President Donald J. Trump, joined by Chinese Vice Premier Liu He, sign the U.S. China Phase One Trade Agreement Wednesday, Jan. 15, 2020, in the East Room of the White House.

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Thanks for the article, “What the Latest Trade Data Tells Us About Tariffs.” It’s a useful review of tariff policy. However, I have to strongly object to the final proposal for solar panels. To argue for trade balancing and at the same time for green energy is like closing the doors, but letting all the flies in.

The American System is premised on industrial growth, i.e., physical profits. Green energy is a net loss, as is a massive trade deficit—there's no difference. To not make this clear, and to obfuscate the principle with what is an otherwise relevant discussion, in the end will only injure and even sabotage the economic revitalization of the US.

We need to increase the physical net gain of our productive potential over each cycle of investment. That means physical profit, as opposed to the accounting tricks called monetary profit today. To create that physical net gain after the costs of inputs and labor, we have to see a net surplus in productive terms. This is easiest to see with energy. If the energy required, as a base metric for all inputs (including disposal costs), is less than the energy output, we have an actual profit. The opposite is true for solar panels, which are a net energy loss. And neither solar nor wind can provide baseline energy requirements because of their intermittency, so both require fossil-fuel backup for redundancy which is thus part of the input costs.

If we removed the massive subsidies for household solar panels and EVs, we would see them for what they are: the play toys of the rich.

Besides, decentralizing energy production is a wasteful use of manufacturing and productive potential. Energy-dense advanced nuclear plants, for example, from the gigawatt range down to advanced modular reactors in the 100 megawatt range, can now be built for cities, as well as for health facilities, water plants, and large industrial firms, at whatever scale is required, providing an abundance of electricity and heat. (Process heat is used in both desalination and consumer and industrial waste-water facilities and other industrial processes but is unavailable from wind or solar.)

This centralized approach to what we might call the “alpine” (furthest upstream) inputs to production, for example in a small industrial city, frees up the individual firms to focus on entrepreneurial improvements to the physical and cultural system, rather than financial schemes like selling solar panels or transitioning to EVs. Not to speak of the decades-long obsession with the financialization of housing for the benefit of the bloated bureaucracies and pet projects of city councils and county boards. Industry was, and remains the foundation for small, medium, and large-scale cities to thrive in the long term. For industry to flourish, we need critical alpine inputs to be of the highest quality and reliability.

This points to a key factor in the revival of the American System, i.e. infrastructure. At the modern industrial scale, no firm can accept the long-term costs or responsibility for what is essentially public infrastructure. The building of a new power grid, modern energy plants, water treatment facilities, new industrial rail services and water transit, and inner-city dense transit capabilities, are key components for driving internal industrial investment on an approximately 25-year cycle. If these large-scale systems are designed from the standpoint of building new centers of modern industry, rather than decentralized consumer affluence—or lack thereof—then we will have a net gain in total investment, with a maximum of public benefit, including for the entrepreneur and the consumer. If they are managed from a physical standpoint, and with an eye towards future productive requirements, the productive potential of the nation, or relevant region, will increase. So will the aggregate physical profits (even if the financial profit will be nowhere near the predatory 20% of the private equity model today), and overall prosperity will increase as well. Under these circumstances, as in the past, other cultural investments will then flourish, like beautiful parks—as in San Francisco, where in the midst of a total dark age, the Golden Gate Park remains a gem of cultural infrastructure and a refuge for the aesthetic mind. 

Of course, with a strong tariff system and enforced domestic content requirements, we can ensure that the new infrastructure uses domestic inputs, and given the appropriate scale, this can provide an environment for long-term capital investments by the private sector. This will benefit from Hamiltonian national banking policies like low interest credit and investment tax credits, which prevent such a policy from being perverted by tax-and-spend government expenditures and protect it from the globalists’ usurious and speculative interests.

The point in short: solar panels are first, a waste of energy—literally—and second, the promotion of solar energy undermines the necessary component of centralized infrastructure that is essential for a domestic manufacturing ecosystem. It is precisely that centralized infrastructure and manufacturing ecosystem that is critical to the revival of the US as a manufacturing superpower.