Monday , December 16 2019
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There is no Deep State

Summary:
I’ll eventually get around to discussing the Trump administration. Because this issue is so emotionally charged, however, it might be helpful to start with a less controversial analogy. At the end of 2018, the Fed announced that it was likely to boost interest rates several times during 2019. In fact, they cut rates on three occasions. Were their intentions thwarted by a “deep state”? The answer is clearly no. Rather, the Fed is under enormous pressure to “follow the market”, to set policy rates at a level close to the underlying equilibrium interest rate, which changes over time. On any given day, they have discretion as to whether they follow the market.  But over long periods of time, a decision to ignore the market will produce severe economic problems and

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I’ll eventually get around to discussing the Trump administration. Because this issue is so emotionally charged, however, it might be helpful to start with a less controversial analogy.

At the end of 2018, the Fed announced that it was likely to boost interest rates several times during 2019. In fact, they cut rates on three occasions. Were their intentions thwarted by a “deep state”?

The answer is clearly no. Rather, the Fed is under enormous pressure to “follow the market”, to set policy rates at a level close to the underlying equilibrium interest rate, which changes over time. On any given day, they have discretion as to whether they follow the market.  But over long periods of time, a decision to ignore the market will produce severe economic problems and ultimately lead to a loss of Fed independence.

I suppose you could call the market a sort of “deep state”, but it’s clearly not a Deep State in the sense of a secretive conspiracy to control the course of events. Each trader is just trying to make some money.

The political equivalent of the market is the zeitgeist, the general sense of what sort of policies are sensible. Over at TheMoneyIllusion, I recently did a post pointing out that presidents were far less powerful than most people assume. I used the example of President Trump’s recent decision to bring troops back to Syria.

One commenter pointed out that Trump gave the order to bring the troops back to Syria:

I agree with your larger point that Presidents powers are overrated, but I don’t see how this article is an example of that. In the fifth paragraph of the article, it specifically says:

“Separately, several hundred other troops, some with armored Bradley fighting vehicles, arrived in Syria from Iraq and Kuwait under a subsequent order from Mr. Trump”

The President made both orders, the order to withdraw and the order to put troops back in. It’s an example of Trump using his powers erratically, not that he doesn’t have power.

In my view, this is analogous to claiming that because the Fed determines the fed funds rate on any given day, we can think of the Fed as determining the path of interest rates over time.

I certainly agree that presidents (like the Fed) have some power, some policy discretion.  But I also believe that people underrate the extent to which their actions are circumscribed by the zeitgeist.  So why can’t we call this mysterious “zeitgeist” a sort of Deep State?

Words matter.  The term “deep state” has clear implications that go well beyond the prevailing views of various people, or the hassles of dealing with a bureaucracy.  As we saw in the Syrian case, Trump did issue the specific order, it wasn’t that the bureaucracy refused to carry out his order to withdraw from Syria.

In addition, many of the Deep State theories revolve around people that Trump himself appointed, such as the heads of organizations like the FBI, CIA, NSA, etc.  The leaders of these organizations occasionally directly contradict Trump on questions such as whether Russia meddled in the 2016 election.  If that’s the Deep State, then Trump appointed its leaders.

But there are much bigger problems with the Deep State theory.  The zeitgeist is much more than government bureaucrats.  Trump also needs the support of Republicans in the Senate, which will soon act as jury in an impeachment trial.  It’s not surprising that Trump cares about their opinions on foreign policy.  Many were opposed to his decision to withdraw from Syria.  On other occasions, Trump has been impacted by complaints from media outlets such as Fox News, and has subsequently adjusted his policies.  And yet I rarely hear Deep State theorists complain that Fox News is part of the conspiracy.  It seems that the Deep State metaphor only applies when the president’s views are altered in a direction that his supporters don’t happen to like.

Many people believe that the world is like a Hollywood movie, where evil masterminds concoct grand conspiracies.  The actual world is much messier.  There is no organized conspiracy to undercut Trump, rather there are a myriad of individual interest groups, some pressuring Trump to be even more Trumpian, and some pressuring Trump to be more of an establishment Republican.

All presidents face similar pressures.  If Trump is being undercut by a Deep State, then all previous presidents have also been thwarted by a Deep State.  But that drains the metaphor of all significance.  It’s like when people say, “everything is political”.  OK, then what should I infer from the statement that event X is political?

There’s another irony here.  When Trump ran for president, one of his strongest arguments was that only he could tame the government.  He claimed that other Republicans such as Jeb Bush were “weak”, and that America needed a strong leader that would force Congress to do his bidding.  In fact, even with the GOP controlling both houses of Congress, Trump was completely unable to get Obamacare repealed.  You could argue that this is because health care is a tricky issue.  But he couldn’t even get the GOP controlled Congress to fund a wall on the Mexican border, even though that was a signature issue in the election.

We now know that this was all just empty rhetoric.  Trump does have a more forceful personality than Jeb Bush, but Bush would have gotten a tax cut through the GOP Congress and would have appointed two conservatives to the Supreme Court.  And Bush would have failed in many other policy initiatives, just as Trump has failed.

Happy Thanksgiving!

There is no Deep State

Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment". In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.

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