BILL MOYERS: This week on Moyers & Company long time insider Mike Lofgren on what he calls the big story of our times – the Deep State.

MIKE LOFGREN: It is, I would say, the red thread that runs through the history of the last three decades. It's how we had deregulation, financialization of the economy, the Wall Street bust, the erosion of our civil liberties, and perpetual war.

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BILL MOYERS: Welcome. If you’ve read the espionage novels of John le Carré, you know that no other writer today has so brilliantly evoked the subterranean workings of government, perhaps because he himself was once a British spy. Le Carré has a name for that invisible labyrinth of power. He calls it the “Deep State.” And now an American you're about to meet in this broadcast has seized on that concept to describe the forces he says are controlling our government, no matter the party in power.

But Mike Lofgren’s no intelligence agent, although he had a top secret security clearance. He’s a numbers man, a Congressional staff member for 28 years with the powerful House and Senate Budget Committees. Over the years, as he crunched those numbers, he realized they didn’t add up. Instead, they led him to America's own Deep State, where elected and unelected figures collude to protect and serve powerful vested interests.

Mike Lofgren was so disgusted, he not only left Capitol Hill, he left the Republican Party and wrote this book, “The Party Is Over: How Republicans Went Crazy, Democrats Became Useless and the Middle Class Got Shafted.” Now, at our request, and exclusively for BillMoyers.com, he has written “Anatomy of the Deep State.” You’ll want to read it as soon as we finish this conversation. Mike Lofgren, welcome.

MIKE LOFGREN: Good to be here again, Bill.

BILL MOYERS: This is a difficult subject to talk about. It would be easier if it were a conspiracy you were describing. But that's not the case, is it?

MIKE LOFGREN: No. I'm not a conspiracy theorist. This is not some cabal that was hatched in the dark of night. This is something that hides in plain sight. It's something we know about, but we can't connect the dots, or most people don't connect the dots. It's kind of a natural evolution when so much money and political control is at stake in the most powerful country in the world. This has evolved over time.

BILL MOYERS: And you call it the real power in the country.

MIKE LOFGREN: Correct. It is a hybrid of corporate America and the national security state. Everyone knows what the military-industrial complex is, since Eisenhower talked about it in his farewell address.

DWIGHT D. EISENHOWER: We must guard against the acquisition of unwarranted influence whether sought or unsought by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes.

MIKE LOFGREN: Everyone knows Wall Street and its depredations. Everyone knows how corporate America acts. They're both about the same thing. They're both about money, sucking as much money out of the country as they can. And they're about control, corporate control and political control.

BILL MOYERS: You said this, in your judgment, is the big story of our time.

MIKE LOFGREN: It is the big story of our time. It is, I would say, the red thread that runs through the history of the last three decades. It's how we had deregulation, financialization of the economy, the Wall Street bust, the erosion of our civil liberties, and perpetual war.

BILL MOYERS: You write that the “secret and unaccountable Deep State floats freely above the gridlock between both ends of Pennsylvania Avenue is the paradox of American government in the 21st century.”

MIKE LOFGREN: Well, that's just the thing. The common narrative of the last five years, and on a superficial level it's right, is that government is broken. It's dysfunctional. It's gridlocked. Well, that's true. And that is the visible the government, the constitutional government we learn about in Civics 101. And it is gridlocked.

But somehow, Obama can go into Libya. He can assassinate US citizens. He can collect all our phone records without a buy or a leave from anyone. He can even bring down a jet carrying a president of a sovereign country without asking anyone's permission. And no one seems to connect the two, the failure of our visible constitutional state and this other government that operates according to no constitutional rules or any constraint by the governed.

BILL MOYERS: You go on to say, though, that it's not just the executive branch that is the heart of this, that it's just one of the several constituencies that make up what you call the Deep State.

MIKE LOFGREN: Well, it's all the national security functions of the government. It's the Pentagon. It's Homeland Security. It's the State Department. It's also Treasury because they have a kind of symbiotic relationship with Wall Street.

BILL MOYERS: For one thing, they control the flow of money.

MIKE LOFGREN: Absolutely. That's why there's such a flow not only of money, but of personnel between Wall Street and the Treasury Department. There's other aspects of government. There's a portion of the judiciary-- a small portion of the judiciary, the so-called Foreign Intelligence Surveillance Courts. Most of Congress doesn't even know how they operate.

BILL MOYERS: Talk a little more about the nexus, the connection, between the national security state and Wall Street. Because this is a theme that runs through your essay.

MIKE LOFGREN: Do you know that about 30 blocks north of here there is a restaurant that will sell you a truffle for $95,000. Also in New York, Christie's sold at auction a painting by Francis Bacon for $142 million. Now a parallel situation with the national security state. The NSA spent $1.7 billion to build a facility in Utah that will collect one yottabyte of information. That's as much information as has ever been written in the history of the world.

It costs $400 by the time the Pentagon finishes paying contractors to haul one gallon of gasoline into Afghanistan. That’s a real extravagant amount of money. In both cases of the national security state and the corporate state, they are sucking money out of the economy.

As our infrastructure collapses, we have a Tinkertoy power grid that goes out every time there's inclement weather. Tens of millions of people are on food stamps. We incarcerate more people than China, an authoritarian state with four times our population. Does anyone see the disparity between this extravagance for the Deep State and the penury that is being forced on the rest of the country? That isn't a natural evolution. Something made it happen.

We're having a situation where the Deep State is essentially out of control, it’s unconstrained. Since 9/11 we have built the equivalent of three Pentagons around the DC metropolitan area, holding defense contractors, intelligence contractors, and government civilians involved in the military-industrial complex. There are over 400,000 contractors, private citizens, who have top-secret security clearances.

BILL MOYERS: And they are heart and soul of the Deep State, as you describe it.

MIKE LOFGREN: Absolutely.

BILL MOYERS: They're being privatized. Which means the power shifts from accountable officials to unaccountable contractors.

MIKE LOFGREN: About 70 percent of the intelligence budget goes to contracts.

BILL MOYERS: How new is this? I mean, back in 2010, the Washington Post published a stunning investigation of what the editors called "top-secret America” I mean, we have known about this, have we not?

MIKE LOFGREN: Yes, we know about this, but the intelligence functions of the government are too important to outsource in the manner we have. It's something where absolute discretion is needed and absolute trust that they are not violating civil liberties. And to put this kind of a burden, if you will, on private-contract employees is, I think, become a great disservice.

BILL MOYERS: You say that you came to question this. It took you a while. It was a gradual enlightenment that took place. You were dealing with big numbers and particular details in the budgets that all of these agencies were sending to you when you were on Capitol Hill, right? You were seeing the numbers?

MIKE LOFGREN: Absolutely.

BILL MOYERS: And you-- what was happening to the numbers?

MIKE LOFGREN: At the end of 2001 is-- we appropriated a lot of money and it didn't seem to be going to Afghanistan, the approximate source of the 9/11 attacks. It seemed to be going to the Persian Gulf region. And I said, "What's going on here? Saddam Hussein didn't bring down the twin towers." So, the little light went on. And I began to sort of disenchant myself from the normal group think that tends to take over in any organization.

BILL MOYERS: Group think? At some point in your essay, you talk about how groupthink drives the Deep State.

MIKE LOFGREN: It absolutely does, just as it tends to drive any bureaucratic organization.

BILL MOYERS: What do you mean by groupthink?

MIKE LOFGREN: Well, the psychologist Irving Janis called it groupthink. It's a kind of assimilation of the views of your superiors and your peers. It's becoming a yes man. And in many respects, it's an unconscious thing.

BILL MOYERS: Yeah, remember what Upton Sinclair once said "It's difficult to get a man to understand something when his salary depends on him not understanding it."

MIKE LOFGREN: That is certainly part of it

BILL MOYERS: You describe Washington as clearly and obviously the headquarters of the Deep State. But talk about some of the others who are in the game.

MIKE LOFGREN: Wall Street is, perhaps, the ultimate backstop to the whole operation. Because they generate so much money that they can provide second careers for a lot of the government operatives. They're going to make more money than they ever dreamed they would on Wall Street. And I think a good example of that is the most celebrated soldier of the last decade David Petraeus. What did he do when he retired? He went to Kohlberg Kravis Roberts, a Wall Street buyout firm with $90 billion in assets under management.

BILL MOYERS: You describe him as a kind of avatar of the Deep State.

MIKE LOFGREN: He is, in a way. Because he now represents both ends of it. We see now our present-day Cincinnatus did not pick up the plow when he lay down the sword.

BILL MOYERS: Cincinnatus was the Roman who left his farm to become a general in the war. When the war was over, he went back to be a farmer. That doesn't happen today.

MIKE LOFGREN: No, it doesn't. The vast majority of generals seem to end up on the boards of defense contractors.

BILL MOYERS: Talk a little bit about what you call this strange relationship between Silicon Valley and the government, and how it fits into the Deep State.

MIKE LOFGREN: Well, the National Security Agency could not do what it does, the CIA could not do what it does, without Silicon Valley. Now, Silicon Valley, unlike the defense contractors, mostly sells to private individuals and to companies. It's not a big government vendor. However, its services are necessary. And de facto, they have become a part of the NSA's operations. I'm sure the CEOs of some of these companies try to obscure the fact that this has mostly been voluntary for many years.

BILL MOYERS: You mean the surveillance?

MIKE LOFGREN: The surveillance.

BILL MOYERS: The gathering of information of unknowing citizens.

MIKE LOFGREN: Absolutely.

BILL MOYERS: For commercial purposes, though.

MIKE LOFGREN: Precisely. They've done it themselves and they've assisted the NSA through a FISA court order.

BILL MOYERS: Foreign Intelligence--

MIKE LOFGREN: Foreign Intelligence Surveillance Act. So, this has been going on for quite a while. Yet now, like Inspector Renault, they are "shocked, shocked" to find out. But I think their main shock is that they're now starting to lose market share in foreign countries.

BILL MOYERS: These moguls, as you call them, pass themselves off as libertarians.

MIKE LOFGREN: Oh, they do. They make a big pretense about being libertarians and believing in the rugged individualism and so forth. But they've been every bit as intrusive as the NSA has been, in terms of collecting your data for commercial purposes, rather than so-called national security purposes.

But they're in it just as heavily as the NSA is. And they somehow manage to get the intellectual property laws rigged so that you are theoretically subject to a fine of up to $500,000 for jail breaking your phone.

BILL MOYERS: Which means?

MIKE LOFGREN: Which means if you don't like the carrier on your phone that the manufacturer dictates you shall have and you change it without authorization you don't have the right to something you bought.

BILL MOYERS: Could this symbiotic and actual relationship between Silicon Valley and the government reflecting the Deep State, explain the indulgence Washington has shown Silicon Valley on matters of intellectual property?

MIKE LOFGREN: Absolutely. People no longer necessarily own their property that they buy if they're buying it from Silicon Valley. They simply have a kind of lease on it.

BILL MOYERS: If, as you write, the ideology of the Deep State is not democrat or republican, not left or right, what is it?

MIKE LOFGREN: It's an ideology. I just don't think we've named it. It's a kind of corporatism. Now, the actors in this drama tend to steer clear of social issues. They pretend to be merrily neutral servants of the state, giving the best advice possible on national security or financial matters. But they hold a very deep ideology of the Washington consensus at home, which is deregulation, outsourcing, de-industrialization and financialization. And they believe in American exceptionalism abroad, which is boots on the ground everywhere, it's our right to meddle everywhere in the world. And the result of that is perpetual war.

BILL MOYERS: And you say it is shadowy and more ill-defined. More ill-defined than what?

MIKE LOFGREN: It's more ill-defined than simply saying Wall Street or saying the military-industrial complex, or saying Silicon Valley, or the corporations. It's a symbiosis of all of the above.

BILL MOYERS: Here's your summing-up quote: "As long as appropriations bills get passed on time, promotion lists get confirmed, black or secret budgets get rubber stamped, special tax subsidies for certain corporations are approved without controversy, as long as too many awkward questions are not asked, the gears of the hybrid state will mesh noiselessly." Is that the ideology?

MIKE LOFGREN: That is a government within a government that operates off the visible government and operates off the taxpayers. But it doesn't seem to be constrained in a constitutional sense by the government.

BILL MOYERS: Is there a solution to the way the system works now?

MIKE LOFGREN: I think we're starting to see some discord in the ideology of the factions that make up the Deep State. We're seeing Silicon Valley jump ship. They are starting to protest against the NSA. We're seeing the Tea Party bailing out against the Deep State. They may be wrong on many economic issues. But I don't think they're necessarily wrong on this one.

BILL MOYERS: So the public could be growing wise?

MIKE LOFGREN: I think they are. There's a much more vivid debate going on in the country about surveillance ever since the revelations by Edward Snowden.

BILL MOYERS: Mike Lofgren, thank you very much for being with me.

MIKE LOFGREN: It’s good to be here, Bill.

BILL MOYERS: Thanks to the journalist Lee Fang, we have another revelation into how the Deep State enterprise works. Writing for the Republic Report, a non-partisan, non-profit that investigates money in politics, he takes up that controversial trade deal called the Trans-Pacific Partnership that President Obama is trying to push through Congress with minimum debate and no amendments. Controversial because some of its provisions reportedly enable corporate power to trump representative government, even go around domestic courts and local laws. One is said to prevent governments from enacting safeguards against another bank crisis, another to empower corporations to sue governments for compensation if, say, environmental protections, or regulations on tobacco and drugs interfered with future profits.

Because of the secrecy we don’t know everything that’s in the draft agreement. Senator Elizabeth Warren calls it “a chance for these banks to get something done quietly out of sight that they could not accomplish in a public place with the cameras rolling and the lights on.”

Which brings us to two officials chosen by President Obama to lead those trade negotiations. Lee Fang reports that they received multi-million dollar bonuses as they left giant financial firms to join the government. Bank of America gave this man, Stefan Seelig, more than $9 million in bonus pay as he was nominated to become the Under Secretary of Commerce for International Trade. And this man, Michael Froman, got over $4 million when he left Citigroup to become the current US trade representative. Now, both are no doubt honorable men – they are all honorable men – but when push comes to shove, and the financial interests of huge corporations are on the table, we can only hope they will act as independent men, not faithful servants of the Deep State. But given the secrecy, we may never know.

According to Fang, many large corporations with a strong incentive to influence public policy give executives bonuses and other incentive pay if they take jobs within the government. Among them: Goldman Sachs, Morgan Stanley, JP Morgan Chase, the Blackstone Group, Fannie Mae, Northern Trust. Citigroup even provides an executive contract that awards additional retirement pay upon leaving to take a “full time high level position with the US government or regulatory body.” I'm not making this up. You get a bigger incentive if you leave Wall Street to go regulate Wall Street. So it is the fox is groomed for the chicken coop, and the Deep State grows fat on its prey.

Coming up on Moyers & Company, a powerful new book breaks the code of "Dog Whistle Politics."

IAN HANEY LÓPEZ: Dog whistle politics doesn't come out of animus at all. It doesn't come out of some desire to hurt minorities. It comes out of a desire to win votes. And in that sense, I want to start using the term strategic racism. It's racism as a strategy. It's cold, it's calculating, it's considered, it's the decision to achieve one's own ends, here winning votes, by stirring racial animosity.

And here's a hard, difficult truth. Most racists are good people. They're not sick. They're not ruled by anger or raw emotion or hatred. They are complicated people reared in complicated societies.

They're fully capable of generosity, of empathy, of real kindness. But because of the idea systems in which they're reared, they're also capable of dehumanizing others and occasionally of brutal violence.

BILL MOYERS: At our website, BillMoyers.com, remember to read the complete text of Mike Lofgren’s essay, “Anatomy of the Deep State,” and then tell us what you think. I’ll see you there and I’ll see you here, next time.