The Planned Chaos of the IRS

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The scandal over the IRS targeting conservative organizations is more than the work of a few rogue employees or a concentrated effort at ideological profiling. It is the epitome of how poorly government operates behind closed doors while bumbling their way from one mishap to another. After all, government is akin to a blend of Gestapo and Keystone Cops, a sort of amateurish performance adrift in an uneven dark comedy and tragedy all rolled up behind a curtain of deception. Like many in society, state actors feel they must protect their interests, and in doing so find themselves engaged in misconduct. And that is when they come face to face with the brick wall of reality, and soon find themselves suffering from a boomeranging phenomenon known as “planned chaos.”

Coined by Ludwig von Mises, this oxymoronic term routinely plagues the noble intentions of mostly ignoble people. And when that happens, the reality-impaired are prone to ignore the law of unintended consequences – which has a long history of making a mockery of politicians and governmental structures alike, biting them where they least expect it. And that is because command-and-control systems need not succeed since they cannot legally fail. In this sense, the conduct of government has always been the poster child of backward incentives, where bad behavior is generously rewarded and good behavior is often left unnoticed or even punished. Government entities require no successful solutions to anything because they have a monopoly over tax-levying and money-printing authority. Why succeed if you cannot fail?

So why would public sector employees care if a governmental department spent $4 million dollars on a single conference? It is not their money. Or care if they targeted a particular group to harass and audit? Why should any public worker try to be make government efficient or successful? Success could be very harmful to a government employee’s career since, according to the Shirky Principle, “institutions will try to preserve the problem to which they are the solution.” The public sector has big incentives to preserve a problem or a falsehood, not to solve it. In fact, I coined a term to analyze this phenomenon in my new book In Defense of Chaos, asserting that “government succeeds by failing.”

Inevitably, failures by the IRS will lead to more funding and more authority for the agency, which, according to the government officials, will surely prevent such scandals from occurring again. Of course, command-and-control systems are dependent on misconduct, fraud and cover-ups. That is the hidden purpose of governmental entities; they were established to live comfortably off of a host. And when someone attempts to remedy government misconducts due to a visible flare-up, long-term improvements are always in short supply. Any call for reforms is simply a technique to calm the masses and to re-camouflage the defective elements of the state from plain sight.

Author and philosopher Robert LeFevre spent considerable time trying to expose the toxic culture of political structures. He knew that it was worthless trying to improve the dysfunctional state. Back in 1978 he gave a speech about government and policing agencies, observing that the monopolistic power of government caused the bureaucratic state to run roughshod over society while breaking its own laws. In his final analyst, he argued that government “is a system that is so bad that as you improve it, it gets worse.”

As pointed out by some defenders of the IRS, the current exposed missteps resulted from conflict between messages within the agencies itself and tax code laws. According to them, there was a serious mission drift since 501(c)(4) tax-exempt groups were supposed to focus mostly on “social welfare” work. They argue that the IRS rules were too confusing and conflicting and therefore resulted in an innocent mistake. This line of reasoning has some kernels of truth. But the IRS and its defenders don’t realize what they are actually saying. They are suggesting that the IRS dwells under a destabilizing “planned anarchy” where a complex, over-planned and over-bureaucratized system is the real culprit. In other words, they have confessed that their system “did it,” that their procedures are responsible for the scandal, causing them to be trapped inside the vortex of a man-made structure overwhelmed by a planned but chaotic situation. Such a scenario is far worse than a short-term vendetta against the opposition. They are saying that systematic failures of government itself are the real problem.

Interestingly, I revealed in my chaology book a similar story of mismanagement that the Soviet Union found compelled to bring to public light. The official government newspaper Pravda published a report in 1988 bemoaning the poor condition of the country’s socialist economy. The Communist Party newspaper editorialized: “Not one of the 170 essential sectors has fulfilled the objectives of the Plan a single time over the last 20 years…this has brought about a chain reaction of hardship and imbalance which has led to ‘planned anarchy’….the disequilibrium has affected every pore of our economy, and has become legendary.”

Unfortunately, government agencies will learn little from their current scandal except to hide their misconduct more efficiently and to keep their mouths shut more tightly. There will be no improvements and few firings. Political biases will continue. Misconduct and cover-ups will persist, but in different ways. Command-and-control systems do not give up ground, they do not compromise. They know they cannot fail in any private-sector conventional sense; they cannot go out of business. They will continue with wasteful, disjointed and fraudulent programs. Nothing can change that. As the old adage puts it, “Bureaucrats do not change the course of the ship of state; they merely adjust the compass.”

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