Donald Trump suffered the first major defeat of his Presidency last night after his Republican party failed to vote on his healthcare plan, casting a shadow over tax reform and infrastructure spending which may also face opposition from emboldened opponents.
The vote on the American Health Care Act (AHCA) had already been postponed on Thursday, but was unceremoniously abandoned on Friday after it became clear there was no possibility of it passing.
A House divided
While the Republicans hold a majority in both houses of Congress the AHCA faced significant opposition from both left and right of the party.
Moderates feared estimates by the Congressional Budget Office, a spending watchdog, which showed the AHCA plans would leave around 24m Americans uninsured. During the election campaign Trump had said no-one would lose healthcare coverage.
On the right of the party, meanwhile, lawmakers insisted the government reduce the scope of the healthcare bill radically.
Earlier on Friday Trump hit out at the Freedom Caucus, a group of ultra-conservative Republicans, saying their opposition to the healthcare bill allowed Planned Parenthood, which amongst other things helps women have abortions, to continue.
Negotiator in chief
Trump and the speaker of the House of Representatives, Paul Ryan, were unable to persuade enough people at either end of the party to see a vote pass, so were forced to give up.
Trump blamed the defeat by a “very, very tight margin” on Democratic opposition, saying the system would “explode” in short time.
He said: “We had no Democrat support. We had no votes from the Democrats.”
The President had tried to force the hand of Republican critics of the bill, saying he would leave the Affordable Care Act, colloquially known as Obamacare, in place. The repeal and replacement of Obamacare had become a familiar plank of Trump’s election campaign platform.
Ryan said: “I won’t sugarcoat this. This is a disappointing day for us.”
He added: “This is a setback – no two ways about it – but this is not the end of the story.”
Markets question the President’s mettle
US markets retreated last night as the bill’s progress stuttered, although the effect late in the day was relatively muted.
The S&P 500, the benchmark index of major US companies, closed down by two points, a small 0.08 per cent decline.
The symbolic Dow Jones Industrial Average declined by 0.29 per cent, with 21 of its 30 constituents seeing their share prices fall.
The trade-weighted dollar index also fell, as the dollar sold off against the euro. However, some of the euro’s gain may have been prompted by surveys showing strong Eurozone industrial activity.
Next up: tax cuts and spend
While markets' response illustrated the relative insignificance of healthcare for most of corporate America, the collapse of the bill nevertheless could prove damaging after a week in which investors seemingly questioned Trump's ability to deliver.
The President has welcomed the surge in US equity markets spurred by his election. He has vowed repeatedly to increase the US's annual GDP growth rate to four per cent, cutting taxes and regulation and creating jobs through big infrastructure spending.
However, doubts last week prompted the S&P 500 to fall by more than one per cent for the first time in more than 100 days on Tuesday.
The ambitious – if so far undetailed – tax reform agenda set out by Trump's transition team is likely to face equally complex political obstacles as the healthcare bill as the administration sets out to fundamentally change the face of corporate America's tax regime and its trading relationship with the rest of the world.