The ultimate motto of the deep state, as enunciated by Napoleon the pig, the Supreme Leader of George Orwell’s Animal Farm.
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What is more important in our life on this world?  Is it the confluence of values bound up in the notions of freedom, personal liberty, and freedom of thought and speech? Or is it government guaranteeing us the material conditions of a good life? Is the ability to think what you wish and fearlessly express your opinions openly to the entire world more important than the government providing everyone with healthcare, food, clothing, and other material necessities?

You might well protest I have presented a false dichotomy, that one set of values does not necessarily prohibit the other, and to a very important degree you would be correct. However, increasingly with the political thunderclouds developing over the Western nations, this dichotomy is being made the central flash point between those who value personal freedom over a government cornucopia, and those who value the opposite. In the end, any attempt by the political Left to provide a universal cornucopia will fail. It is not possible for them to provide such a source of material well-being, even in principle — a point I will return to later in this essay. Nevertheless, just the attempt to provide everything for everyone through the powers of the state would lead us to the fascist deep state that at least some progressives profess to abhor.

The Road To Serfdom Revisited

One extremely important dilemma  with depending on the state to solve all important human problems is that the people who try to accomplish all this inevitably discover government just does not have the requisite power to do the job. A very important reason for this is the intrinsic impossibility of the task, which I will describe in the next section. Nevertheless, progressives and other dirigistes seem blithely unaware of just how impossible their goals are through government coercion.  That being the case, they look around for what power they might add to government to make the tasks more possible, never suspecting their labors might be Sisyphean. Yet later, they will discover other problems, requiring  still further acquisitions of government power. As time goes on, assuming the government started out as a form of democracy, it will become progressively less so, with personal freedoms drained from the people.

This is a syndrome discovered long ago, first by Alexis de Tocqueville (he called it “the road to servitude”), and then by Friedrich Hayek, an Austrian economist who personally witnessed the rise of Hitler’s Third Reich during the 1930s. In 1946 Hayek recorded his seminal observations in his book The Road To Serfdom [E2].

According to Hayek the beginning of the road to serfdom is found when economic or social distress causes people to demand the government do something, anything to relieve that distress. In more recent decades, belief in the efficacy of government to affect the economy beneficially has greatly waned under the assault of such men as Milton Friedman, Robert Lucas, Jr., Finn E. Kydland, Edward C. Prescott, and many other neoclassical economists. However, as the economist and economic historian Mark Skousen tells us,

But it wasn’t always that way. In fact, during most of the twentieth century, heavy-handed central planning was considered more efficient and more productive than laissez-faire capitalism. [E1, Chapter 16]

In Hayek’s view centralized economic planning by the government is intrinsically undemocratic, as both elected and unelected government appointees begin to work their will and impose it upon the people. Slowly, little by little, increasing amounts of economic power are centralized in the state. In chapter 7 of The Road to Serfdom, Hayek immediately reminds us with a quote from Hilare Belloc that, “The control of the production of wealth is the control of human life itself.” Then he declares

Our freedom of choice in a competitive society rests on the fact that, if one person refuses to satisfy our wishes, we can turn to another. But if we face a monopolist we are at his mercy. And an authority directing the whole economic system would be the most powerful monopolist conceivable.

Later, he writes any one person or group of people who controls production and prices possesses almost unlimited power over the people who need those goods. In a free-market if we can not satisfy our needs from one vendor, we can always go to another. However, if government effectively controls the economy, everything is catastrophically changed. If the state controls the economy, Hayek observed that

In a directed economy, where the authority watches over the ends pursued, it is certain that it would use its powers to assist some ends and to prevent the realization of others. Not our own view, but somebody else’s, of what we ought to like or dislike would determine what we should get. And since the authority would have the power to thwart any efforts to elude its guidance, it would control what we consume almost as effectively as if it directly told us how to spend our income.

This is the direction in which the United States has been pushed by progressives ever since the administration of Woodrow Wilson beginning in 1917, exactly one century ago. Over that century of time, the U.S. Congress has ceded increasing amounts of power to the executive branch and to semi-autonomous independent agencies, like the Federal Reserve Board of Governors, the Central Intelligence Agency, the Consumer Financial Protection Bureau, the Federal Trade Commission, the Federal Communications Commission, the Environmental Protection Agency, the National Labor Relations Board, the Federal Energy Regulatory Commission, and many, many more. Just from the names of these agencies, you can get a feel for how much power they have to regulate our lives without our consent.

A federal independent agency is an organ of the federal government that, although constitutionally a part of the executive branch, exists outside of the federal executive departments and the Executive Office of the President. Depending on the agency, the president usually even lacks the power to dismiss its members. This means there is little or no executive branch control over them once their governing members are appointed. Until their appointments expire, they are essentially answerable to no one but the courts.

The regulatory state embodied by these independent agencies are the foundation of the deep state that is now a thorn in the side of the Trump administration. The term “deep state” was originally used to describe a part of Turkey’s government in the 1990s. What it means is a portion of the government that does not respond to and/or resists the policies of  the elected government. Because of their semi-independence from the elected branches of government, and because of their relative inertia, the regulatory state formed by the independent agencies creates a perfect foundation for any deep state.

The independent agencies were purposefully designed originally by progressives to remove much of the power to rule from the hands of elected politicians, and appointees directly controlled by politicians, and place it in the hands of educated technocrats. Since the late 19th and early 20th centuries, rule by bureaucratic technocrats has been a favorite mode of ruling by progressives, a predilection that seems to survive among modern day progressives. Originally designed to control American corporations, away from the corruption and ignorance of politicians in the late 19th and early 20th centuries, in more recent times independent agencies have been used just to amass government economic power. More than that, once some new power was instituted, the use of that power would be almost on autopilot.

Once regulatory rules from the independent agencies are promulgated, they can be very difficult to rescind. If the President can not directly fire appointed agency members, they have every legal right to thumb their noses at him should their policies conflict. In addition, the agency members’ terms of appointment are generally four years, but the appointments are typically staggered . This is to prevent a new president from overturning the ruling commission or board altogether to institute the rules the new president would want. Not only can they resist policy changes a president was elected to carry out, but they can also be the source of many news leaks unfavorable to the President and his policies. In the first few months of his administration, Donald Trump has certainly learned this to his cost.

The American deep state resides not just in the independent agencies, but also in the regular departments of the executive branch. Career government officials can be expected to resist reductions in their powers and roles in the government. Other than verbally, they have less power to resist policy changes than members of independent agencies, but they can be the source of malicious leaks.

However parts of the deep state are situated in the federal government, their members’ sympathies are almost guaranteed to be with the side advocating greater government power — their own power. If they did not believe (or could not bring themselves to believe) that what they did was for the ultimate good of the country, one would expect many of them to go find a more satisfying, rewarding job. Because they want to help create a better country, they can be expected to lust after the power to do it. Therefore, one would expect to find them more often than not on the side of progressive policies than neoliberal ones. Little do they know that they set the stage for their own failure and defeat.

The Impossibility of a Government-Provided Utopia

Earlier in this essay  I made the important assertion that any progressive, deep state resistance to Trump’s neoliberal policy reforms would ultimately be doomed to failure. The deep state might well be able — in combination with the progressive news media in alliance with the Democratic Party, and with the dysfunction of the Republican Party itself — to completely stymie Trump’s legislative agenda. However, to the extent progressive policies continue or are extended in future Democratic administrations, they must necessarily fail.

The most important and fundamental of the reasons for progressive failure arise from the chaotic nature of all human networking systems, the most important of which is the economy. Physicists are quite familiar with this kind of chaotic system, as they deal with it all the time in what are called fluid N-body systems. The letter N refers to the large number of particles making up the fluid system, each one of which has six degrees of freedom ( three coordinates of position and three components of velocity), making for a total of 6N degrees of freedom minus the number of any constraints. Every constraint, such as provided by conservation laws of momentum, energy, and angular momentum, will reduce the number of degrees of freedom by one. In a solid-state system where all the particles make up a solid body, the constraints force all the particles into a lattice with unvarying positions (ignoring vibrations) between the particles. The number of degrees of freedom are then reduced from 6N to just nine: the three coordinates of the center-of-mass, three components of the body’s total momentum, and three components of the angular momentum. In a fluid system, however, the degrees of freedom are many orders of magnitude greater than the number of constraints, with each particle moving smoothly from collision-to-collision with other particles, at which they discontinuously change their motion.

As it turns out, there is an almost exact mathematical analogy between a fluid N-body system (say the planetary weather system) and a country’s economy, or even the world economy. This analogy was explored in the post How Is the Weather Like a Country’s Economy. In the case of an economy, the “particles” making up the system are not atmospheric molecules, but the producers and consumers of goods and services, who interact through the law of supply and demand, and the law of marginal utility. If we would look at the system of the world economy consisting of every economy on Earth, we would have to add the law of comparative advantage to the laws of interaction between suppliers and consumers. The space in which the economic “particles” move is not the six dimensional position-velocity space of physics, but a two dimensional space formed by the quantities and prices for the economy’s goods and services. The number of degrees of freedom is then 2N where N is the number of goods and services.

Any modern human economy, no matter whether free-market or socialist, is necessarily a chaotic system, and it is chaotic for the same reasons the planetary atmosphere is. First, each system is composed of a humongous number of degrees of freedom, with the number of constraints many fewer than the degrees of freedom, even in a socialist economy. Second, each “particle” of the system interacts locally in “collisions” with other “particles” of the system. This means in the case of an economy the suppliers and consumers of a good — purely in terms of their own interaction — interact solely with each other rather than with the other suppliers and consumers, and they interact only if they agree on the quantity and price of the goods to be exchanged. This system characteristic makes the system fluid, since interactions at a distance will not freeze up the system like a solid-state body.

One thing implied by the configuration of such systems is a large number of fluid instabilities. In a physical fluid system the Rayleigh-Taylor instability and the Kevin-Helmholtz instability come immediately to mind. With the Rayleigh-Taylor instability, a heavy fluid supported over a lighter fluid will immediately begin to fall through the lighter fluid, initiating a turbulent flow that ceases only when all the lighter fluid is on top of the heavier fluid. With the Kevin-Helmholtz instability, two fluid flows at different velocities parallel to each other cause shearing forces that set up eddies that tear the flows apart. It is easy to imagine analogous instabilities in an economic system.  For example, a government forcing of economic assets (an analogue for the force of gravity) into a particular kind of investment (the producers and consumers of goods of which form the heavier fluid) displace producers and consumers of other goods (the lighter fluid) requiring the same inputs as the government encouraged good. This would be a clear analogue of the Rayleigh-Taylor instability.

The major point here is that equilibria and quasi-equilibria in these kinds of systems are formed locally in the system’s state space. Any government global perturbation on demands for goods and on allocation of economic assets would set-off Rayleigh-Taylor and/or Kevin-Helmholtz like instabilities. Any such instability would create innumerable supply and demand imbalances with various goods and services. Each such imbalance would cause trades that otherwise would occur not to occur, lowering the economic output of the country. Overall, global government perturbations on the economy tend strongly to destroy economic output. This is a view of governmental economic effects that is strongly supported by history, whether it is the history of what caused the Great Depression of the 1930s to last so long, the history of what actually caused the Great Recession of 2008-2009, or the history of why the Soviet Union collapsed, and why developing countries do not grow strongly until they move toward greater economic freedom.

A second compelling reason to believe progressive polices will ultimately fail is that the U.S. economy will not be able to afford them for much longer. No matter what the tax rates, we know empirically the U.S. government always collects about 19% of U.S. GDP, year in and year out, a result known as Hauser’s law. Therefore the amount of government revenue is strictly limited by the size of the U.S. GDP every year, not by the tax rates. If we were to do a nonlinear least squares fit of exponential curves to both federal revenues and federal  expenditures on mandatory entitlements (medicare, social security, and medicaid), we obtain the curves shown below.

Note that the mandatory expenditures curve (the blue curve) crosses the federal revenue curve in April 2031. This means that by that date, mandatory entitlement expenditures plus interest on the national debt will soak up every single penny of government revenues. This will happen unless entitlement expenditures are greatly reduced or the growth of the GDP is greatly increased.

From their rhetoric on how much they want to expand government domestic programs and therefore spending, it seems progressives have no understanding at all of either of the major points I have just made. Their ultimate failure therefore seems assured. The only remaining question is: Will they grievously harm the country in the process?

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