April 4, 2025 – Buckle up for a wild ride with Jim Puplava and energy guru Mark Mills at the National Center for Energy Analytics as they unpack America’s AI boom and tariff chaos! Mills drops a bombshell: a single AI data center guzzles a moonshot’s worth of energy daily—think Elon’s Starship blasting off. With Trump pushing to bring factories home, the grid’s creaking, and China’s hoarding minerals we desperately need. Tariffs could spark a ’70s-style stagflation nightmare unless tax cuts and deregulation soon follow. Can pro-growth reforms avert an economic stall, or are we headed for decline? Tune in to this critical discussion—your business strategy may depend on it.
Website: National Center for Energy Analytics
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Key points discussed in today's show:
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AI’s Energy Hunger: A mid-sized AI data center consumes as much energy daily as a moon rocket launch, with tech giants outspending the Apollo program’s decade-long cost in a single year.
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Tariff-Driven Reshoring: The Trump administration’s push to bring manufacturing back to the U.S. escalates electricity and mineral demands, straining infrastructure.
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China’s Mineral Dominance: China controls 50-90% of global refining for critical minerals, dwarfing OPEC’s oil share and posing a supply chain risk for U.S. industry.
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Stagflation Risk: Mills warns tariffs could lead to Jimmy Carter-era stagflation—rising prices with no growth—unless paired with tax cuts and deregulation.
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Electricity Surge: Reshoring and AI growth are driving utility demand unseen in decades, with data centers using 10x more power per dollar invested than electric cars.
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Regulatory Roadblocks: New mines take 10-16 years to build due to permitting delays, hampering domestic mineral access vital for manufacturing.
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Policy Fix Needed: Mills advocates Reagan-style tax cuts and deregulation alongside tariffs to spark a boom, not bust, urging Congress to act.
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Global Dependency Danger: Over-reliance on foreign minerals and stalled domestic production could leave the U.S. vulnerable, akin to a de-industrialized Europe.
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Private Sector Lead: AI and cloud growth are private-sector driven, but success hinges on government enabling energy and resource availability.
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Economic Stakes: Without pro-growth reforms, Mills predicts a slow slide to irrelevance, contrasting with China’s strategic rise.
Transcript
Here’s the corrected transcript with punctuation, spelling, and grammatical errors fixed, keeping it as close to the original as possible, and with most dashes removed. Speaker labels are bolded prior to each section. I’ve retained some dashes where they enhance natural speech flow, but reduced them significantly.
Jim Puplava:
Well, the tariffs are the number one issue in the news these days, but there’s another issue that has dominated the markets, and that is AI in the growth of the cloud. Let’s talk about where this is going and also about reshoring in the need for minerals. Joining us on the program is Mark Mills. He’s executive director and founder of the National Center for Energy Analytics. He’s a distinguished senior fellow at the Texas Public Policy Institute and a faculty fellow at the McCormick School of Engineering at Northwestern University. Mark, you were on Capitol Hill this week on Tuesday talking about America’s AI moonshot. Draw the analogy for our listeners of the moonshot in terms of what we’re trying to do now with AI.
Mark Mills:
The chairman of the committee was eager, and I share his eagerness to shine a light on what’s going on, as have some other committees. The moonshot analogy works okay in a broad sense. We are enthusiastic about it. This captures the sense that everybody, I think, believes it’s a big deal what’s going on in AI. It’s substantial, not just in a technology sense, but in the great powers competition sense. The moonshot was like a great powers competition: who’s going to get to the moon first in a technology competition. This is very much like that. It’s also a lot like the moonshot, as I pointed out, in energy terms. Most people are beginning to have a sense that this is a very energy-hungry technology. I context it this way, and I don’t think anybody’s done the calculation quite this way. A mid-sized AI data center, by midsize, is something the size of a Walmart building full of computer chips, so it’s a pretty big building. The natural amount of energy it uses every day is the same amount of energy it takes to launch a rocket to the moon.
Jim Puplava:
Wow.
Mark Mills:
So every day, every single day, one data center is using a moonshot’s worth of energy every day. In fact, the new moon rocket that Elon Musk is building at SpaceX, the Starship, is natural gas-powered. It’s an LNG-fueled rocket ship. Most data centers are going to be LNG, natural gas-fueled. So there’s an even closer correspondence between the moonshot and energy than most people realize. Where the analogy breaks down, as I point out in my testimony, is in terms of what AI is going to do versus the moonshot. The moonshot technology, the Apollo program, was chump change compared to what AI is going to cost. The data center industry right now, the big tech companies, are going to spend more this year on data centers than the entire decade of the Apollo program cost, to give a sense of money in inflation-adjusted terms, in real dollar terms. The goal of the moonshot was to stimulate a space industry of some kind, which we have with satellites, communications. But it’s the moonshot itself: put 12 men on the moon once, that’s it. What we’re trying to do is get AI into everybody’s business, everybody’s pocket, everybody’s office. It’s a very distinctly different goal. It has national security implications, it has competitiveness implications. But from the viewpoint of the goal, it’s not like the government is going to get us on the moon, make AI work. We have private industry. That’s an important distinction: distributing AI to everybody rather than just for 12 men. The analogy is interesting, but it begins to fall apart when you think about it in practical implementation terms.
Jim Puplava:
Well, the thing that I don’t think people understand is the enormous amount of electricity it requires to run these centers. If you throw that, Mark, on top of the efforts by the Trump administration to bring industry back, I think of where I grew up in Phoenix. They’ve got a Taiwan Semiconductor plant, they have an Apple plant and Intel plant. That’s going to take a lot of electricity and energy to power that. Then you throw AI on top of that. All of a sudden, we’re seeing growth rates in the utilities that we haven’t seen in two or three decades.
Mark Mills:
Yeah, well, about two decades. It grew like this three decades ago, but the last two decades we’ve had very low or stagnant electric demand growth. Part of that is important to keep in mind because we deindustrialized in some sense, we became very unfriendly to manufacturing. So the demand for electricity, an extremely energy-intensive business like manufacturing, didn’t grow like it would have otherwise. Our share of global manufacturing has declined over the last two decades. We should not be surprised that our electric consumption has moderated. The other reason is that we’ve had one-time gains in efficiency. The addition of LED lights into homes and buildings everywhere is a one-time gain in efficiency. That moderated demand. It’s not going to happen again; it happened once in history. Similarly, there’s been one-time gains in the efficiency of your refrigerator. The refrigerator you and I have in our kitchen now uses about a quarter as much electricity a year as the one 20 years ago. Once all the housing stock had shifted out of the old inefficient fridges to the new ones, that moderated electric demand. There’s tens of millions of refrigerators. That happened at the same time as the arrival of the cloud and data centers. In effect, the electric demand of the cloud was hidden by the declining demand for electricity from these other two domains. Total demand stayed flat; people thought nothing new was going on. Those of us who studied this, and I have for decades, wrote about this many times the last couple decades, predicting exactly where we are. When we decided to reshore manufacturing, which seemed politically inevitable, and when we exhaust the efficiency gains that are one-time in the commercial and residential sector, electric demand is going to take off. It is; it’s epic growth increases that are coming. Let’s frame it this way with these big fabs, these chip factories, TSMC’s factories. When they get built, a billion dollars of chip fabs will use about as much energy over a decade as a billion dollars of aircraft. It’s electricity, not oil, but in dollar terms, they’re about the same. If you build a billion dollars of data centers, it will use three to four times more electricity than a billion dollars of fabs. If you’re in Arizona and you see a billion-dollar fab go up, you just saw the equivalent of a billion dollars’ worth of airplanes’ worth of energy demand in the form of electricity. If you see a billion-dollar data center go up, you just saw the equivalent of $10 billion of aircraft worth of energy demand being put in place, right there, but in the form of taking electricity off the grid or from power plants. These are extraordinarily energy-intensive. A billion dollars of electric cars uses about a tenth as much electricity as a billion dollars of AI data centers. Dollar-for-dollar of capex, you increase your electric demand by 10x more if you’re building AI data centers versus putting electric cars on the road.
Jim Puplava:
Well, let’s talk about the implications. We talk about these digital cathedrals, the demand for electricity to power these AI and cloud data centers. Add to that, we’re bringing manufacturing back to the U.S.; there’s going to be more demand for electricity. Then on top of that, Mark, let’s move into raw materials. If we’re bringing factories back and you’re going to start making stuff, you’ve got to have minerals.
Mark Mills:
Yeah.
Jim Puplava:
I think of the Resolute Mine in Arizona. I think BHP and Rio Tinto have been trying to get that into production for over a decade.
Mark Mills:
Yeah.
Jim Puplava:
So how are we going to do all this stuff if we don’t allow mining to take place in this country? I don’t think depending, if we want to bring manufacturing back, but we’re going to buy our raw materials from China, I don’t think that works.
Mark Mills:
That’s what we’re doing; I know, that’s exactly it. In fact, it’s worse than that. All raw materials have to be refined. It’s obvious when you say it: you can’t eat corn unless you do something with it. You have to cook it; that’s a form of refining. If you’ve ever tried to eat a raw cob of corn, it’s not very pleasant. You certainly can’t use wheat without what amounts to a refining process. You can’t use oil without refining it. You can’t use the copper in rocks and copper ore without refining it. One would want to know who’s doing the refining, not just who’s doing the mining, because the refining is the choke point. China is the utterly dominant minerals refiner on the planet. They went about the business of expanding their reach into mining globally, not just domestically in China, but controlling or owning the mines in South America and especially Africa, and many miners for many products. They produce these, or the raw ore, for nickel, copper, lithium. They ship the ore to China for refining. China has a market share for a dozen of the critical minerals that ranges from 50 to 90% of world refining, global refining. They have a market share in what are called energy minerals, the minerals critical to the energy industry and to the industrial sector and to, by the way, chip-making. Their market share in energy and critical minerals is triple OPEC’s market share in the oil business.
Jim Puplava:
So if we don’t do this, how is this going to work? I’m thinking of the tariff wars right now. They’ve been putting tariffs in place, and it’s like we’re waking up to the fact we’ve had tariffs leveled against us for almost two or three decades.
Mark Mills:
Yeah.
Jim Puplava:
Then all of a sudden it’s this something new that we’re thinking about. How does this work? Can he effectively wave executive orders and speed up the process of bringing these mines into production? I think of Arizona; there’s mines in Minnesota, we have some in Alaska, Maine, all over the place. We’ve got the minerals, but we can’t have access to them.
Mark Mills:
Well, he can do some things; any president can do some things. What he can’t do is accelerate the velocity, we call it, to the natural velocity of industrial processes. Mines are really big industrial things. If you had no U.S. impediments and regulations of any kind, it still takes years and years to build a new mine. It could accelerate the permitting of existing mines that have spent a decade and millions of dollars trying to get permits; just get them done, get them over the finish line. Definitely can do that. To expand mining significantly, create net new mines, we have to be realistic. The average time it takes to create a net new mine globally is 16 years. Doing it quickly takes about a decade, which is why the Chinese have been at it for two decades. This is a very conscious public policy they made. They didn’t make a secret about what they were going about; they published their plans 20 years ago and 10 years ago. It’s not like we didn’t know they were doing it. We were pretty happy in the West, Europe, and the United States, at getting the minerals and mining done by somebody else inexpensively. That has consequences. We depend on imports, 100% dependent on imports for about 20 critical metals and minerals, 100% dependent. The United States used to be; people talk a lot about the rare earth elements. You probably know rare earth elements are not rare; they have rare properties, which makes them extremely useful. Neodymium makes it possible to make incredibly powerful magnets and motor generators, wind turbines, military equipment, and electric motors. The United States was the dominant miner and supplier and refiner of rare earth minerals through the end of the 20th century; we produced about 90% of it in the world. China now produces about 80%, and we produce close to zero. This was not because we ran out of the minerals; we essentially chased those industries out of the country. I come back to tariffs; I want to say one quick thing about our manufacturing sector in globalization and tariffs. I think the instinct to use tariffs as a tool to convince investors and countries to build factories and do things here, whether it’s a mine or refinery, I get it. He’s not the first president to do that; President Reagan did that with the motorcycle and auto industry very effectively. It has to be paired with the other two tools that Reagan employed 40-plus years ago. You use a tariff as a tool to get negotiations going; of course, somebody else builds factories here with their money. You also have to cut taxes, and you have to cut regulations if you provide incentives to build here. You make it hard to build here by virtue of, for our industries, high taxes and, for both foreign and domestic industries, regulatory impediments. It won’t happen; it’ll take too long, or they just won’t do it. Prices will just go up, and no alternatives will get built. The political momentum now is obviously towards tariffs as the bludgeon to get people to start negotiating, but building things here, understandable. Count me a fan of that. If Congress doesn’t step in and step up and get the tax cuts, which Reagan implemented to pair with the tariff threats, we won’t get an economic boom. We’ll get Jimmy Carter stagflation is what we’ll get.
Jim Puplava:
Yeah, because one of the things we’re seeing in my own state of California with the fires, trying to get it cleaned up, is the permitting to go in and build. If you can’t get things like fire insurance for your home, if you just lost an $8 million mansion, why are you going to go and rebuild if you can’t get fire insurance or...
Mark Mills:
If insurance is so prohibitively expensive? Because, as you know, in California, the state decided to create standards requirements for insurance companies that they won’t meet because they can’t make a profit meeting them. The state provides backstop insurance, which I wouldn’t say is useless, but very limited coverage for the hapless homeowners who are stuck with the state insurance. We’ve had several decades of bad policy, industrial policy, and bad collateral regulatory and tax policies associated with bad industrial policy. I’m also not a fan of industrial policy in the sense that most people think of it. Most of the times when governments get involved in industrial policy, they want to pick the industries they want to be winners; this is the instinct once you decide you’re doing industrial policy. The right way to do industrial policy is to decide you want industry; you need it, all kinds. We don’t know which ones will prosper, but create the conditions for industrial prospering, which means cutting back on regulations, making the regulatory domain have greater certainty, and cutting back on taxes. If you feel compelled to subsidize things, and Congress can’t help itself, or state governments, that’s what politicians do. They take money from you, or they give money to you. Their only tools are to take money or give money away, which is other people’s money. If you feel compelled to subsidize industries, rather than subsidize specific industries like the chips industry, picking winners and losers through a federal portal, accelerate depreciation. Put an extra kicker on depreciation capital. You know how money works and finance works; if I make capital cheaper through either low interest rates or accelerated depreciation, you’ll get more investment, more capital investment. That will happen. If you want to target it to the industrial sector for manufacturing, great, I’m all in on that. Don’t start cherry-picking who should get the money; that just creates a system, a kleptocratic system where the people in the nomenclature, the old Soviet Union, they’re the winners because they know who to talk to, as opposed to you don’t talk to anybody. Just build what you think makes sense, and you get preferences in the broad sense. Both parties are guilty of trying to pick winners and losers. I agree with you; we need mining back. By the way, I worked for a mining company when I was young; we have abused our mining industry. You can get it back, but it’s going to take those kinds of broad tools. You could put tariffs on minerals that are imported, for sure, and that might provide some temporary help and induce foreign miners to invest in mines here. They’re not going to invest in a mine here if it takes 25 or 30 years to get the permits; they’re not crazy. It doesn’t matter if you tariff them or not; they’re still going to put the mine where they can actually get it built, which is going to be in South America, China, or Africa.
Jim Puplava:
Well, this brings up the whole question, and you address this in your presentation to Congress: this is something that’s generated by the private sector. We don’t need government; the AI, the cloud centers, this is private sector money. If we don’t have the electricity, if we don’t have the grid to support it, if we don’t have the raw materials that manufacturers need, or we get involved and we have to buy it from China and they get pissed off at us because of something and decide to withhold it, which they’ve done with rare earths, yeah, we’re in trouble.
Mark Mills:
This doesn’t work, absolutely. It’s not that we don’t want to trade with other countries, including countries we don’t like very much. We’ve done that for centuries, always; we don’t always only trade with our friends. We even trade with our enemies unless they get in the penalty box, like Iran and North Korea. That’s what America’s always done. The problem is when you get these deep asymmetries; you can’t be so dependent that you have no, to use a Trump term, negotiating power. This has always been true. We’ve drifted into some levels of dependency that are very dangerous; I agree with you. We’re going to have to probably take extraordinary measures to reverse it, but it’ll take time. Certainly your comment about private markets and private money, this is also true about electricity. Electricity is a heavily regulated industry. If you want more electric generating plants, I take this bet every day to next Sunday that we can get all the power plants you need; we don’t have a problem building power plants in the United States. We have a problem with the regulatory structure that allows the market to build the power plants that we need to power an economic boom, both for manufacturing and for data centers. We can do this stuff; this is not rocket science. I’m talking about building nuclear power plants a decade from now; you’re going to have to build combustion turbines, gas turbines, gas engines, even the dreaded coal plants. That’s what we’ve seen; a lot of utilities defer or cancel shutting down coal plants recently in the last few months because of the demand for electricity taking off. I expect we’ll see more of that, and that’s a good thing.
Jim Puplava:
You know, it’s amazing that people don’t put through, and we’ve got this thing, and you’ve talked about this: this iPhone. It looks like a small little device. Apple said it doesn’t take too much to run this thing. But the apps behind this get back to what we’re seeing being built: the AI centers, the cloud centers.
Mark Mills:
Yeah.
Jim Puplava:
Enormous. Talk about the size and scales. I just read Meta just bought, I think, 2,500 acres in Louisiana; they’re going to build a $10 billion AI center. Jobs it’s going to create, but you’re talking about massive structures.
Mark Mills:
Yeah, this is the part that’s fascinating to me. I wrote a lot about this in my book The Cloud Revolution, and coined this phrase “digital cathedrals” in an earlier book and put that in the newer book. Data centers epitomize the scale at one end of the spectrum of things that we think are tiny and light, like our smartphone, our iPhone; it’s physically tiny, physically light, does magical things. These magical things are done in big machines elsewhere; you don’t see the big machines that are the highways, the so-called information superhighways. The wireless network involves as much electricity, by the way, as the data centers do; it’s just that it’s a dispersed demand. All the cell towers and all the routers, the things that move the information, consume as much electricity as the data centers that churn the information and store it. Scales are really staggering. To your point, the Meta data center site is typical of a number that have been announced, like the Stargate. There’s one in Pennsylvania, just announced in Homer City, Pennsylvania, site of a really old coal plant they’ve taken down. They’re going to be putting up there 3 gigawatts of gas-fired generation to power data centers. A gigawatt, a big nuclear plant is 1 gigawatt, and so in the next few years, they’re going to build the equivalent of three nuclear plants’ worth of power generation, gas-fired, right near the Marcellus Shale, ample gas supply. The Louisiana site that you talked about from Meta for Facebook is going to be powered by three 1-GW natural gas-fired power plants, again, natural gas-fired, not nuclear plants. They’re going to build some solar and wind stuff too, and it’s part of the whole package, but the key takeaway is that this massive site is going to be run by natural gas. Louisiana is dead center in a massive gas field, just like West Texas and central Pennsylvania. Maybe the easiest way to understand the scale here is that I wrote this some years ago, and it’s still true; in fact, it’s more true now than when I wrote it a decade ago: your iPhone uses more electricity than the refrigerator in your kitchen. Most people have the equivalent of several iPhones personally, but in most houses, there’s one refrigerator, maybe two. In most houses in America, there’s at least three iPhones or four iPhone-like devices: iPads and laptops. Each one of them is a bigger electricity user, remote from you, the cloud and the networks to support it. Your share of it is like a refrigerator. If you’re Gen Z or if you watch Major League Baseball and stream video to your phone, which a lot of people do, then it’s two refrigerators.
Jim Puplava:
You know, one thing when we take a look at all of this, you talk about the regulation, the taxation; it takes 15, 16 years to bring a mine into production as we go forward. The tech companies, I think, understand this because they’re reaching out to utilities. That’s even better politically because a governor doesn’t want to see power outages in their state because you put in a couple data centers. My own state is just a disaster; we’re passing a law to allow insurance companies to sue the oil companies for the fires and climate change. What I want to get to is the environmental movement over the last two or three decades is: okay, we want clean energy, we don’t want pollution, but all we’ve done is outsource this elsewhere. We’ve outsourced it to China, India, South America; it’s being done there, we don’t see it, so it looks clean here. They don’t understand what it takes to make that.
Mark Mills:
Yeah, this is a point where I do a lot of writing, as you know, so I think words matter; that’s why I write. As a physicist, I think facts matter and data. The two intersect in the energy domain in a fascinating way. We call windmills and solar panels “clean energy”; okay, what do you mean by clean? As you know, what people really mean is carbon dioxide, so we’ve got this evolution of the word “clean” not to talk about water pollution, habitat destruction, razing trees, paving things, and that’s not what we mean anymore in the popular discourse. “Clean” means, if you use the magic Google machine, we all know what clean means: it means cutting carbon dioxide emissions. The problem is all of us know what we really mean by clean; a lot of people care about carbon dioxide emissions, I get that, but everybody cares about clean air, clean water, how much land we disturb. The point of that is obvious: the windmills and solar turbines that appear are called “clean tech”; it’s a complete misnomer. They aren’t any cleaner; in fact, they’re less clean than conventional technologies like gas turbines or nuclear plants or even coal plants, because when you count up the quantity of minerals and rocks you have to access to produce the same amount of energy, and those, to your point, the mining for those takes place elsewhere, especially offshore, increasing in the last few decades, all of the environmental impacts from mining are invisible to us. We’re pretending they don’t exist, and we call the technology clean. I give an easy example: with an electric car, the battery in a typical electric car weighs a half-ton; it doesn’t burn gasoline, yeah, no kidding, it’s an electric car, so it doesn’t emit carbon dioxide. Obviously, to charge the battery, there’s carbon dioxide emitted depending on where you make your electricity, but more importantly, that one battery, which weighs a half-ton, requires you to mine something like 250 tons of the earth just to make one battery. That mining of the 250 tons of the earth, taking place elsewhere, is using oil-fired machines, big diesel machines; the rock is crushed with big diesel- and coal-fired machines, transported with oil-fired machines, and so all that involves an environmental impact and trade-offs; all of it involves carbon dioxide emissions, but you don’t see it because the car gets to your driveway, and all those emissions happen before you got the car and elsewhere, but they’re very real, and they’re very big. Same is true with solar panels. The solar panels on a roof of a California home, a typical small home, since 90% of all the photovoltaic cells themselves are fabricated in China, you can calculate that something on the order of 30 tons of Chinese coal was burned to put the solar panels on just one roof.
Jim Puplava:
So as we take a look at this, Trump wants to bring industry back, and we need to start making things because we saw the vulnerability, I think, during COVID with the supply chain disruptions: everything from pharmaceuticals to computer chips. As you mentioned, there’s two other aspects of that: we’ve got to get the taxation, so if Taiwan Semiconductor or some other company is going to come here to build, Saudi Arabia or whoever else they’re talking about, they have to have the tax incentives to do that, but more importantly, the regulations. What can the President do to do that, or does that have to be an act of Congress?
Mark Mills:
Well, both, so there’s a lot of things that a president can do; Reagan did, with accelerating permitting, holding the agencies that do the permitting’s feet to the fire, putting people in charge that actually do their job right; they have to get their job done. There’s a statutory requirement in many of these laws, like the National Environmental Policy Act, to get a review done within two years. Two years is a long time, but two years at least seems reasonable; it doesn’t happen. There’s no recourse to the company if it takes four years, five years, and then when you get your permit, it’s just revoked casually from another lawsuit. These kinds of lacks of certainty can be rectified to some extent by administrative fiat, but they have to be rectified fundamentally by acts of Congress; Congress needs to modify, amend, or update laws that are being abused so that we keep in place what we’ll call environmental guardrails that everybody wants, but we have more certainty and less abuse of the rules, so businesses can look at it and say, I can meet all those rules, and I can get them, and if I get one year to get a permit, I’m all in; I’ll spend the money. If your time to get the permit, for example, overlaps two different presidencies, then we know what that means: you went from a Keystone Pipeline, for example, being approved and then hundreds of millions being spent, to being revoked when the next president came in; of course, this was Trump’s first term into Biden’s term. Those things scare capital away; they don’t attract capital; it’s a very bad thing. Yes, the president can do something, but a lot of what he can do is the bully pulpit: to get Congress to step up, and that’s going to be hard. I do think we have a shot at getting Congress to step up, in large part now because there’s a better realization, especially because of AI and data centers, that the kinds of things that everybody seems to want to have happen: more manufacturing, more data centers, competing AI with China, all these things that we have now a bipartisan agreement on, there’s no escaping that; it’s hard to do that without greasing the skids, so to speak, not just giving money away, getting out of the way. I’m cautiously optimistic that the bipartisan sense that we’ve got to get manufacturing going, we’ve got to get these other things happening, will get us to some kind of bipartisan legislation on the regulatory reform, but it won’t happen unless a president pushes hard for it as well; this is how politics always works in our country.
Jim Puplava:
You know, the problem is if we don’t get this done, the way we were going was unsustainable, whether the money we were spending or relying on China to manufacture all our goods and get our raw materials. A guy by the name of Erik Prince, founder of Blackwater, just spoke at Hillsdale College and talked about how military warfare is changing: you send an $800 drone against us, and we fire a million-dollar missile. How does that work? You go broke doing that? If we don’t do this, what, if you’re optimistic, what if things did not go right, what would they be? They don’t get the regulation removed, they don’t allow mining to take place; in your mind, what would that be?
Mark Mills:
I said I was cautiously optimistic; okay, I’m hedging.
Jim Puplava:
You’ve got a hedge there?
Mark Mills:
I hedge in my optimism. We have examples of what’s going to happen; it’s not hard to guess; it doesn’t require a particularly clear crystal ball. Germany is de-industrializing as we speak; England is de-industrializing in real time, right before our very eyes; their dependencies, not just on gas before the Ukraine war with Russia, they have lots of other dependencies, so you become a de facto vassal state. You don’t disappear as a country, but you become enervated instead of energized, so your growth collapses. Canada, Germany, England’s wealth per capita is flat or declining. Germany, the German average per capita GDP is roughly equal to the average of the poorest U.S. state now; same is true for England and for Canada. That’s the future; the future is you de-industrialize, you’re subject to the predations of other countries economically and militarily, and the country will still be there, and you’ll have more debt, all those things, but fundamentally it’s a slow-motion catastrophe; these are high-inertia systems, but we move into slow motion to becoming an irrelevant country, just like the United Kingdom is now, sadly. That’s the future if we keep having punitive regulatory policies, which we have, not as bad as them, but that’s the direction a lot of people want to take them; if we have punitive structures with respect to how you supply energy, if we move our energy system to what they’ve done, which is lots of windmills, shutting down nuclear plants, shutting down coal plants, we’ll follow in their steps. They gave us the gift of the lesson of what the path represents, and we just take a look at what’s going on in those countries. It doesn’t mean you can’t go there for a vacation; it’d be pleasant; there’s still hotels, obviously, it’s just that as a nation they’re drifting into senescence and irrelevance, which is very sad, and it creates obvious risks geopolitically as we think about how the world’s realigned, because there’s a lot of bad actors in the world who become predators, not just economically.
Jim Puplava:
You know, it’s amazing that people in Congress, the problem I have with Congress, a lot of them don’t understand economics, and especially, this is on both sides, where they don’t understand: hey, okay, you want to bring industry back, what are you going to do to make it easier for them to build a plant? What are you going to make it easier from an incentive point of view to bring that plant here tax-wise? They don’t follow through with all that; everybody’s excited about AI, but AI takes power, it takes electricity.
Mark Mills:
Yep, well, they think they’re following through because that’s why they passed the CHIPS Act, which was bipartisan, so what they’ll say, and the defenders of the CHIPS Act say, we’re giving you an incentive; we’ll write you a check. The problem with subsidies, grants, writing checks, as you well know, is that they have strings attached, so you have to jump first; you have to apply for it, which takes time and takes lobbyists and jump through hoops, so not only are you now a vassal to the government offering you a check, you have to do a bunch of things they’re asking to do. If what the government did instead was say, look, we’re willing to spend that amount of money, of taxpayers’ money, to get chip fabs back here, I’ll give an obvious example what Congress could do: a much more equitable blunt instrument would be to offer far greater depreciation and tax breaks for chip fabs. Just say if you build a chip fab here, you pay no taxes for five years; pick a number, whatever the number is, to balance out to be equal to the subsidy. Don’t give an overt upfront subsidy that people have to petition you for and beg for and hire lobbyists for; give an ex post facto subsidy locked into law: you build it, we’ll give you accelerated depreciation, we’ll give you no taxes, whatever the giveaways you want to give, but then you’re not picking. The market will figure out what to build, whether it’s foreign or domestic, I mean foreign-owned or domestically owned; they’ll figure it out. Also offer accelerated portals to the permits; do the same for power plants. You’ll get an outcome that would be exciting and fast, but the human instinct is that there’s a lot more power attached, to be unkind to Congress, but it’s easy to do; there’s a lot more power attached to you have to petition me to ask me for the money, as opposed to just providing the market with the incentives, and there’s no reward in terms of personal politics; nobody is going to put money into my PAC because they don’t have to talk to me because they could just get the benefit by building the plant.
Jim Puplava:
It was really amazing how, I think it was Elon Musk, and I think it was Virginia, where he in three months built one of the largest data centers; he did, and then came in and brought in two natural gas plants, had it up and running in three months.
Mark Mills:
Right, that was Memphis, Tennessee.
Jim Puplava:
Yeah, but as you point out, if we don’t get manufacturing back here, don’t get mining back here, we’re going to go the route of Germany, England, and we’ll just be nothing but a satellite in a Chinese empire sphere.
Mark Mills:
Yeah, I’m writing a piece now for City Journal, trying to find a simple thousand-word way to frame the argument of why manufacturing matters in a post-industrial society. I guess the answer is China showed us why it matters because they took over the leadership in manufacturing things, but people have in their head in a sense that they really do have bought into the post-industrial language. That phrasing is true if you thought our economy’s growth was primarily anchored in industrialization; our growth is no longer anchored in industrialization, but industrial policy, industrial infrastructure is a predicate for growth, and so it’s a subtlety that’s not trivial. So it doesn’t matter if we have chip fabs here? Well, yeah, apparently it does, and we invent the chips, but they’re made over there; that matters.
Jim Puplava:
Yeah, it’s just absolutely amazing that people aren’t picking up on what this means because we’ve been able to live this way for three or four decades; we outsourced. Just a quick question: I think that as I was pondering, reading a lot of this stuff that really hit me is if you look at industrialization and outsourcing of manufacturing, I think it began in the ‘70s; we had inflation, we had labor unions and strikes and things like that, and companies said, you know, screw this, we’ll just shut the factory down, put it over there, I don’t have to deal with this.
Mark Mills:
Right?
Jim Puplava:
Yeah.
Mark Mills:
Look, I think there’s a set of factors that came together. Economic opportunities overseas were very real if you’re an investor.
Jim Puplava:
Yeah.
Mark Mills:
That was real because of the velocity and the favoritism that was played to capital; you put capital to work in those markets, you could put it to work quickly, you got quick return, and the costs were lower for all set of reasons, not least because we made it expensive here. You add that to the politics, to the environmental part, where we don’t like it here because it’s dirty industries, and then the political psychology itself of we don’t need this stuff, really, it doesn’t matter that much; it’s a miss, but those things all together, it wasn’t one thing, it’s like this toxic brew of things that came together and put us in a hole. The real problem Trump’s got, we all have, is that these things are hard to fix quickly. Some of them you can accelerate a lot, but they’re not; we’re not going to delink from China easily or quickly, and the Chinese know that. Trump’s not stupid; it’s not like he, I don’t believe he thinks for a second that we’re going to not have imports from China; he just wants the playing field to be different, and he’s using a very blunt instrument for it. I’m not so sure he’s wrong, given the fact that we’ve now spent what, 20 years longer there is. A friend of mine was in the Commerce Department and was involved in the negotiations with Europe, with Japan and Europe, both on these trade issues, the asymmetries, during the Bush administration, and he confirmed my own suspicion, having not been involved in them. I said, we know they’re asymmetric; you can’t put a GM dealership in Japan, you just can’t do one, never mind tariffs, there’s no dealership, you can’t open one; that’s not a tariff if you just can’t do it. There’s a whole set of things like that; he said they would have meetings and sit around tables and write papers and be delegations, and the Japanese would promise, our friends, Germans would promise, nothing happened, nothing changed, nothing changed, so they just rope-a-doped us, and Trump knows all this. These are the people who work for him; they rope-a-doped us, he said, okay, I’ll fix that.
Jim Puplava:
You know, it’s amazing because people don’t realize he went after Mexico and Canada. I’m in the financial industry, and we have a large Canadian audience that listens to the show, and I can’t do business with them, although Canadian banks, TD Waterhouse, now owned by Schwab, was Canadian; the largest RIA in the city was just bought out by a Canadian bank, but we cannot do business with Canadians.
Mark Mills:
Okay? So every business has a story just like yours; everybody, the agricultural group, the farmers, the manufacturer, all have stories just like yours with every country, whether it’s Canada or Japan, and so how do you fix that? Because they keep doing it over and over again; it’s nonstop, and you know for a fact that if Canada came back and said, we’ll do these three things if you end the tariffs, we’ll let financial institutions operate in Canada, we’ll let you sell your butter here, we’ll get rid of a bunch of stuff, and we’ll build, we Canada, because Canada has Canadian companies, we’ll build, we’ll do this, tariffs would be gone. It’s very transactional, and it may be the only thing that’ll work, but if they don’t negotiate, if they, you know, this is a game of chicken, if they don’t negotiate and start doing things that result in them relaxing their rules, not tariffs or the equivalent, quickly, I don’t know, we’ll get stagflation. I really do think we’ll get stagflation; we’ll just have higher costs and not much growth.
Jim Puplava:
You know the thing that really struck me though, the U.S. economy, 11% is dependent on exports; Europe, over 20; Canada, over 30; Mexico, over 30; China, over 20, so we’re better off. We’re more self-sufficient to some extent that we’re not as dependent.
Mark Mills:
Oh, much, much more so, no question. I think China is fundamentally an export economy, and I think it’s more like half of their GDP is tied up in exports. They need exports. The problem is we need a lot of the stuff they’re making; we just do. We don’t have options that we can switch to quickly or easily, and they know that, whereas with Canada and lumber, Trump was right; we don’t need a single board foot of Canadian lumber; we’ve got lots of forests. This is an industry that can do just fine without Canadian lumber; we shut down all the Maine lumber industries evaporated years ago; fire it up again, you can fire it up in one year, six months, if you really thought you wouldn’t be buying Canadian lumber. I would have no doubt you’d have new lumber mills in Maine, assuming the governor wouldn’t be so insane as to oppose lumber mills being built again. I agree with you; I think what I’ve told my friends that say 20% tariff on, call it 15% of all goods, which is imports, is a 3% tariff; it’s a 3% inflator on overall, but it won’t be 3%, because as my buddy Ken Fisher said in one of his little podcasts, the tariffs always have a lower impact than the nameplate percentage because the sender, the origin country, typically absorbs a third of it; the intermediaries often absorb a third of it, so at most a third of that 20% is passed on to the actual goods going into the country, so the real impact is probably 1 percentage point. That’s 20% tariffs on the, and it’s inflationary, 1% higher costs across the board; okay, it’s not the end of the world. It’s this Powell coming up and acting like that’s going to feed inflation, but a trillion dollars of spending yet to be spent under the IRA is not inflationary; why isn’t he talking about that? There’s 1 to 2 trillion dollars of unspent money induced by the Inflation Reduction Act that is yet to be deployed, which will produce nothing of value; it’s profoundly inflationary and can’t get caught. You want to save a trillion dollars from the budget, one-stop shopping: revoke the IRA, trillion of savings.
Jim Puplava:
Well, I just hope he does this renaissance and we wake up to this because it would be sad to see this country go the way of England and Germany.
Mark Mills:
Yeah, I left Canada for a reason; I like the excitement of the American economy. I am optimistic this will get resolved, but it’s going to be an ugly fight, and there’ll be collateral damage; some of the brute force policies will cause some unexpected consequences that are not going to be ideal.
Jim Puplava:
That’s, you know, they’ve been used to doing this to us for decades, and all of a sudden you’re taking something away, and they’re putting up a stink: hey, why are you doing that?
Mark Mills:
I know, this is the way it’s always worked, exactly. If you’re in the gas business, I’ll tell you, you probably watch that Homer City site that got announced last week, 3 gigawatts of gas, so you think about everything in the food chain: the supply of the gas, the midstream, all the whole infrastructure on gas. If you do a calculation, just a BCF term, if you just assume that half of the data centers that are in the pipeline get built, you get a lot of gas; you get about a 20 or 30% increase in gas supply will be a call on it, which is, we can do it, but if you add 20 to 30% of demand over the next four or five years to gas, that’s boom; that’s a lot of gas.
Jim Puplava:
Well, we’re invested in gas pipelines, so I’m optimistic, I think, but I think he’s got a short window period of time; he’s got, if we don’t see any change or positive change or the public does, then he’s going to run up against the congressional elections, and they’ve already told them what they’re going to do; if they take the House, they’re going to impeach him, of course.
Mark Mills:
No, well, the Senate’s not going to, but they’ll be preoccupied with, instead of passing any legislation, they’re just going to spend all the time attacking Trump, and yeah, I agree, he’s got one year, not 18 months, but one year. I think they made this decision tactically; they knew this would be hard; they thought it was important; they wanted to do the hard thing first, but let’s just hope they get the tax cuts passed, and that these Republicans talking about tax increases, I mean, it strikes you crazy; what the heck is wrong with the Republican Party that we’re talking about tax increases, guys?
Jim Puplava:
Well, Mark, as we close, you’re a prolific writer; I mean, some of your books are fabulous; recommend reading them all.
Mark Mills:
Some of my books, I’ve read them all.
Jim Puplava:
So...
Mark Mills:
I’m just kidding; I’m just busting your chops.
Jim Puplava:
Why don’t you tell people about the National Center for Energy Analytics? The information that you’re putting out, you very seldom see elsewhere, and you’re really hitting on some really key themes that kind of bring all this together: okay, we’re going to bring manufacturing back, we’re going to build AI and cloud centers, but what does that mean and what does it take to get all that to work?
Mark Mills:
Well, a year ago I started, with the help of some generous donors and the Texas Public Policy Foundation, we created a new national energy think tank because there wasn’t one. If you think about, we’ve been talking about the centrality of energy issues with respect to national security and the environment and trade and economics and industry, obviously, it’s self-evident, it’s important, but a think tank dedicated just to the energy issue seemed to be in need, so we created it. We’re not into our first year of full operation yet, but we’ve got, people can find the website easily by just doing National Energy Analytics and Google National Center for Energy Analytics; the website’s energyanalytics.org. We’ve issued about eight studies, about 150 articles, reports, and op-eds by our scholars; we have a dozen scholars, an advisory board that’s spectacular, people who are leaders in their own right and at least provide me with terrific help and advice and guidance on the technology policy issues to focus on, not the operational details. Look, I have no illusions that one center or one person or any group of people can stop the tide of nonsense; there’s a lot of really silly things being said, promoted about energy, not just by Congress, by a lot of serious people, some not well-meaning, some well-meaning, but we’ve got to try. I think it’s just too important, and to get this right matters; energy is the kind of thing you take for granted when everything’s going well; if it’s reliable and inexpensive, it’s not on anybody’s radar; it becomes self-evident when it’s expensive or not there when you need it, why it matters. It’s like every domain in our lives, right? You have to illuminate what the facts are for people in a way that they’ll understand and believe it’d be credible, to make sure bad policies don’t happen, and that’s the mission of the NCEA.
Jim Puplava:
No, you do terrific work; it’s one of my go-to sites and follow, and it’s impacting a lot of what we’re doing from an investment point of view because we’re in natural gas, we’re in pipeline companies because we see that as the other side of AI. Mark, it’s always a pleasure speaking with you; all the best, and check out Mark Mills on Amazon; he’s a prolific writer, there’s numerous books, everyone is a recommendation. Mark, thanks so much for being on the program.
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