3a. CIA people told new director, "er, boss, that was actually us".
3b. CIA director does not believe his own people.
And of course the whole "Team B" episode (Rumsfeld etc.), where the complete lack of evidence that the Soviets had <weapon-of-choice> was reinterpreted to mean they MUST OBVIOUSLY HAVE <even-worse-than-weapon-of-choice-even-if-physically-impossible> and perfect secrecy, otherwise how could we not have found any evidence?
Former German Chancellor Helmut Schmidt recounts that he never read the BND reports, because anything they wrote was tainted. He just asked other world leaders directly instead.
These are not, I should stress, the strangest people who held influence over the intelligence community in those days.
The official CIA judgement on the matter was more qualified, pointing out that the USSR supported "national insurgencies and some separatist-irredentist groups," but did not directly support terror groups (although they did support states like Libya that, in turn, supported and directed terror operations): "[T]he terrorist activities of these groups are not coordinated by the Soviets. The Soviets have on occasion privately characterized certain nihilistic terrorism as 'criminal,' and have urged other revolutionary groups to cease and desist from terrorist acts the Soviets considered 'self-defeating.'"
One certainly could point out that US support for groups like the Afghan mujahideen and the Pakistani government, the Central American Contras and their narco-trafficking allies, and right-wing "Gladio" networks in Europe would have, from the banks of the Moskva, looked a lot like US support for terrorism as well.
But CIA's considered analysis was basically ignored by senior political leadership, including CIA director Bill Casey, and a pervasive and almost hysterical suspicion of the Soviet leadership overshadowed US foreign policy for most of the 1980s, resulting in lost diplomatic opportunities and a few close calls with general war.
And, of course, what spy agency wouldn't want (4)?
If you create enough propaganda, repeat it long enough, and put great effort in to suppressing the debunking of that propaganda eventually your own people will fall victim to that propaganda and believe that it is unquestionably true. At that point any remaining success is not the result of good decision making but of either randomness or some very dominant advantage over all other parties.
Politics is particularly sensitive to this weakness. While the original group of propaganda producers understand what the bullshit in the message is, and understand the actual purpose of the action being justified is, even the brightest outside of this group will struggle to figure it out.
Without naming names, you can watch politicians and political groups trip and choke on their own propaganda all of the time. The simple explanation stuff sounds farcical, while incredible complex propaganda can often only be identified by someone with a deep understanding on the topic. Sometimes it is more dangerous to the producing group than the intended target.
1. CIA created black propaganda in USSR linking Soviets and international terrorists to foment dissent in Russia.
2. Somebody picked it up from outside and wrote a book about Soviet-terrorism links.
3. CIA director read the book, took it seriously, freaked out, lobbied for more powers.
4. CIA and NSA got more powers.
It's clearly not the first time in history that an intelligence organisation engineered a privilege escalation from fraudulent circumstances, but doing it by accident seems almost funny.