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New blow for Trump as Obamacare repeal bid collapses
For President Donald Trump, it was the lost art of the deal
Trump suffered a stinging defeat in his first major legislative challenge on Friday in a Congress controlled by his own party when Republican leaders pulled legislation to overhaul the U.S. healthcare system, a major 2016 election campaign promise of the president and his allies.
House of Representatives leaders yanked the bill after a rebellion by Republican moderates and the party’s most conservative lawmakers left them short of votes, ensuring that Trump’s first major legislative initiative since taking office on Jan. 20 ended in failure. Democrats were unified against it.
It was the latest in a string of political stumbles and controversies for the administration as Trump scrambled to achieve a crucial success to steady his presidency.
Trump had thrown his full political weight behind the measure, spending days arm-twisting recalcitrant Republicans, and he declared himself “disappointed” and a “little surprised” by the defeat.
The battle was an eye-opening experience for Trump, who has entered the White House with no experience in politics or government, including the delicate navigation of Congress.
Amid a chaotic scramble for votes, Ryan, who championed the bill, met with Trump at the White House. Ryan said he recommended that it be withdrawn from the House floor because he did not have the votes to pass it, and Trump agreed.
“We were just probably anywhere from 10 to 15 votes short,” Trump said. “With no Democrat support we couldn’t quite get there.”
The president then met with House Speaker Paul Ryan – then spoke with him by telephone when it was clear the party did not have the votes to get its plan across the finish line.
“I told him that the best thing I think to do is to pull this bill and he agreed with that decision,” Ryan said.
Senate Democratic leader Chuck Schumer said the bill failed “because of two traits that have plagued the Trump presidency since he took office: incompetence and broken promises.”
And the bill’s defeat marked a second major policy setback for the new president, who has seen his attempt to curb travel from Muslim-majority countries twice frozen by the courts.
Trump went on the offensive Friday, branding Democrats as the real “losers” of the failed repeal bid because “now they own Obamacare. They own it, 100 percent.”
Trump’s efforts to engage the bill’s opponents at times seemed to muddy the process further, as he largely cut Ryan out of negotiations. (Ryan didn’t seem to mind, calling Trump a “great closer.”)
But even as Trump offered concessions, conservatives did not budge and moderates were angered.
But while Trump was quick to blame Democrats for not giving “a single vote” for his plan, Ryan owned up to the failures.
“I will not sugar coat this. This is a disappointing day for us,” said the top Republican in Congress.
Even as Trump expressed frustration, he said he was optimistic that his lieutenants will be able to craft an “even better” piece of health care legislation.
The Trump-backed plan, intended to expand free-market competition in the insurance industry and lower the cost of premiums for most Americans, would also have slashed public assistance to people who have no health coverage through their employer.
Some 14 million people stood to lose their coverage starting next year, according to congressional forecasts.
Basic benefits covered under Obamacare — such as maternity care and emergency room visits — would no longer have been considered essential and required for insurers to provide.
The bill now appears dead, with Republican lawmakers urging a return to the drawing board.
Congressman Mo Brooks, a member of the ultra-conservative House Freedom Caucus that largely opposed the measure on grounds it was too similar to Obamacare, said he was “pleased as could be that the legislation has failed,” arguing it would have been bad for Americans.
Passage would have handed Trump a monumental victory, and put him on a path toward fulfilling his promise to “repeal and replace” Obamacare.
Trump’s hallmark salesmanship seemed to abandon him this week. Although he furiously courted the hard-line conservatives opposed to the reform bill, they largely refused to yield, and in the process he alienated moderates who initially supported the bill.
The president then switched tactics and gave up trying to bring the conservative opponents into the fold, instead delivering an ultimatum that all Republicans needed to back the bill. That did not work either.
“This demonstrates that campaigning and legislating are two different things,” said Jim Manley, once a top aide to former Democratic Senate Majority Leader Harry Reid.
The collapse on Friday was an embarrassing loss of face after he and his administration insisted up until the time of the vote by the U.S. House of Representatives that there was enough Republican support.
It brings into question the neophyte president’s ability to move big-ticket legislation through Congress. And for a celebrity businessman who brands himself a deal-maker and fixer, it casts doubt over his ability to deliver on his bold “drain-the-swamp” promises to shake up Washington.
The White House wants to advance, among other things, tax reform and a massive infrastructure package this year, but now it must address whether a change of approach is needed and whether congressional allies such as House Speaker Paul Ryan can be counted on to deliver.
“This is the most consequential day of Trump’s presidency and it’s not just a failure, it’s a stunning failure,” Charlie Sykes, an influential Wisconsin Republican political commentator and frequent Trump critic, said on Twitter.
Trump appeared to chalk up the loss in part to his own inexperience after House leaders pulled their bill to repeal and replace Obamacare following defections by both moderate and far-right Republican members who were unmoved by Trump’s ultimatum to vote for the plan or live with the current system.
“We learned a lot about loyalty. We learned a lot about the vote-getting process,” Trump said after the bill was withdrawn, adding that he would move forward with other priorities.
It was yet another setback for an administration barely two months in office that has already seen its national security adviser resign, had its immigration restrictions struck down in courts, and faces a barrage of questions about the Trump campaign’s ties to Russia.
Trump also failed to persuade the American public that the bill was an improvement over the one it would have repealed and replaced: the Affordable Care Act – the signature domestic achievement of former Democratic President Barack Obama. Polls showed the replacement bill to be deeply unpopular, and conservative Republicans complained that their offices were being deluged by calls from constituents opposing it.
Representative Joe Barton of Texas blamed the failure on Republicans who control the White House, Senate and the House still learning how to govern after eight years of Obama.
“Sometimes you’re playing fantasy football and sometimes you’re in the real game,” Barton told Reuters.
Representative Mario Diaz-Balart of Florida called it “a big blow” for the Republican agenda.
Stuart Diamond, a professor who teaches negotiation at the Wharton School at the University of Pennsylvania, said Trump’s strong-arm tactics backfired.
“Threats don’t work in general,” he said. “They cause damage to relationships. They definitely don’t work in a situation with a lot of different stakeholders, where the power is distributed.”
The lesson from the debacle, said John Feehery, a Republican strategist who was an aide to former House Speaker Dennis Hastert, is that the White House needs to take a firmer hand in crafting legislative strategy. On healthcare, Trump largely deferred to Ryan’s office, which drafted the bill in secret, sowing mistrust among conservatives.
Many analysts and investors have seen a failure of the bill as a catalyst to bring forward action on the tax reform as well as deregulation and infrastructure spending.
“The market is taking it as a positive that they are not pursuing something that looked like it was hitting a brick wall, and that means it’s more likely they can move on to other issues the market would like such as deregulation and lower taxes,” said Margaret Patel, senior portfolio manager at Wells Fargo Asset Management in Boston
The American Health Care Act (AHCA) has no path forward for now. That said, addressing health care in some way will be politically necessary so expect health legislation to be considered again at some point later this year or next year.
Tax ReformWith Americans now “stuck with Obamacare for the foreseeable future”, attention shifts to Trump’s next agenda item: tax reform.
Congress now faces arguably an even tougher legislative reform: overhauling the tax code, which has not been done since 1986 and involves navigating a snake pit of competing special interests. Like Trump’s healthcare proposal, it could struggle against public opinion, with Democrats likely to cast it as a Republican giveaway to the rich.
This was confirmed by none other than the President himself who said that “Republicans will probably work on tax reform now.” To be sure, following today’s embarrassing fiasco, Trump will be eager to move on to a law which will be easier to pass, and according to market consensus, tax reform is precisely that. Alas, consensus may once again be wrong.
Ignoring the fact that work on tax reform in earnest won’t start for 6-8 weeks as House Ways and Means member Merchant said moments ago, and may not even take place until fiscal 2018 (after August), the reality is that since Obamacare and tax reform are both parts of the Reconciliation process, as a result of not freeing up hundreds of billions from the deficit that the CBO estimated repealing Obamacare would do, it means that Trump’s tax cuts have been hobbled – by as much as $500 billion – before even starting.
Furthermore, with the Freedom Caucus flexing its muscle and openly defying Trump, another major headache for Trump’s tax reform is that the Bordere Adjustment Tax – an aspect of the reform that the Caucus has been vocally against – is likely off the table. And since BAT was expected to generate over $1 trillion in government revenues, it means that a matched amount in tax cuts is also now off the table.
In summary, between Obamacare repeal and BAT being scrapped, roughly $1.5 trillion in budget “buffers” are wiped out.
Sean Spicer today said repeatedly that Trump had talked to “everyone” and listened to “all” ideas, which reflects zero consideration of Congressional Democrats. If such sentiment persists it just raises the degree of difficulty for tax reform, particularly if the White House doesn’t change its position on keeping corporate tax reform tied to personal tax reform.
Preliminary discussions on tax reform could begin soon but not legislative action is not expected on tax reform until June. This week’s events do not change market expectation that tax legislation will be enacted within the next year and actually suggest that enactment could come slightly sooner than previously expected.
Other issues must be addressed before Republican leaders can shift their full focus to tax legislation. The Senate is expected to consider the nomination of Judge Neil Gorsuch to the Supreme Court the week of April 3, which raises the risk of a Democratic filibuster, which Republicans might counter with a controversial rules change (the so-called “nuclear option” for Supreme Court nominations).
Following a two-week recess, Congress will return the week of April 24 to consider extending spending authority, which expires April 28; inclusion of funding for the President’s proposed border wall would raise the risk of a government shutdown.
Congress will also need to address the FY18 budget resolution before it can act on tax reform. This is necessary to provide the “reconciliation instructions” that allow Republicans to pass tax legislation with only 51 votes in the Senate (and therefore no Democratic support). As we have noted before, reaching an agreement on the FY budget resolution will not be easy; in the past, conservatives have demanded a balanced budget within ten years but this would require endorsing spending cuts (in non-binding form) that some centrist Republicans might oppose.
Tax reform will probably not begin to move through the legislative process until June. In light of the other issues described above, we would not expect the House Ways and Means Committee to vote on a tax reform bill until late May (less likely) or June (more likely).
The Committee is unlikely to release a detailed proposal until they are ready to vote, so details regarding the House proposal may not be known for at least another two months or so.
Citations
https://sg.news.yahoo.com/trump-lost-art-deal-003258774–business.html
http://www.zerohedge.com/news/2017-03-24/why-todays-republican-debacle-makes-tax-reform-less-likely
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