Trump's really big supporters openlyÂ grieved that the explosionÂ of hisÂ emphatically promised Obamacare replacement bodes poorly for all of Trump's plans. Fox's Sean Hannity and Lou Dobb's regaled the Republican party for failing to takeÂ the reins and lead now that the partyÂ finally has the chance to prove it can do what it has promised. Hannity stated thatÂ numerous high authoritiesÂ told him failure of this partial repealÂ marks the end of any Obamacare repeal for 2017.
This first attempt by Trump and his party to see if they can accomplishÂ anythingÂ together was by everyone's account (except Trump's) a dismal failure. EvenÂ Paul Ryan, who drafted the plan that Trump endorsed, admitted the enormity of the failure quite honestly. The least I can say for him (not being one who likes him in the slightest) is that he owned this humiliation of the entire Republican party.
Ryan picked up theÂ argument leveledÂ against Republicans byÂ Democrats when they were running congress, which said that it is easy to be an opposition party and simply stand againstÂ everything, but quite a different matter to be creative and actually govern. Democrats long argued that Republicans really have no plan to replace Obamacare that could possibly succeed -- that they were all talk -- and Republicans just proved them right. Since Republicans kept Democrats completely out of the discussion, it's fair to say RepublicansÂ failed entirely on their own.
Ryan failed embarrassingly, and I question whether hisÂ leadership will survive this failure, except for the fact that the faction most responsible for the failure (outside of Ryan himself) is the one that would likely seek his blood if Ryan had succeeded. Nevertheless, they cannot stand him and would probably join any other faction that now wants to bring him down. The choice of a new leader might be the only thing that could, at this point, saveÂ the Republican party from itself, but it seems highly unlikely they could agree on who the leader should be.
Trump failed bigly, too, because the truth is that he swore over and over to his supporters that he would get a "great" replacement through congress as one of his first orders of business. Granted he did not say he would succeed right away, but only that he would make it his first order of business. It is, however, now questionable that he will ever get a replacement through, much less a great one. He has three more years to try again, but a total failure within your own party to get your first order of business done, especially when it is something the entire Republican party has said it will do over and over for years and when you are in your honeymoon period, is no small failure.
Ryan has manned up to that. The party needs to also. Trump blamed it on Democrats, but that actually isÂ deplorable, because Trump knew every time he made the promise thatÂ he didn't have a ghost of a chance at getting DemocratÂ support, given how much he attacked them over the plan. How could he not know that unless he is delusional? The last group in the world that would help him repeal Obamacare would be Democrats. So, if the repeal's failure is their fault, give thatÂ they were never even included in the discussion, the failure to realize the obvious -- that they would never support him -- was his own.
RepublicansÂ couldÂ learn from this and do better, but it remains to be seen whether they are able and willing to learn. That requires humility, which is always scarce in congress. In the meantime, the failure to deliver Trump's big promise of "immediate Obamacare repeal" is a death knell to the Trump Rally, and the clock is ticking against all of Trump's plans.
(It doesn't guarantee that the stock market will immediately crash, though it easily could; but its rally days are over. My prediction last year was that the rally would endÂ as soon as Trump and congress had to actually workÂ together. That is whenÂ investors would be forced toÂ grasp reality and see that nothing Trump has promised is anywhere near as likely to come to pass as they believe. That is when I expected they will start to let go of their Tumphoria. Candidate promises are easily made. Legislation is not, and congress has never been more divided. Neither has that congressional subset calledÂ Republicans.
A house divided against itself
Here is how it all came down.
The proposed American Health Care Act (AHCA) diedÂ because the House Republican Conference (the official name for the entireÂ Republican caucus inÂ the House of Representatives) is divided into factions that aligned in three groups. When the center group -- the largest group of Republicans who solidly backed Paul Ryan's bill -- tried to move further right to appease the most conservativeÂ group, it lost votes fromÂ the group that is furthestÂ left (more centrist with respect to American politics overall). There are nowhere near enough votes in the center group of Republicans to beat Democratic opposition, andÂ compromise toward one faction lost the other; so no HouseÂ majority could be built.
It is hard to say exactly who was in each group because no vote was taken to put members on record, but this appears to be generally howÂ things fell apart:
1) By far theÂ largest group would have consisted of the house's largest conservative faction (172 members), known as the Republican Study Committee, probably joined byÂ members of the House Republican ConferenceÂ who do not identify with any particular faction. I'm talking here about theÂ groupÂ that solidlyÂ supported President Trump and Speaker of the House Paul Ryan on the AHCA as originally drafted.
The Republican Study Committee -- formed inÂ 1973 to keep an eye on the party's moderate leadership during the Nixon-Ford years -- is the House's oldest active faction. It has allied itself over the years with theÂ National Rifle Association, the Heritage Foundation, Focus on the Family, the religious right, Concerned Women for America, the conservative magazine National Review. Â One might now categorize it as representing the centerÂ of the House Republican Conference (though the truest middle consists peopleÂ who don't belong to any faction).
This caucus, as the House Republican Conference'sÂ mainstay faction, has included such Republican luminaries as Vice President Dan Quayle, former Vice President Dick Cheney, Majority Leader Eric Cantor, former House Majority Leader Tom DeLay, and current Vice President Mike Pence. House Speaker John Boehner was not a member of the group.
2) The smallest, rewest, andÂ mostÂ conservative faction of the House Republican Conference, called the "Freedom Caucus," was established in 2015 to battle then Speaker John Boehner, particularly to fight his approval ofÂ Obamacare (the Affordable Care Act). These members of congress canÂ be seen as the present rabble rousers because this is theÂ factionÂ that wasÂ willingÂ to shut down the government in the original fight against Obamacare. Naturally,Â this group remainsÂ set toward makingÂ sure Obamacare is completely repealedÂ and is willing to shut down government again, including apparently the leader of the House and the President just to make sure Obamacare isÂ fully repealed. Not compromising on abolishing Obamacare was more important to them than whether or notÂ Trump succeeds by getting off to a strong start.
The Freedom CaucusÂ is toughÂ enough that it forced John Boehner to remove his butt fromÂ the speaker's cushion, which led to his exitingÂ congress altogether, so Paul Ryan knows full well they could accomplish that again. ThisÂ battle-hardened caucusÂ embracesÂ the tea party folks, but it is not the Tea Party Caucus, which is now nearly inactive because the official Tea Party CaucusÂ was largely rejected by citizens in the tea party movement (includingÂ members of congress, such as Marco Rubio, who were elected by those citizens). It was rejected because the tea party movementÂ saw theÂ Tea PartyÂ Caucus as a Republican attempt to hijack a grass-roots movement. By nature, those who identify themselves as part of the tea party movement do not want to see their movementÂ institutionalized or co-opted by the establishment.
The Freedom CaucusÂ currently has thirty-one members.Â The group that initially opposed the ACHA certainly included this faction and likelyÂ some ofÂ the Republicans' more libertarian faction, formed by Representative Ron Paul, called the Liberty Caucus. These two factions overlap in membership. Michelle Bachman, for example, was a founder ofÂ the Tea Party Caucus (now largelyÂ subsumed by the Freedom Caucus) and a member of theÂ Liberty Caucus.
3) A larger faction of the House Republican Conference consists of about fifty people, who are the left-mostÂ Republicans in the House of Representatives (meaning only that they are moderates since no one in the Republican party is a leftist). This groupÂ was established in 1994 as the "Tuesday Group" when Republicans took control of the HouseÂ under theÂ more conservative leadershipÂ ofÂ Newt Gingrich. Gingrich rallied Republicans around hisÂ Contract with America. The Tuesday GroupÂ formed to resist Gingrich'sÂ more conservative positioning of the Republican party.
The actual battle went like this: Unquestionably, those aligned with theÂ Freedom Caucus felt the original AHCA bill, as proposed by Paul Ryan,Â did not go far enough in repealingÂ Obamacare. Therefore, the groupÂ of Republicans who were with Trump and Ryan modified the bill to strip out more of Obamacare by taking down some of its Medicaid provisions and other benefits in order go gain some of the more conservative votes. That resulted in those aligned with theÂ Tuesday Group (the most moderate Republicans) feelingÂ the bill now went further right than they could tolerate. As a result, the Republicans lost some moderate votes when they compromised toÂ pick up more conservative votes, and they never gained all of the conservative votes. So, they could not find a majority that could agree on any bill, and they had already thumbed their noses at Democrats completely, so they certainly wouldn't get any help there.
Why Trump faces big-league troublesÂ in enacting anyÂ of his stimulus plans
As Lincoln said in quoting Jesus Christ, "A house divided against itself cannot stand." (Lincoln was talking about government. Jesus was talking about the devil. Beg me to describe the difference.)
One major accusation Democrats made against RepublicansÂ whenÂ Republicans ran an opposition government against Obama was that it is easy to simply be against everything. It is quite another job to govern -- to have a clear vision, a good vision that will actually do something for America, and then to unite behind it. Anybody can oppose things without an idea in his or herÂ head as to what willÂ actually work to do some good.
Now that he'sÂ been knocked around by his own party, Paul RyanÂ co-opted the argumentÂ as his own: (See his comments at the start and then atÂ the 6:30 time makerÂ and especiallyÂ 8:12Â marker.)
And thisÂ is exactly why Trump is going to have a hard time getting his legislation passed. Republicans could somewhat unite in opposing anything Democrats came up withÂ because even enemies are known toÂ unite around a common foe. However,Â the formationÂ of the Freedom Caucus and its overthrow of John Boehner provesÂ even that kind of unityÂ is never complete and hard to achieve. Coming up with great ideas, which Trump entrusted to Ryan, and then unitingÂ around somethingÂ you can support, though not fully, isÂ harder still.
As the new opposition government, Democrats are solidly united against Trump, and the Republican party is too divided to create a large enough majority to overcomeÂ the Democrats. It has become increasingly divided since the tea-party movement began, so that will not easily change. ItÂ couldÂ change now that all Republicans should be able toÂ see that,Â if they don't unite around something, they will get nothing at all; but will it?
The Freedom Caucus has not exactly shown itself to be a group that is amendable to softening its positions toward the party's center, and the Tuesday Group, which might soften toward the party's center, will never go asÂ far right on anything as the Freedom Caucus demands. That said, other issues may be less polarizing than Obamacare, given that the Freedom Caucus largely formed around the intention of defeating Obamacare during the Boehner years.
It tookÂ only took a matter of days for plan number one to fall embarrassingly flat on its face. That's a bitter reality for both Trump and Ryan because promises to repeal and replace Obamacare or just abolish it entirely were the biggest and most frequent pledges heard from all Republicans. So, if they can't get together on that ...
Moreover, Trump cannot just blame Ryan for this failure because Ryan was Trump'sÂ Chosen One, entrusted with the entire task of developing Trump'sÂ "really great" plan. The fact that Ryan is purely establishment and essentially wasÂ a NeverTrumper calls into question Trump's judgment and his ability to delegate things he doesn't know how to create to the right people to create them.
Trump clearly had no great plan of his own. He entrusted development of aÂ plan to Ryan against the advice of his son-in-law, Jared Kushner, because Ryan is the only Republican who has put together any Obamacare-replacement plan in the past. TrumpÂ essentially just dusted off a plan thatÂ was sitting on the Republican playbook shelf and said, "Use parts of this." He didn't choose great people to create a plan, as he said he would; he chose Ryan, one of the worst, who chose to exclude all opinions duringÂ the creation process that were not closely aligned with his own.
The promises to get rid of Obamacare because it was "a really bad plan"Â were all empty promises because no Republican actually had any better idea, and America overall does not wish to simply default back to the situation that existed before Obamacare as being satisfactory either, though some would prefer it over Obamacare.
Trump evenÂ blinked onÂ his get-tough negotiations with his own party. He said he was going to force a vote so that Republicans whoÂ voted against this repeal and replacement of parts of Obamacare would be held accountable on election day. He reneged and backed Ryan's desire to simply pullÂ the vote so that no one is held accountable and no one can see by what margin it actually failed. (Perhaps the failure was bigger than we know.) So, Trump cannot separate himself from Ryan's failure because he chose and backed Ryan all the way.
As a result, no one had to goÂ on record as being the reason hope of anÂ Obamacare repeal in 2017 failed. As Ryan announced in the video above, Obamacare now stands as the law of the land for the foreseeable future because Republicans could not find any plan around which they could form a congressional majority. (In other words, he will not approve another go at it in this session of congress because the votes are not there, nor is the hope of compromise; and any future party leader is going to be hesitant to take this battle on, seeing how Ryan got clobbered.)
Due to a small faction demanding everything, no Republican got anything they could take back to their voters.Â Even strong supporters of President Trump like Lou Hobbs and Sean Hannity see this as a massive failure of the Republican House to accomplish anything:
As Hannity said to all congressional Republicans in the video above just before the bill's final hour,
It's time for you to give the American people a bill that you have now promised them for almost eight years. I would argue tonight,Â Failure is not an option for theÂ president of the United States and his first piece of legislation. If you don't succeed, you will have nobody to blame but yourselves.... And here's my message to youÂ people in congress: For the love of God, after eight years, can you please do your job? Can you please find a way to work together? Can you please find a way to serve your country, not yourselves, not your re-election?
They just couldn't do it. They couldÂ not succeed even in the slightest compromise even with the promise that this was only phase one and more of their wishes would come later. Republicans now have all the reins of power, and they still accomplished nothing!
What it all means for the Trump Rally
This total fiasco -- which was huge, really huge -- demonstrates why I've said all along that Trump's road to getting his plans enacted through congress, even with Republicans in control of both houses, is far from being the likelihoodÂ thatÂ hasÂ been priced into the stock market byÂ the Trump Rally.
While the AHCA defeat is not the end of the game for Trump's plans, it showsÂ exactly why I've said the Trump Rally is a clear case of irrational exuberance on the scale that precedes a major crashÂ (said when writing about the stock market's response to Trump'sÂ stimulus plans back in December):
Is the stock market irrational in its exuberance for shifting so much just because of Trump's pledges, which are far, far from becoming reality? I think so. I haven't even talked about Democrat resistance to Trump's plans, and he's already got resistance from the Republican leader of the senate....Â That doesn't mean the market won't keep going up. Who knows what the maximum height or duration of irrational exuberance is (because who knows how crazy people can get); but I am certain of this much: the higher the stock market rockets upward on such irrationality, the harder it falls into the chasm of ever-growing debt from which it has been constructed.... There is nothing you're going to do that can stop the markets (in stocks and bonds) from having their hangover when the bubbly stuff is over and irrational exuberance suddenly looks like delirium. Our greatest economic crashes have always happened when least expected. ~ "Irrational Exuberance in US Stock Market Grasps at 20K for Dow"
This past week provesÂ the stock market was irrationally premature in rising to Trump'sÂ stimulus talk. Trump has no possibility of any support from Democrats, who hate his guts on just about everything he stands for, andÂ we have now seen proof that he has no majority support he can count on in his own party.
This is one major reason I have refused toÂ join those who believeÂ things will and are now turning around economically because of Trump's election, even though it has probably cost me readers (given that my audience is largely anti-establishment). For Trump'sÂ plansÂ to become reality, he hasÂ to build consensus around a plan that can save the economy, and he is far from either consensus or a plan that can save the economy from its fundamental flaws. The best his plan would do -- if he could get it enacted -- is pump it higher forÂ a little longer. You can accomplish a little bit in the US by executive decree, but not much. Maybe Republicans will now join around a tax plan, but time is not on their side.
Moreover, failure of the Obamacare repeal makes the math of Trump's tax plans harder because he was counting on an Obamacare repeal to soften some of the costs in his budget. If he planned to get some budgetary ideas through without negotiating with Democrats by using the budget reconciliation process that eliminates the possibility of a filibuster,Â this failure alsoÂ calls thisÂ approach into serious doubt as a strategy. The market should start to sort these realizations out in the days and weeks ahead, and that will take a toll on the Trump Rally, maybe evenÂ cutting it down entirely to where it began.
So, my prediction remains that the economy, including the stock market, goes down this year for the numerous reasons I've given beyond the solitary reasonÂ that has just played out above. He hasn't even started squaring off with the Democrat's opposition. This one went down just from the opposition within his own party! Total dysfunctionality within his own party and a possible revolt against the leader of the houseÂ is not going to go choke down easilyÂ in the marketplace.
It's time to wake up and smell the ammonia!