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Saving for Retirement

My Comments: It’s a truism in our society that having more money rather than less money is a good thing. And retirement, by definition, is a time in your life when earning money to pay bills and enjoy life is not in the cards.

That being said, if you expect or need to transition to retirement, it would be helpful if you had the necessary financial reserves to make it happen on your terms. Here are 7 things financial advisers wish you knew about saving for retirement.

Holly Johnson, WiseBread April 19, 2017

Wish you had a crystal ball for retirement planning? Most of us do, and for good reason.

Even if you’re sure you’ll have enough money to retire, there are no guarantees until you get there. If your nest egg runs short, it will be far too late for a do-over.

This is where a financial adviser can help. A financial adviser will know if you’re heavy on risk, not diversified enough, failing to maximize tax advantages, or simply not saving enough.

They will also make sure to take into account your lifestyle and preferences to ensure you’re on the right path to your ideal retirement, and not just following a cookie cutter plan that’s not going to be the right fit.

We asked financial advisers for some of the most important ideas they wish their clients understood when it comes to money, retirement, and the future.

1. Social Security will be around in some form
Andrew McFadden, a financial adviser for physicians, says many clients refuse to accept that Social Security will still be around when they retire. This is especially true if they are part of Gen X or Gen Y, he says, since they are decades away from receiving benefits.

However short on funds we may be, the Social Security Administration projects the ability to pay around 75% of current benefits after the fund is depleted in 2034. This is a key detail, notes McFadden, since many people hear Social Security is going bankrupt and refuse to acknowledge any benefits in their own retirement planning.

“It’s not all roses, but that’s still a far cry from those bankruptcy rumors,” says McFadden. “So lower your expectations, but don’t get rid of them altogether.”

2. It’s OK to “live a little” while you save for retirement
Russ Thornton, founder of Wealthcare for Women, says too many future retirees sacrifice living now for their “pie in the sky” dream of retirement. Unfortunately, tomorrow isn’t promised, and many people never get to live out the dreams they plan all along.

“So many people assume they can’t really live until they’re retired and not working full-time,” says Thornton. “Nothing could be further from the truth. Find ways to experience aspects of your dream life now, whether you’re in your 30s, 40s, or 50s.”

With a solid savings and retirement plan, you should be able to do both — save and invest adequately, and try some new experiences that make life adventurous and satisfying now.

“Don’t accept the deferred life plan,” he says. That future you dream about and plan for may never come.

3. The 4% rule isn’t perfect for everybody
Born in the 90s, the 4% rule stated retirees could stretch their funds by withdrawing 4% per year. The catch was, a good portion of those investments had to remain in equities to make this work.

The 4% rule lost traction between 2000 and 2010 when the market closed lower than where it started 10 years before, says Bellevue, WA financial adviser Josh Brein. As many retirement accounts suffered during this time, it was shown that the 4% rule doesn’t always work for everybody.

It doesn’t mean the rule should be thrown out completely though, nor should it still be followed like gospel. In fact, in 2015, two-third of retirees following the 4% rule had double the amount of their starting principal after a 30-year stretch. These retirees could have benefited from taking out more than the limited 4%, which could have meant an extra vacation each year, or another luxury that they were indeed able to afford.

There’s absolutely no denying the importance of making your retirement dollars last. But, after a lifetime of working and saving, you also deserve to enjoy those dollars to their full capability.

Bottom line, take time to re-evaluate your drawdown strategy every few years and make adjustments as necessary. While you don’t want to go broke in retirement — you also don’t want to miss out on all the incredible things this time in your life has to offer.

4. Retirement looks different for everyone
Minnesota financial adviser Jamie Pomeroy says he wishes people would abandon their preconceived notions on what retirement should look like. He blames the financial industry in part for perpetuating the idea that certain retirement planning accounts and products work for everyone. “They don’t,” he says.

“Some enjoy retiring to the beach, some take mini-retirements before reaching a retirement age, some work part-time in retirement, and some just want to spend time with their grandkids,” he says. “The concept of retirement is dynamic, ever-changing, and defined very differently by lots of different people.”

To find the right retirement path and plan for your own life, you should sit down and decide what you really, truly want. Once you know what you want, you can craft a realistic plan to get there.

5. Investment returns aren’t as important as you think
According to North Dakota financial adviser Benjamin Brandt, too many people focus too much energy on their investment returns — mostly because they are an immediate and tangible way to gauge the success or failure of our financial plans.

Investment returns should only be judged in the proper scope of a long-term financial plan, and “over decades,” he says.

In the meantime, our behavior can make a huge impact when it comes to reaching your retirement goals. By spending less and saving more, for example, we can avoid debt and potentially invest more money over the long haul. Those moves can help us retire earlier whether the market performs the way we hope or not.

6. Small changes add up
When it comes to retirement planning, many people feel overwhelmed right away. For example, some people may realize they need $1 million or more to retire and give up before they start.

Financial adviser Jeff Rose of Good Financial Cents says this could change if everyone realized how small changes — and small amounts of savings — add up drastically over time.

“Someone who invests just $200 per month for 30 years and earns 7% would have more than $218,000 in the end,” says Rose. “Now imagine both spouses are saving, or that they boost their investments incrementally over the years.”

As Rose points out, a couple who invests $500 per month combined and earns 7% would have more than $566,000 after 30 years.

Looking for ways to save money and invest more will obviously make this number surge. If you boost your contributions each time you get a raise, for example, you’ll have considerably more for retirement. Remember even the smallest contributions can greatly add up over the years.

7. Don’t forget about long-term care
Joseph Carbone, founder and wealth adviser of Focus Planning Group, says many future retirees are missing one key piece of the puzzle, and that piece could cost them dearly.

“I wish many of my clients understood the biggest hurdle from passing wealth on to their heirs is long-term care costs,” says Carbone. “Whether it is home health care, assisted living, or the dreaded nursing home. It is real and it is scary.”

According to Carbone, most people have no idea how much long-term care costs and fail to plan as a result. “Even though the average stay is only 2.7 years in a nursing home, the total cost for those 2.7 years could be well over $400,000,” he says

To help in this respect, Carbone and his associates suggest working with an attorney who specializes in elder law. With a few smart money moves, families can prepare for the real possibility of using a nursing home at some point.

One more thing advisers wish you knew
While financial advisers don’t know everything, their years of experience make them painfully aware of what lies ahead for those of us who fail to plan. And, if there’s one thing financial planners can agree on, it’s this: The sooner we all start planning, the better off we’ll be.

Cheap Electricity and Food

My Comments: Over the next 25 years, the US will resume it’s role as THE major global economic influence. You can argue it will happen as a result of bringing coal mining jobs back to Appalachia or because there will be a wall built along our Mexican border, one built by Mexico with help from China to keep Americans out, but it will happen.

Right now we’re the only industrialized nation on the planet with a food surplus. I’m reminded again of comments by Thomas P. M. Barnett several years ago. He said our ability to grow food and export our surplus would position us as the dominant nation on the planet. Wars will be fought not over energy but over food.

With projected advances in solar technology suggesting a 30% or more net increase in efficiency, tribal pressures to promote coal, oil, and perhaps even natural gas will diminish. Let’s hope so. BTW, that’s my dad on the tractor in 1933 in Vermont.

by Joseph Hincks / December 15, 2016

Solar power is becoming the world’s cheapest form of new electricity generation, data from Bloomberg New Energy Finance (BNEF) suggests.

According to Bloomberg’s analysis, the cost of solar power in China, India, Brazil and 55 other emerging market economies has dropped to about one third of its price in 2010. This means solar now pips wind as the cheapest form of renewable energy—but is also outperforming coal and gas.

In a note to clients this week, BNEF chairman Michael Liebreich said that solar power had entered “the era of undercutting” fossil fuels.

Bloomberg reports that 2016 has seen remarkable falls in the price of electricity from solar sources, citing a $64 per megawatt-hour contract in India at the tart of the year, and a $29.10 per megawatt-hour deal struck in Chile in August—about 50% the price of electricity produced from coal.

Ethan Zindler, head of U.S. policy analysis at BNEF, attributed much of the downward pressure to China’s massive deployment of solar, and the assistance it had provided to other countries financing their own solar projects.

“Solar investment has gone from nothing—literally nothing—like five years ago to quite a lot,” Zindler said.

When the numbers come in at the end of 2016 the generating capacity of newly installed solar photovoltaics is expected to exceed that of wind for the first time: at 70 gigawatts and 59 gigawatts respectively, according to BNEF projections.

Medicare Statistics

My Comments: Medicare is a critical element for retired Americans. These statistics are not jaw-dropping but re-affirm our need to be very careful about making changes to Medicare.

I’m not convinced the folks in Congress have my best interests in mind when they talk about making changes.

Consider yourself enlightened.

Maurie Backman | Apr 20, 2017

You’re probably aware that Medicare provides health coverage for seniors 65 and older. But did you know that Medicare has several distinct parts, each of which provides its own set of services?

Here’s a quick breakdown:
• Medicare Part A covers hospital visits and skilled nursing facilities.
• Medicare Part B covers preventative services like doctor visits and diagnostic testing.
• Medicare Part D covers prescription drugs.

There’s also Part C, Medicare Advantage, that offers a host of additional services. Whether you’re approaching retirement or are many years away, here are a few key Medicare statistics you should be aware of.

1. There are 57 million Medicare enrollees in the U.S. 
A good 16% of the U.S. population is covered by Medicare, but it’s not just seniors who get to enroll. Younger Americans with disabilities are also eligible for coverage.

2. About 11 million people on Medicare are also covered by Medicaid.
Though Medicare offers a wide array of health benefits for seniors, it doesn’t pay for everything. In fact, about 20% of Medicare enrollees rely on Medicaid to pay for services Medicare won’t cover, such as nursing home care.

3. Net Medicare spending totaled $588 billion in 2016.
That’s about 15% of the federal budget. And that number is expected to rise to nearly 18% of the budget in about a decade’s time.

4. The standard Medicare Part B premium amount in 2017 is $134.
Many people assume that Medicare enrollees don’t pay a premium to get coverage, but it isn’t true at all. While Part A is generally free for most seniors, Part B comes at an estimated cost of $134 per month. That number may also be higher depending on your income, or lower if you were collecting Social Security as of earlier this year and had your Part B premiums deducted directly from your benefits.

5. Poor health can be 2.5 times as expensive for Medicare enrollees.
A 2014 report by the Kaiser Family Foundation (KFF) revealed that the typical Medicare enrollee who identified as being in poor health had out-of-pocket costs that totaled 2.5 times the amount healthier beneficiaries faced. This is just one reason it’s crucial for Medicare enrollees to capitalize on the program’s free preventative-care services. Catching medical issues early can often result in a world of savings.

6. A single hospital stay under Medicare can cost almost $4,500 out of pocket. 
Here’s some more discouraging news out of KFF. Back in 2010, Medicare enrollees who had a single hospital stay incurred $4,475, on average, in out-of-pocket costs.

7. Medicare enrollees 85 and older spend three times more on healthcare than those aged 65 to 7.  It’s probably not shocking news that older seniors spend more money on medical care than those a decade or more their junior. But what may be surprising is just how much those 85 and over wind up spending. According to KFF, in 2010, Medicare enrollees 85 and older spent close to $6,000 to cover their healthcare needs.

8. In 2015, 243 medical professionals were charged with Medicare fraud. It’s not uncommon for members of the medical establishment to engage in Medicare fraud, whether it’s in the form of inflating bills, performing (and charging for) unnecessary procedures, or billing for services that were never rendered. The good news, however, is that officials are getting better at identifying and prosecuting Medicare fraud. In fact, in 2007, the Medicare Fraud Strike Force was created to put a stop to fraudulent activity that eats away at the program’s limited financial resources.

9. More than 17 million Americans are enrolled in a Medicare Advantage plan. Medicare Advantage is an alternative to traditional Medicare that offers a number of key benefits, such as coverage for additional services (including dental and vision care) and limits on out-of-pocket spending. Between 1999 and 2016, 10 million Americans signed up for a Medicare Advantage plan, and enrollment now represents roughly 30% of the Medicare market on a whole.

10. A good 38% of Medicare funding comes from payroll taxes.
Nobody likes paying taxes, but without them, Medicare simply wouldn’t have enough money to stay afloat. Currently, the Medicare tax rate is 2.9% for most workers (which, for salaried employees, is split down the middle between worker and employer), but higher earners making more than $200,000 a year pay an additional 0.9%.

Getting educated about Medicare can help you make the most of this crucial health program. It pays to learn more about how Medicare works so that you can take full advantage when it’s your turn to start using those benefits.

How Not To Screw Up Your Investments

My Comments:
Basic stuff for some of us; gibberish for others. So if you have difficulty with this, ask your financial advisor for help.

Dana Anspach on April 6, 2017

Smart investors follow an asset allocation plan.

An asset allocation plan tells you how much of your total investments should be in stocks versus bonds and then gets into additional detail, such as how much should be in large company U.S. stocks (or index funds) vs. international vs. small cap.

You maintain investment ratios by rebalancing on a predetermined basis, such as once a year. In a 401(k) plan, rebalancing is often accomplished automatically by checking a box that says something like “rebalance every x months to this allocation.”

In general, while you are saving, rebalancing can be easy. If you should have 10% of your investments in small cap, and you only have 5%, when you fund your IRA, you put it in a small cap fund.

This process gets more complex as you accumulate different types of accounts. You may have a 401(k), an IRA, a Roth IRA, or a 403(b). If a married, your spouse may also have multiple types of accounts. Maybe you also have a deferred comp plan or stock options. Now rebalancing must encompass which types of investments should be in which accounts. While working, as you add money to accounts you can make progress on maintaining the right balance by putting new deposits into the investment type that is most needed.

When you retire, if you have multiple types of accounts, it gets more complex. Should you withdraw from the S&P 500 Index SPX, +0.11% fund in your brokerage account first, or sell a portion of the stable value fund in the 401(k)? Some 401(k) funds won’t allow you to choose which fund to sell. You may have to take withdrawals proportionately from each investment type, which isn’t necessarily a bad thing, but it limits flexibility in how you manage your investments.

If you have enough wealth, rebalancing won’t matter. I have one client who has about $2 million with my firm and manages the bulk of his investments, another $6 million, at Vanguard. I recently asked him how he manages cash flow in retirement. He said when his checking account gets too low he sells something at Vanguard. Pretty easy for him. The amount he is selling is small compared with his portfolio size, so his decision will have an insignificant impact on his portfolio allocation.

Most retirees don’t have $8 million in financial assets. If you are a consistent saver, you may have $500,000 to $1.5 million; if you have a great job or inherited wealth, perhaps a bit more. You have enough to be comfortable, but the decisions on how you withdraw it will have a significant impact on your total wealth and available cash flow in retirement.

There are two primary approaches to rebalancing in the withdrawal phase: systematic withdrawals and time segmentation.

With systematic withdrawals, you withdraw proportionately from each investment type. For example, if you were withdrawing $30,000 from a $500,000 account which was allocated 60% to stocks and 40% to bonds, you would sell $18,000 of your stock holdings and $12,000 of your bond holdings, thus maintaining your 60/40 allocation. Systematic withdrawals are easy to manage if the bulk of your investments are in one account.

If you have multiple account types, systematic withdrawals are more difficult. For tax reasons, it often makes sense to withdraw from one type of account first, and that account may be allocated differently than other accounts. And, if you’re married, your spouse may invest conservatively, while you invest more aggressively, or vice versa. Investing this way may not be optimal, but if you haven’t coordinated your plan as a household, this is often the reality. Multiple accounts with varying tax consequences and an uncoordinated allocation make maintaining an appropriately balanced portfolio while withdrawing more challenging.

With time segmentation, first, you develop a plan that tells you which accounts to withdraw from in which years. Next, you match up the investments in those accounts with the point in time where you plan to take the withdrawals. If you know you are going to withdraw $30,000 a year for the first five years from the IRA, you will have $150,000 of the IRA in safe, stable investments, like CDs or bonds with maturities matched to the year of the withdrawal, or low duration bond funds.

As with all investment strategies, there are pros and cons to any approach. The biggest problem is many people don’t have a plan at all. Having a well-tested retirement income plan brings peace of mind. A plan allows you to relax and enjoy your retirement years. If you are nearing retirement age and don’t have a defined rebalancing strategy in place that shows you when and how you will take money out, it’s time to get one.

What’s Killing The Long-Term Care Insurance Industry?

My Comments: This was written almost five years ago. During these years, every reader today is almost five years older and while the world has changed dramatically, the demographics are still with us.

Among the existential risks we all face is what is known as a Long-Term Care, or LTC event. Before we all die, about 70% of us are going to be directly affected. At some point, family and friends can no longer adequately care for someone, and an outside caregiver enters the picture.

It’s not a cheap solution. But I’ve yet to find anyone who says just drop me in the woods somewhere and leave me to the critters. It doesn’t happen that way. My solution of choice is one that requires assets be re-positioned to gain leverage, and provide an escape clause if an LTC event never happens. This article will help you better understand the context in which the solution of choice becomes the answer.

by Howard Gleckman | August 29, 2012

The long-term care insurance industry is in big trouble. Consumers aren’t buying. Carriers are dropping out of the market. And those that are staying are raising premiums, cutting discounts, and eliminating products–all of which are discouraging even more consumers from buying.

What’s gone wrong? The industry has two fundamental problems. A long-standing one–buyers are dropping coverage less often than the industry predicted. And a more serious new one–historically low interest rates are sucking the profit out of the business.

As a result, just about every LTC insurance company has raised premiums in recent years for both old policies and new ones. And now many have begun trimming their product lines and eliminating or reducing discounts.

For instance, Genworth, which dominates the LTC market, announced on Aug. 1 that it plans to raise premiums on pre-2003 policies by 50 percent over the next five years, and on newer policies by 25 percent over the period. It will tighten underwriting for new products, requiring, for the first time, blood tests for applicants. It will also stop selling lifetime benefit policies, reduce spousal discounts from 40 percent to 20 percent, end preferred health discounts, and stop selling products that allow consumers to pay premiums up-front rather than over their lifetimes.

Another big player, Transamerica, has announced similar cut-backs.

Finally, some household names are simply dropping LTC insurance entirely. In February, Unum stopped selling group policies (a product once thought to be the industry savior). In March, Prudential stopped selling individual coverage and on Aug. 1, it abandoned the group market as well.

For years, carriers underestimated how many consumers would let their insurance drop before they went to claim. The companies assumed that as premiums increased and buyers’ disposable income shrank, a certain percentage would drop coverage. The phenomenon, known as the lapse rate, increased returns to insurers and allowed them to keep premiums under control.

But as it turned out, lapse rates have consistently been much lower than the companies figured (typically about 1 percent, compared to 5 percent for other insurance products). That squeezed their profits and forced them to raise rates which, in turn, made insurance less attractive to new potential buyers.

In recent years, the industry has adjusted its estimate for those drop-outs, and newer policies–with higher premiums– are more profitable than older ones. But carriers have had much more trouble adjusting to the newer problem: How to survive in a nearly zero interest rate environment.

To oversimplify a bit, insurance companies earn revenue by collecting premiums and then investing that income. Because long-term care insurance companies typically do not pay claims for many years, they hold premium income for a long time and, thus, investment income is a very important part of their business model.

Those investments are limited by state insurance regulators to ultra-safe bonds. But ten-year Treasury bonds are returning just 1.6 percent. Five-year notes are paying a paltry 0.7 percent. That is far lower than overall inflation and significantly lower than the annual increase in long-term care costs, which is roughly 5 percent.

The math is brutal: No insurance company can pay claims and make a profit when its costs are rising by 5 percent but its investment returns are in the neighborhood of 1 percent.

Keep in mind that long-term care insurers are almost all subsidiaries of much larger life insurance companies. And their parent firms, anxious to manage risk in what was already a very risky business, are not at all troubled by the decline in LTC sales. In fact, slashing sales may be exactly what they have in mind.

Until a few years ago, carriers that stopped selling LTC insurance would sell their existing policies to other firms. But, today, in a reflection of the state of the industry, there are no buyers. In most cases, the large carriers will continue to cover their current customers, though policy-holders should not be surprised to see ongoing rate increases.

Overall, though, the decline of the private LTC market is a huge problem, especially since it is coming just as Washington is seeking ways to reduce Medicaid, the most important payer of long-term care costs. It is yet one more reason why it will be critical to find a workable solution to the problem of long-term care financing.

The 7 Elements of a Successful Retirement

My Comments: Just 7? No, there are lots more, but you have to start somewhere.

The first element reflects my personal approach to this. There has to be a real understanding of the difference between strategies and tactics. There’s a reason that seems militaristic because it is. I’ve just borrowed it to use in financial planning.

Nick Ventura/Apr 12, 2017

Start with well-defined goals, and revisit them at least annually. The closer you get to retirement, the more often you should sit down and think about your overall retirement strategy. In Ernie Zelinski’s “How to Retire Wild, Happy and Free,” the author makes the argument that setting your retirement goals expands far beyond managing your finances. Retirement planning should encompass all areas of your lifestyle, from where you live and where you travel to how you spend your day and what truly are your income requirements. Cookie cutter percentages and rules of thumb serve merely as benchmarks. Successful retirement planning requires flexibility and the willingness to look at all aspects of your life.

Many people get great satisfaction from work. So, if you are retired, and you like to work, pick something you like to do and gain emotional satisfaction from that activity. This includes working for charitable causes, hobbies, family involvement, etc. These “jobs” may or may not come with financial remuneration. But that’s not the point; many people derive emotional satisfaction and self-worth from working.

Another aspect of retirement is lifetime learning. Staying relevant in today’s technology economy requires a willingness to learn and adapt. Consider this: most medical professionals would agree that 20% to 30% of medical knowledge becomes outdated after just three years. Keeping current on technology and medicine will certainly enhance your retirement success.

Budgeting is more than setting a top-line spending number based on a pre-arranged percentage. Often times, we work from the bottom up, exploring what a client actually spends, instead of what they think they spend. It is not uncommon for individuals to drastically underestimate their spending on non-essential items. How much is your cell phone bill? Cable bill? Groceries? Starbucks?! We encourage clients to look at these as recurring payments. Not $140 a month, but $1,680 a year. Big difference, right? Getting as granular as possible is liberating when planning your retirement income.

While many planners suggest that a client will need two-thirds of their working salary to live comfortably in retirement, our experience shows that they may need anywhere from 50% to 150%. That’s a big range. Only by taking the time to define your goals, and the expenses that accompany them, can we put an accurate “spend” and “income” figure on a retirement portfolio. Even the best crafted budget has to be flexible. Emergencies happen. Grandkids happen. Sadly, health concerns happen. For both positive and negative circumstances, budgets can, and will, expand and contract. Build contingencies into your budget and income plan for a successful retirement.

Let’s consider income. Retirement income can come from many sources. Social security, pensions, retirement accounts, annuities, dividends, even earned income. As financial planners, we often hear stories from clients who “forgot” that they had earned an pension from an employer that they had left decades ago.

Take the time to go through your employment history and discover what benefits you may have forgotten. The impact could be meaningful from a cash-flow perspective. Inheritances can also create retirement income. Again, we often see clients receive an inheritance and immediately spend it. We’d rather go with the gift that keeps on giving – by investing the inheritance along the same lines of a retirement asset and creating a lifetime income stream.

Invest for your whole life.
Just as your budget is not going to be static during your retirement years, the idea that your investment portfolio should never change is obsolete as well. We live in a world of massive disruption and change. Years ago, retirees would abide by the rule taking 100%, subtracting their age, giving them the “appropriate” allocation to the equity market (blue chips only!). Today’s world does not permit such simplicity of thought.

This philosophy created an asset allocation for retirees that was heavily dependent upon the fixed income markets. Risk in today’s fixed income markets is considerably less predictable. When creating income in a portfolio, investors should examine many different sources of income. Is it time for fixed or variable rate income sources? Are dividend producing stocks inexpensive or overvalued? Is real estate a proper asset to produce income? Can alternative investments like MLP’s create an income stream? In finding these answers, a successful retirement income stream can become multifaceted and flexible.

Some investors have opted for “all-in-one” strategies, where a glide path mutual fund encompasses their entire retirement portfolio composition. These funds become gradually more conservative the closer an investor gets to retirement. Some funds manage “to” the retirement date, while others manage “through” the retirement date. If you own one of these vehicles, do you know what the fund is designed to accomplish? These funds use historical data to project out into the future the ideal asset allocation. We don’t know what the future holds, and advocate investments that have the ability to be flexible.

Successful retirement comes down flexibility. Flexibility of goals. Flexibility of income streams. Flexibility of spending. Flexibility of retirement investments. Flexibility of the overall plan. As you design your retirement plan, take the time to build in flexibility. It will help build peace of mind, and lead to a more successful retirement.

Nick Ventura is the founder and chief executive of Ventura Wealth Management.

Donald Trump’s Big Problem

My Comments: To my Trump supporting friends, this is not a rant against our president. Governments work, or don’t work, on vastly different rule sets than does private enterprise. Government is a public enterprise and the outcomes by their very nature will be markedly different. His skills as a businessman don’t necessarily translate effectively to the public world he now inhabits.

The words written by Matthew Yglasias below are the observations of someone well versed in the mechanisms by which decisions are made at the highest levels of government. These decisions almost always appear somewhere in the 24 hour news cycle, and which, to a greater or lesser degree, affect ALL of us regardless of our age or status.

by Matthew Yglesias on April 17, 2017

Donald Trump doesn’t know what he’s talking about. This became clear when he said he realized dealing with North Korea was “not so easy” after 10 minutes with the Chinese president.

Dealing with complicated problems is an occupational hazard faced by outsiders in all fields — and there’s never been a president who is more of an outsider to the realm of public policy. Consequently, a lot of his assertions about critical matters of public concern are based on … nothing at all. As president, he is fitfully coming into contact with concrete policy choices, actual information, and well-informed people. And it’s making a difference.

That’s the dynamic behind many of this spring’s jarring policy reversals on backing out of NATO, Chinese currency manipulation, and relations with Russia.

And to the extent that Trump is replacing ignorance with information and bad policy with good policy, it deserves to be celebrated rather than mocked. But the wild swings themselves are disturbing and have consequences. And Trump’s actual habits around issuing ignorant pronouncements and failing to obtain sound information don’t appear to have changed. Most fundamentally of all, Trump’s laziness and ignorance leave him easily manipulated.

Some of the things he’s “learned” since taking office aren’t true, like when Paul Ryan convinced him Republicans had to do health care reform before tax reform. And as his equal-opportunity openness to both new information and new “information” become clearer to all interested parties, the race will be on to manipulate the president and incite further chaos in American public policy.

Trump didn’t realize being president is complicated

Trump’s basic worldview, as articulated on the campaign trail, was that all the major dilemmas of American public policy had easy solutions. The reason the problems had not been solved already was that America’s political leaders were too stupid, too corrupt, or too “politically correct” to solve them.

This is a reasonably widespread view of things among the mass public, but as Trump has been discovering since taking office, it’s not true.
• Trump pronounced in February that “nobody knew health care could be this complicated” until he sat down to look at legislative options.
• Earlier this week, he explained that he’d changed his mind about North Korea after speaking to Chinese President Xi Jinping because “after listening for 10 minutes, I realized it’s not so easy.”
• Having talked it over with his economic and foreign policy advisers, Trump has realized that China stopped manipulating its currency some time ago, and that slapping the country with an official currency manipulator designation would impair cooperation on other issues, like the aforementioned North Korea.

Trump’s reversal on Russia and Syria doesn’t yet have a pithy quote attached, but it’s a fundamentally similar issue. During the campaign, Trump again and again called for the United States to take a tougher line on Iran and a softer line on Russia. From a broad, hazy, distant view of the world heavily colored by ethnic nationalism and Islamophobia, this combination of ideas makes sense.
But the real world is, well, complicated. Trump’s desire to cozy up to the Gulf states and confront Iran led very quickly to conflict with Moscow — which anyone could have explained to candidate Trump had he cared to ask.

Trump decided the Export-Import Bank is good after talking it over with the CEO of Boeing, and a handful of high-level meetings have convinced him that NATO is worthwhile after all.

Trump still hasn’t learned how to learn

A lot of this is change for the better, but the fact that it keeps happening suggests Trump has not really internalized the key lesson.

Peter Baker of the New York Times reports that “only after he publicly accused Mr. Obama of having wiretapped his telephones last year did [Trump] ask aides how the system of obtaining eavesdropping warrants from a special foreign intelligence court worked.”

One particularly chilling example of Trump’s casualness about information gathering is that Michael Crowley and Josh Dawsey report he was asking aides for information about why Assad would use banned chemical weapons only after American Tomahawk missiles had destroyed Syrian military targets. The shocking truth is that it’s probably Trump’s own rhetoric about Syria in particular and chemical weapons in general that led Assad to think there would be no consequences for violating his 2013 agreement.

A clearer and better-organized policy process could potentially have avoided the gas attack, the subsequent perceived need for a US military response, and the inevitable worsening of relations with Russia that resulted from it.

The other turnabouts are also a little alarming. Like Trump, I am not deeply versed in East Asian security issues and long had a fuzzy impression that China could make North Korea do basically whatever it wanted. Then I went on a journalists’ tour of China, organized by the Chinese government, during which Chinese officials argued fairly persuasively that this is wrong. But I didn’t just take their word for it. Having had my thinking challenged, I went and checked to see if credible Western experts agreed — and indeed they do.

After all, one problem with simply changing your mind after talking to a well-informed person is that lots of well-informed people are nonetheless wrong or pushing a partial agenda. In my experience, business lobbyists on both sides of the Export-Import Bank issue are deeply informed — better informed than I am, for sure — and make somewhat persuasive arguments. Trump tends to resolve this kind of situation by simply agreeing with the last person he talked to.

Trump is “learning” things that aren’t true

The fundamental problem here is that what Trump “learns” is sometimes actually bad information.

Baker also reported that before becoming president, Trump “had never heard of the congressional procedures that forced him to push for health care changes before overhauling the tax code.”

One reason Trump had never heard of these procedures is that he was not familiar with congressional procedure. But another reason Trump didn’t realize that procedural rules in Congress forced him to push for health care changed before overhauling the tax code is that this isn’t true.

Since becoming president, Trump has several times referred vaguely to complicated statutory requirements that forced him to prioritize Obamacare repeal. His explanations of this are invariably fuzzy because in fact there is no statutory requirement for him to do health care reform before he works on tax reform.

Instead, this “health care before tax reform” idea was simply Paul Ryan’s legislative strategy. Ryan wants to pass a tax reform plan with a party-line vote, which means he needs to use the budget reconciliation process to avoid a Senate filibuster.

You can’t write a reconciliation bill that increases the deficit over the long term. So Ryan’s plan is to repeal the Affordable Care Act — which, among other things, would sharply reduce taxes on the rich, but would avoid increasing the deficit since the cuts will be offset by spending less on insurance for the poor and middle class. Then, having locked that tax cut into place, Republicans could move on to a revenue-neutral tax reform using the lower revenue number as the baseline.

Ryan has his reasons for wanting to do it this way, and those reasons to involve procedural arcana. But nothing is being forced on anyone here. It’s simply a choice he made and then apparently tricked the president into endorsing.

Things are going to keep getting harder

Trump is currently dealing with extremely difficult issues for the simple reason that he is the president of the United States and the issues the president deals with are generally complicated and difficult. But in all honesty, he hasn’t yet handled any truly hard cases.

Even something as tough as a North Korean nuclear test or a Syrian chemical weapon strike is, fundamentally, a ripe issue that the professionals in government have had a long time to chew over. What inevitably happens over the course of an administration is that some genuinely unpredictable crises emerge. There could be an infectious disease outbreak, or revolution in the capital of a friendly autocracy, or a recession, or a bank failure, or a terrorist attack.

Unforeseen crises truly put a leader and his team to the test, drastically altering the policy space and creating opportunities to push new agendas.

Sometimes, as with the Obama administration’s response to the Ebola outbreak of 2014, a crisis can be successfully resolved by persevering with an approach that is met with initial criticism on Capitol Hill and cable news. Other times, a crisis can be an opportunity for people with strong opinions and poor judgment to push the country into a reckless misadventure, as with the Bush administration’s invasion of Iraq.

Based on what we know of Trump’s decision-making, it’s difficult to imagine him doing the former and very easy to imagine him doing the latter.