Trump fails to close the deal on healthcare

Patricio Navia

Buenos Aires Herald, March 31, 2017

 

US President Donald Trump has suffered the biggest political defeat of his short presidency after the Republican-controlled Congress failed to repeal and replace “Obamacare.” Though he likes to stress his abilities as a negotiator, Trump failed to close the deal on a key piece of legislation. Because failure to pass healthcare will make it more difficult to pass tax reform — the next big item on the legislative agenda — and because Trump’s reputation as a dealmaker has been damaged, the healthcare reform defeat is a real threat to the success of his administration.

 

During the campaign, Trump vowed to repeal and replace Obamacare (the Affordable Care Act) as soon as he became president. Along with his promises to build a wall on the southern border and to lower taxes, ending Obamacare became one of the most important pledges of the Trump presidential campaign.

Trump was confident that he could quickly dispose of the most important reform implemented by his predecessor. Stressing his reputation as a great dealmaker, Trump implied that it would be easy for him to get politicians to make a deal to replace what he termed as a disastrous health programme. Trump’s best-selling book, The Art of the Deal, showcases him as a great negotiator who can align otherwise divergent interests behind a common goal. Because Obamacare was widely disliked among Republicans — though for different reasons — when Trump won the election and Republicans retained control of both chambers of Congress, most people anticipated that Obamacare would be repealed.

 

But the great negotiator turned out to be incapable of closing the deal. Moderate Republicans who liked some features of Obamacare lobbied hard to keep them in place. GOP governors who rely on the expansion of Medicaid (government-run health insurance for the poor) also wanted to keep those provisions in place in the new legislation. Hard-right Republicans who reject the notion of socialised medicine wanted to repeal everything. Trump needed to find a middle-ground that would allow him to fulfill his campaign promise. He had to broker an agreement that would allow him to keep some of the popular provisions of Obamacare and repeal the rest of the complicated policy structure put in place after a complex bargaining process personally led by his predecessor. But the great negotiator turned out to fail at his first big test.

 

Repeal and replace

When the proposal to repeal and replace Obamacare was withdrawn from the House of Representatives — and Paul Ryan, the Speaker of the House, who led the repeal effort, admitted that Obamacare would continue to be the law of the land — Trump attempted to blame Democrats for the failure of his administration. In subsequent hours, moderate and hardline Republicans started to blame each other for their failure to use their legislative majority to replace Obamacare. In private though, most critics have begun to point fingers at the White House for the monumental failure. Comparing Trump to Obama, they criticise the current president for not spending as much time as Obama did to lobby in favour of his plan. Though the White House claims that Trump made his strongest effort to help pass the bill, the fact that his government gave up on replacing Obamacare just two months after the inauguration and Trump did not actively publicly campaign to get more Republicans on board to support the bill seems to indicate that Trump was not fully vested in repealing and replacing Obamacare.

 

The administration has now indicated that the White House will now focus on passing tax reform — which will seek to lower taxes for corporations and include tax incentives for investments and job creation. However, the likelihood of passage for any tax reform bill will be negatively affected by the failure to repeal and replace Obamacare. In order for the tax reform to generate enough support in Congress, the government must provide an explanation for how it plans to make up for the impact of a tax cut on the budget. Since the fiscal budget is already in the red, a tax cut will force additional government spending cuts. The repeal of Obamacare would have cut government spending. Now that Obamacare remains the law of the land, the tax reform will either need to be scaled back or there will need to be additional government spending cuts. Since Trump has promised to increase defence spending, the only possible sufficiently large budget items that can be cut are entitlements, like social security and Medicare (health insurance for the elderly). Yet, it is unlikely that many Republicans who are in favour of tax cuts will support cuts in entitlements that directly affect their constituencies. Since many conservative Republicans favour fiscal responsibility over tax cuts, the need to finance Obamacare reduces Trump’s leeway to implement ambitious tax cuts and spending increases in defence and infrastructure.

 

Trump’s inability to close the deal on healthcare thus reduces his bargaining space for the next item in his agenda: tax cuts. But his inability to push through the effort to repeal and replace Obamacare calls into questions his own ability to close deals with the Republican-controlled Congress to make America great again.