Three Levels Of Chosenness
בפסוק בנים אתם כו' עם קדוש אתה כו' ובך בחר
On the pasuk, "You are children to Hashem your God" (Devarim 14:1), and "For you are a holy people" (Devarim 14:2), and "Hashem has chosen you to be His treasured people."
The Sfas Emes opens with three phrases the Torah uses to describe Bnei Yisrael: children, a holy people, and a chosen people.
והם ג' בחי' כי האדם כולל כל העולמות
These are three distinct levels, for man encompasses all the worlds within himself.
He sets up that these are three separate spiritual rungs, mirroring how a person contains all the worlds within himself.
והנשמות נק' בנים אבל נשתלחו בעולמות התחתונים ונתלבשו במלבושים שונים
The neshamos are called "children," yet they were dispatched into the lower worlds and were clothed in various garments.
The neshamos in their root are called "children" of Hashem, but they were sent down into the lower worlds and wrapped in various coverings of the physical realm.
ועם קדוש אתה היא מדרגה למטה מבחי' בנים
"You are a holy people" is a level beneath the aspect of "children."
The title "holy people" is a rung that stands one step below the elevated status of "children."
ואעפ"כ היא בחי' עליונה שאין שם מגע נכרי והם קדושים ומובדלים
Even so, it is a lofty level, where no foreign touch reaches, and they are holy and set apart.
Despite being lower, this is still an exalted level untouched by any foreign or unholy influence, where Bnei Yisrael remain holy and separated.
אבל בך בחר ה' היא עולם שלמטה שאנחנו בין האומות ולכן צריכין בחירה ע"ז כמ"ש בחרתנו מכל העמים
But "Hashem has chosen you" refers to the lower world, where we dwell among the nations, and therefore one requires a choosing for this, as we say, "You have chosen us from among all the peoples."
The phrase "Hashem has chosen you" speaks to the lowest world, where Bnei Yisrael live among the nations, and precisely there a deliberate divine choosing is needed, as expressed in the bracha "You have chosen us from all the peoples."
ואמר לא תתגודדו דרשו חז"ל ל"ת אגודות אגודות
And Scripture says, "You shall not cut yourselves" (Devarim 14:1); Chazal expounded, "Do not make yourselves into separate factions" (Yevamos 13b).
The Torah's command "do not cut yourselves" is read by Chazal as a warning against splitting into divided factions.
כי כשמתאחדין כאחד זוכין לבחי' בנים ולכן בש"ק דמתאחדין בי' זוכין לבחי' נשמה יתירה ונק' בנים:
For when Bnei Yisrael unite as one, they merit the aspect of "children"; and therefore on the holy Shabbos, when they become unified within it, they merit the aspect of the extra neshamah and are called "children."
When Bnei Yisrael join together as one they rise to the level of "children," and this is what happens on Shabbos, when their unity earns them the extra neshamah and restores the name "children."
Summary: The Sfas Emes draws three ascending names the Torah gives Bnei Yisrael, "children," "a holy people," and "a chosen people," and maps them to three spiritual worlds contained within every person. In their root the neshamos are "children" of Hashem, but they descended into the lower worlds and were clothed in garments; "a holy people" is the rung just below, still untouched by any foreign influence, while "chosen" describes the lowest world where we live among the nations and therefore need a deliberate divine choosing. He then ties this to the verse "you shall not cut yourselves," which Chazal read as a warning against fracturing into separate factions. For only when Bnei Yisrael unite as one do they rise back to the status of "children" of Hashem. This is realized each Shabbos, when their unity draws down the extra neshamah and they are once again called His children.