In March, President Trump declared himself a “wartime President” leading the fight against the Covid-19 pandemic. He was right about the human toll—in two months the pandemic has killed more Americans than any conflict since World War II.
But for a self-described “wartime” President, Trump’s leadership has lacked the mobilizing effort that defined America’s response to historical crises of this magnitude. Trump has time and again shirked responsibility for leading the nation. Trump essentially said the states are on their own to procure medical supplies. Governor Jay Inslee of Washington aptly said, “Can you imagine if Franklin Delano Roosevelt said, ‘I’ll be right behind you, Connecticut. Good luck building those battleships’?”
Of course, it is unimaginable that President Roosevelt would have said that—and Roosevelt’s legacy is important as we think about the path forward today. Amidst today’s dysfunction, it is worth examining how Roosevelt led the production of what he called the “Arsenal of Democracy”—the material that America and its allies needed to win World War II. Roosevelt’s wartime leadership shows the value of a President willing to take charge of the national response, as the federal government did to prepare America for the impending crisis and ensure production of the material it would need to win the war.
Today, American companies are churning out the material needed for this war—distilleries are producing hand sanitizer, fashion designers are making masks, and car companies are manufacturing ventilators. While the private sector has a crucial role to play in responding to the pandemic, America’s experience from World War II shows that the federal government must lead and take decisive action to coordinate and support the production of the “Arsenal of Democracy.”
As Nazi forces advanced across Western Europe in the spring of 1940, Roosevelt was increasingly focused on preparing the United States for what he saw as its inevitable entrance into the war. On May 16, 1940, Roosevelt addressed a joint session of Congress and asked for approximately $1.2 billion in defense appropriations. Though America was not at war, Roosevelt said that the nation’s “facilities for production must be ready to turn out munitions and equipment at top speed.” Roosevelt did not shy away from setting high expectations. In 1939, U.S. aircraft factories had produced fewer than 3,000 warplanes and Roosevelt told Congress that he wanted a “greatly increased additional production capacity. I should like to see this Nation geared up to the ability to turn out at least 50,000 planes a year.” It was an ambitious program—the CEO of Lockheed Aircraft said: “The air industry was called upon to build thousands of something it had built only dozens of before.”
In 1940, America faced a shortage not only of airplanes and tanks but also of the raw materials necessary for military production. As historian David Kaiser notes, the stockpiles of “tin, rubber, and even high-octane gasoline” were grossly insufficient and the “situation was even worse with respect to key materials that would have to be produced industrially, including steel, aluminum, aviation gas, and synthetic rubber.” There was an acute need to stockpile the strategic metals necessary for the nation’s military hardware.
Roosevelt had served as assistant secretary of the Navy in World War I, and he had a great appreciation for the importance of logistics and contracting—mundane matters of central importance to get the United States on a wartime footing. And he knew that ultimately the government, not private industry, had to be responsible for acquiring and producing the materials required for the national defense. On May 26, 1940, he delivered a fireside chat in which he promised to take America’s defense to “whatever heights the future may require” and said that “private business cannot be expected to make all of the capital investment” needed to prepare America for war. As historian Susan Dunn notes, many companies at this time were reticent to invest capital in the new facilities that would be needed to scale up production.
Roosevelt wanted to repurpose a New Deal agency, the Reconstruction Finance Corporation, to kick-start military mobilization. Originally created by President Hoover in 1932, Roosevelt had expanded the RFC to become, in effect, the bank for the New Deal. The RFC was a public corporation that made $10 billion in loans during the Great Depression and became, in one historical estimate, “one of the most successful ventures in the struggle for recovery from the Depression.” Led by Jesse Jones, a self-made Texas business magnate with an eighth-grade education, the RFC was essential in the New Deal. Along the way it had earned the ire of some Republicans who viewed it as “stepping too close to private enterprise.”
Roosevelt’s proposal to empower the RFC to acquire strategic materials for the national defense and set up defense plants was met with hostility from some Republicans. At a hearing on the proposal on May 30, Republican Senator Robert Taft of Ohio, a staunch opponent of FDR’s domestic and foreign policies, described the plan as “the most outrageous legislative proposal that has been made to the Congress since I have been here.” He and others shared a concern that the RFC would be encroaching on the role of private business. Jones, a businessman by background, did not see the relationship between business and government in those zero-sum terms: Both industry and government “must realize that neither can get along without the other, and that more is to be gained through cooperation and restraint than by keeping constantly at each other’s throats.”
After some alterations, the bill was enacted on June 24—just days after the staggering news that Nazi troops had entered Paris and France had surrendered. The legislation gave Jones (as federal loan administrator) broad powers to create corporations that can “produce, acquire, and carry strategic and critical materials as defined by the President” and to take steps to support the development of defense plants. The bill, as Jones recalled, gave the RFC “perhaps the broadest powers ever conferred upon a single government agency,” and he set out “to help the United States gird itself for whatever military perils might befall.”
The RFC swiftly set up a number of subsidiary corporations—the Metals Reserve Company, the Rubber Reserve Company, the Defense Plant Corporation, and the Defense Supplies Corporation— that were tasked with stockpiling strategic and critical supplies and expanding defense production. In January 1941, Roosevelt was inaugurated to an unprecedented third term. That same month, Jones was featured on the cover of Time.The accompanying article proclaimed him the most important man in America outside of FDR himself. Indeed, Jones and his team were busy acquiring and producing the materials that were needed for military mobilization. At the time, some American companies were reluctant to invest in expanding their facilities, and Jones threw the RFC apparatus at ramping up America’s military mobilization. By December 1941, according to historian Steven Fenberg, the Metals Reserve Company spent nearly $1 billion on amassing strategic metals; the Defense Plant Corporation spent $2.5 billion on new defense factories; and the Defense Supplies Corporation acquired 250 million pounds of wool (needed for uniforms) and had also begun to produce millions of gallons of aviation-quality gasoline. As Japanese conquests in Asia cut off America from its principal sources for rubber, the Rubber Reserve Company found new ways of making procurements from Latin America. This work, although perhaps not the most glamorous, was critically important. America’s tanks and planes required vast amounts of rubber.
By the time the Japanese attacked Pearl Harbor on December 7, 1941, the United States had—thanks to Roosevelt’s leadership—set up the infrastructure for how the country would address these industrial challenges. Of course, the war would be fought on battlefields around the world, but, as a 1942 article in Foreign Affairs made clear, “economic warfare,” including “buying strategic materials,” was critical. As Roosevelt put it in a 1942 message to Congress, “Powerful enemies must be outfought and outproduced.”
The RFC agencies ramped up their efforts to secure strategic materials and expand defense production. They publicly financed new factories needed for the war effort—ultimately two of every three dollars that went into new industrial facilities during the war came directly from the U.S. government. Through the ‘government-owned, contractor operated’ model, the Defense Plant Corporation was able to “fund enormous expansion in the aircraft, chemical, and steel industries.” The $7 billion spent by the Defense Plant Corporation financed the construction of projects on an unprecedented scale, such as the 6.3-million-square-foot Dodge plant on the South Side of Chicago that made engines for the B-29 Superfortress bomber. By 1944, the United States was producing nearly 100,000 planes a year.
To solve the rubber shortage, the U.S. government supported the production of synthetic rubber in the United States. Synthetic rubber, made from petroleum, was still a fairly new technology. Leaders from industry, academia, and government came together to form the Rubber Survey Committee in 1942 and recommended a type of synthetic rubber that could be produced at a massive scale. America’s rubber manufacturers agreed to share technology, and the RFC funded the construction of dozens of production plants. Production of synthetic rubber went from 3,300 long tons a year in 1940 to 756,000 long tons in 1945. America’s trucks, jeeps and airplanes relied on rubber tires—and the RFC ensured there was enough to keep them moving forward.
American companies—like General Motors and Ford Motor Company—would retool for wartime manufacturing, and ultimately produce much of the material critical to winning the war. Some have argued, including Arthur Herman of the American Enterprise Institute, that the important role of the private sector in WWII was a repudiation of the legacy of the New Deal. However, this view ignores the centrality of the RFP in getting America on a wartime footing. In the critical months before the Pearl Harbor attack and America’s entry into the war, it was the RFP’s innovative system of public financing—a tool that had been central to the New Deal—that put America on the path to producing the “Arsenal of Democracy.”
Time described these increases in wartime industrial output production as nothing short of a “miracle”—a miracle that Americans could not truly appreciate, Times aid, “because it is too big for the eye to see in an hour, a day, or a month.”
Although this “miracle” of government-led production seems all but forgotten, today, in the wake of the Covid-19 pandemic it has taken on a new import. However, unlike Roosevelt, who harnessed the power and prestige of the federal government to mobilize the national effort, we now face a President who is disdainful of the capacity of government, preferring to rail against the “deep state.” This President who, after giving little attention to preparedness for the pandemic, had the audacity to say, “I don’t take responsibility at all.”
What Roosevelt’s example shows is that the President is responsible for preparing the national defense—whether that be against war, pandemic, or economic depression. Starting in 1940, he took important steps to prepare America for the challenges of fighting a global war. He knew that there were many—including the America First Committee—who would prefer that America ignored foreign conflicts. He said to them: “Frankly and definitely there is danger ahead—danger against which we must prepare. But we well know that we cannot escape danger, or the fear of it, by crawling into bed and pulling the covers over our heads.” Eighty years later, Trump disclaimed responsibility for preparation and claimed of the coronavirus, “We pretty much shut it down coming in from China” and, even once it started to spread, “It’s going to disappear. One day—it’s like a miracle—it will disappear.”
Trump has time and again abdicated his responsibility for ensuring that America has the critical and strategic materials needed to combat the pandemic. Trump said he did not “take responsibility at all” for the lack of preparation on testing. On the ventilator shortage, Trump similarly denied any responsibility, saying: “We’re a backup. We’re not an ordering clerk. We’re a backup.” Trump essentially told states to procure materials on their own, saying the federal government is “not supposed to be out there buying vast amounts of items and then shipping. You know, we’re not a shipping clerk.”
Trump’s advisers have made clear that they do not see the procurement and distribution of medical supplies as their responsibility. White House adviser Peter Navarro said, “We’re getting what we need without putting the heavy hand of government down.” Jared Kushner put it bluntly: “The federal government is not designed to solve all our problems; a lot of the muscle is in the private sector, and there’s also a lot of smart people.”
Even after the grave nature of the crisis became clear, the federal response has been anemic. As Ben White noted in Politico, “the federal response has been too small in scope and short on creative solutions to meet the greatest challenge since World War II.” There are major inadequacies in testing and tracking/tracing that are rooted in the government’s lack of planning. The federal government did not bring in a centralized and professional leadership to manage supply chains, such as the Defense Logistics Agency. “The problem with the federal plan is that it is not a federal plan,” said Jeremy Konyndyk, a former Obama Administration official who worked on the Ebola response. “It’s a list of things they think the states should do.” Trump’s utilization of the Defense Production act has been limited and haphazard.
Many members of Congress nonetheless understand the need for greater government involvement in the production of medical supplies—and they can look to the “Arsenal of Democracy” as a model.
Congress should consider the creation of a time-limited Health Finance Corporation modeled on the RFC, as scholars Michael Lind and James Galbraith have proposed. The CEO and Board would be a combination of cabinet secretaries as well as experts in areas including medicine, public health, and supply chains who would be confirmed by the Senate. The corporation would enjoy the powers once held by the RFC: to make loans and purchases in order to “produce, acquire, and carry strategic and critical materials as defined by the President.”
The Health Finance Corporation would, as Lind and Galbraith argue, create an “efficient one-stop shop for financial resources in this crisis. It could fund clinics, factories, emergency field hospitals, quarantine centers, civilian supply—whatever is needed to get the nation through the crisis.” A modern-day RFC is a practical solution to the complex supply chain challenges we face in fighting this pandemic. It could, as Saule T. Omarova, a Cornell Law professor and former Treasury Department adviser, has proposed: “identify specific bottlenecks in the supply chain of critically needed products, prioritize and formulate concrete action items, and organize the requisite financial and other resources to scale up or repurpose individual facilities’ productive capacity.”
The Health Finance Corporation could play a crucial role in streamlining the supply chain for testing. Scott Gottlieb, who served as Trump’s FDA Commissioner, stated in April that testing was still hampered by “supply chain constraints, like reagents [and] personal protective equipment for providers.” Like the rubber-procurers at the RFC, the Health Finance Corporation could help to ensure that these critical supplies are being produced and then distributed where they are needed. The corporation could even finance the construction of new facilities to manufacture medical supplies or commercial labs to run the tests, utilizing the RFC’s “government-owned, contractor-operated” model.
The idea could attract bipartisan support. As Todd Tucker of the Roosevelt Institute noted recently, proposals modeled on the Reconstruction Finance Corporation “have been championed on the left and the right, and by politicians from Bernie Sanders to Marco Rubio.” The HFC would be making investments in companies—not giving out taxpayer dollars. The RFC, as economic historian Louis Hyman notes, actually made money overall and its investments were crucial in the doubling of the real GDP during World War II. The RFC’s critical investments, as Hyman notes, “developed different projects that turned cutting edge-technology into self-sustaining enterprises.” This is an idea that could unite Democrats and Republicans, even in today’s partisan environment.
In the next coronavirus relief legislation, Congress should establish the HFC and appropriate significant seed funding for the HFC’s initial investments and activities. As Lind and Galbraith note, the HFC could then fund itself by issuing bonds, taking advantage of the historically low yields on treasuries. The President would then need to appoint a CEO who could match up to the legacy of the RFC’s Jesse Jones. Writing in the The New Yorker last month, John Cassidy proposed a new RFC and suggested that the CEO should be someone “whom both parties regard as an honest and independent-minded patriot.” To ensure transparency and prevent any self-dealing, the HFC could have oversight mechanisms similar to the ones Congress established in the CARES Act.
In this crisis, the status quo is failing, and, to quote Roosevelt, we need “bold persistent experimentation.” Seventy-five years after the Allied victory in World War II, we can still learn from Roosevelt’s wartime leadership and the forgotten history of how the Reconstruction Finance Corporation helped build the Arsenal of Democracy in order to forge a bold national strategy and win the war we are fighting today.