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Beware of bailouts masquerading as national security investments

Beware of bailouts masquerading as national security investments
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Not everything labeled “a matter of national security” is. Politicians and interest groups have a long history of misapplying the term to lend legitimacy to pet projects. Now, it’s being tossed around to justify bailing out power plants.

Electric companies in Ohio, Pennsylvania, and West Virginia say they will shutter some coal and nuclear plants over the next few years unless they get help from the government. On Thursday night, Bloomberg reported that the Energy Department has drafted a plan to direct grid operators to buy electricity from these at-risk plants. It would be, Bloomberg noted, “an unprecedented intervention into U.S. energy markets.”

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What does the department get the authority to issue such a mandate? Apparently, it will rely on the Defense Production Act of 1950 (DPA). But using DPA in this way would distort the act’s purpose, dilute legitimate security concerns, and remove the real issue — energy policy — from public debate.

 

It’s worth remembering why the DPA was passed. At the outbreak of the Korean War, the U.S. and its allies found themselves short of equipment and supplies needed to support the troops of allied forces. President Truman asked Congress for legislation that would prioritize limited resources and invest in the productive power of the U.S. domestic economy for the sake of military readiness. Lawmakers responded with the Defense Production Act, giving the president authority to ensure the availability of resources as necessary to support national defense.

While the war ended, the act remained. Over the years, as it went through multiple re-authorizations, the DPA’s definition of “national defense” was expanded to encompass any manner of agendas, from disaster response and critical infrastructure protection, to a vague notion of energy security.

Many in Congress were appropriately outraged when the Obama administration used the act to jumpstart a domestic advanced biofuel industry through the Navy’s “Great Green Fleet” and similar programs. Senate Armed Services Committee Chairman John McCainJohn Sidney McCainLive coverage: McSally clashes with Sinema in Arizona Senate debate Is there difference between good and bad online election targeting? Murkowski not worried about a Palin challenge MORE (R-Ariz.) called the lack of a compelling operational requirement an “alarming departure from the traditional use of this authority.”

The Department of Energy’s current scheme to subsidize coal and nuclear plants is yet another attempt to promote politically preferred energy technology under the guise of national security.

The DPA was intended to authorize limited industry protections for the sole purpose of enabling and maintaining U.S. national defense. Just because the Pentagon can use certain products, materials, and technologies doesn’t mean that the companies producing them should be shielded from market competition. The DPA is not a bailout program, and should not be treated as such — particularly in a sector where numerous and plentiful substitutes exist.

Criticality, for the purpose of the DPA, should pertain only to those industries whose continued operation is not only directly necessary for the national defense, but for which there is no suitable alternative and which cannot be sustained through private-sector demand. The closure of plants producing products that are neither scarce nor sensitive poses no threat to national security and does not warrant industry protections.

The circumstances surrounding the coal and nuclear case meet none of these criteria. Politicians and special interests too often inappropriately use national security to justify economically harmful policies that do little, if anything, to enhance national security. The “national security card” gives them a free pass from political debate and taxpayer oversight.

That certain coal- and nuclear power plants are no longer competitive is an economic issue, not a security problem. If lawmakers wish to deal with that issue, the appropriate course of action is to address the decades of bad federal policies that have put these plants in jeopardy.

But pulling resources away from legitimate defense priorities — at a time when electricity is abundant, the military is struggling to rebuild, and near-term threats are growing — ignores strategic realities and undercuts the real purpose of the DPA.

Rachel Zissimos is a policy analyst specializing in national security issues at The Heritage Foundation. Katie Tubb is a policy analyst in Heritage's Roe Institute for Economic Policy Studies.