doctors fear that shortages of the respirator masks, surgical gowns and disposable gloves needed to shield them from infection will return with a vengeance.

President Trump has sweeping powers to compel companies to produce protective gear and to guarantee that the federal government will pay them for it — and as his election campaign intensifies, he has been boasting about aggressively using them. But in fact, most of his administration’s use of that authority, granted under the Cold-War Defense Production Act, has had nothing to do with the pandemic.

A White House report released last month claimed that Mr. Trump has wielded the act nearly 80 times to alleviate shortages of masks and other medical supplies.

“My administration has harnessed the full power of the Defense Production Act to achieve the greatest industrial mobilization since World War II,” Mr. Trump said at a briefing to announce the report’s release.

His daughter, Ivanka, said in her speech at the Republican National Convention that her father had “rapidly mobilized the full force of government and the private sector.”

Yet all but six of the examples cited in the report were either executive orders unrelated to the production of medical equipment or Defense Department expenditures that do not address the nation’s supply shortages.

U.S. government agencies routinely use the Defense Production Act. It is used thousands of times a year for things like purchasing critical military equipment and speeding up infrastructure repairs following hurricanes. But during the early months of the pandemic, the White House suggested that wielding that authority would have amounted to left-wing overreach.

Mr. Trump’s newfound embrace of the law comes as Joseph R. Biden, the Democratic nominee, has attacked the president’s failure to use it.

“Why in God’s name didn’t he move quicker on the Defense Production Act to provide P.P.E., the protective equipment for doctors and first responders?” Mr. Biden asked recently in an interview with CNN.

An analysis by the nonpartisan Congressional Research Service described the administration’s use of the act as “sporadic and relatively narrow,” noting that most of the $1 billion that Congress allocated under the Cares Act for purchases of medical equipment and protective gear under the Defense Production Act was shifted to the Defense Department, which spent most of the money — $688 million — on semiconductors, shipbuilding and space surveillance.

Dr. Nicole Lurie, a Biden campaign adviser who was the assistant secretary for preparedness and response at the Health and Human Services Department during the Obama administration, said: “No one is going to remember how much he slammed the D.P.A. in the past so the administration can create this illusion that they are using it. But the truth is that the White House is still failing to centrally manage the supply chain.”

Peter Navarro, the White House trade adviser who is the policy coordinator for the Defense Production Act, defended the administration’s decision to shift $688 million in Cares Act money to military contractors, saying the companies had been financially weakened by virus-related disruptions and were essential to the nation’s industrial defense base.

In an interview, he said the administration preferred to wield the law as a cudgel to encourage companies to act voluntarily in the national interest, though in one notable instance in April he used the act to prevent 3M from exporting respirator masks it had produced. The Justice Department has also used the law at least three times to prosecute individuals accused of hoarding or overcharging for essential medical goods.

“The most important lesson of the Trump administration using the D.P.A. is that of talking softly and carrying a big D.P.A. stick,” he said. “If I am trying to solve a problem with company X or company Y and they get a call from me as the Defense Production Act policy coordinator, the response is usually ‘how can we help serve.’”

ImagePeter Navarro, the Trump administration’s chief trade adviser and policy coordinator for the Defense Production Act, during a coronavirus briefing on April 2.
Credit…Doug Mills/The New York Times

Although the dire shortages of medical gear have eased since the early months of the pandemic, nursing homes, hospitals chains and doctors in private practice say they are still struggling to obtain the masks and gowns that can shield workers and patients from infection. Health experts fear a rise in coronavirus infections this fall and the return of seasonal flu could intensify demands for personal protective equipment, or P.P.E., most of which is produced in China.

Get Us PPE, a nonprofit group that connects health providers to available medical gear, said that 77 percent of the clinics, long-term care facilities and rural hospitals requesting goods in August reported that they had run out of at least one essential item, up from 65 percent in June.

In a report released earlier this month, the American Nurses Association found that one in three of the 20,000 members who responded to a survey in August said that they were short or completely out of the N95 masks that can filter out most virus particles. More than two-thirds said their employers required them to reuse their masks, a 6 percent increase since May, and more than 60 percent said they felt unsafe wearing masks designed for single use.

Ernest Grant, the association’s president, said the lack of domestic supplies had left nurses at the mercy of foreign-made masks that are sometimes poorly made or outright counterfeit and flawed.

“We’ve been urging the administration since mid-March to use the D.P.A. to ensure that everyone has adequate supplies so our nurses don’t have to worry that each time they put on a mask they are putting themselves, their patients and their families at risk of infection,” he said.

In late March, as coronavirus cases exploded and after weeks of criticism over federal inaction, the president reluctantly invoked the act but said he would only use it in a “worst-case scenario.” In the following days, he claimed to have used the law to spur General Motors to make ventilators — company officials say they were working on the deal a week before Mr. Trump claimed credit. He also falsely suggested the law allowed federal authorities to nationalize industries. “Call a person over in Venezuela, ask them how did nationalization of their businesses work out? Not too well,” he said.

Credit…Chip Somodevilla/Getty Images

Created in 1950 during the Korean War to speed production of essential defense-related goods, the law has been reauthorized and amended more than 50 times to empower the Federal Emergency Management Agency, H.H.S. and other agencies to use it during national crises.

Mr. Trump’s disparagement of the law as disruptive to businesses — a view embraced by the United States Chamber of Commerce — contrasts with its frequent use. The Defense Department, on average, uses the law 300,000 times a year to ensure contractors prioritize government orders, and FEMA has employed it more than a thousand times for relief efforts following hurricanes and other national disasters, according to a report by the Department of Homeland Security.

“It’s not rocket science. All it does is put the government at the head of the line before the private sector,” said Larry Hall, who recently retired as the director of the Defense Production Act program division at FEMA. “We’re at war, and the enemy is called Covid. The question is do we have the guts that our grandfathers had to mobilize the economy of the United States against the against this enemy.”

The law gives the federal government the power to combat hoarding and price gouging and the ability to allocate vital goods in the national interest. It also includes a provision that protects industries from antitrust litigation when they cooperate with one another during a national emergency.

Critics say use of the provision allowing the government to take over the allocation of scarce medical supplies would have helped ameliorate the chaotic free-for-all during last spring that pitted governors, hospitals and municipal health departments against one another in competition for N95 respirator masks, hand sanitizer and disposable gloves.

Eight months into the pandemic, policy experts and industry officials said the federal government’s ability to orchestrate the allocation of vital goods is no longer as urgent. But they say employing its authority to give companies financial resources to produce more goods would ease shortages of protective gear, testing supplies and the syringes and glass vials needed for a potential vaccine. Such incentives would also help reduce American reliance on China, they said.

Scott Paul, president of the Alliance for American Manufacturing, an industry group that seeks to increase domestic production, said that many executives would welcome the financial incentives that are part of the Defense Production Act, a provision known as Title III.

“The Trump administration’s use of the D.P.A. has been sporadic, vindictive and too late,” he said. “They have not wielded the tool very effectively, which is striking to me because in most other respects, the administration hasn’t been afraid to wield executive power.”

Credit…Michael Conroy/Associated Press

Title III has been used a handful of times in recent months, including for a $133 million contract for three companies, 3M, Honeywell International and Owens & Minor, to make N95 masks, and a contract for two medical supply companies, BD and Quidel, to ramp up production of rapid coronavirus test kits for nursing homes. In May, the administration announced a $75 million contract to Puritan Medical Products to expand production of nasal test swabs.

Other initiatives have run into trouble. A deal to provide Eastman Kodak a $765 million loan for the production of pharmaceutical ingredients announced with great fanfare by Mr. Trump in July has been put on hold while the Securities and Exchange Commission investigates allegations that insider trading prompted a meteoric rise in the company’s stock. Democrats in the House are also looking into the loan.

Then there is the star-crossed deal Mr. Navarro negotiated in April with the medical device maker Royal Philips, which was awarded a $647 million contract to make thousands of ventilators for H.H.S. under an accelerated schedule. Last week, the company announced that the remainder of the contract had been abruptly canceled, and Philips said it would only deliver 12,300 of the 43,000 machines that had been ordered.

A House Oversight subcommittee has said it will investigate the deal with Philips.

A spokeswoman for H.H.S. declined to comment but said the agency was conducting an internal probe into the contract.

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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