The 'biggest loser' after Obamacare reform's death may be Trump's whole agenda, analysts say

Trump: Probably going for tax reform next
Trump: Probably going for tax reform next

Rest in peace, Trump agenda?

After the stinging defeat of the GOP's bill to reform Obamacare, the White House and Congress were left reeling amid finger-pointing over who shouldered the blame. Meanwhile, a number of political veterans say President Donald Trump's entire economic agenda could be imperiled by the failure to pass an Obamacare replacement — which could also mean the market may have to lower its expectations.

Now that Obamacare will remain in place, analysts say there are numerous risks building to Trump's ambitious plans for the economy. The health care bill's failure also creates a budget crunch that could make tax reform much more difficult to accomplish.

Although many observers also lashed out at House Speaker Paul Ryan for a plan that was largely authored by him, "The big loser is going to be the president," Larry Lindsey, former economic adviser for George W. Bush, told CNBC's "Power Lunch" Friday.

"Yes, this makes tax reform more difficult but not impossible," Speaker Ryan said in a briefing Friday evening. "We will proceed, and we will continue with tax reform."

However, Lindsey said one of the "silliest" things he's heard from people is that the health-care proposal not passing will be good for Trump's tax reform. "Absolutely not," he added.

"They might move on to [tax reform] next, but when you have a president who can't deliver his own caucus, then the president's position will be weakened on all issues," Lindsey said. "If you're in Congress and you don't like something, you now have an example of how you can 'roll' the president."

During a briefing with reporters on Friday, White House spokesman Sean Spicer acknowledged Friday the budgetary conundrum that could arise, but said there was "huge appetite for tax reform."

Nevertheless, Trump has now been dealt humbling defeats on several fronts, and his opponents sense blood in the water. Meanwhile, expectations for tax reform, the linchpin of a brisk rally that has carried major stock market indexes to new highs, are dwindling.

A replacement for Obamacare "was necessary for budgetary reasons, for tax reform, because it was a revenue gainer," said Lindsey. Trump's goals for economic growth should also be questioned now, he warned.

'Intimately connected'

President Donald Trump pauses as he speaks from the Oval Office of the White House in Washington, DC, on March 24, 2017.
Mandel Ngan | AFP | Getty Images

Across the political spectrum, there was near universal agreement that the GOP would struggle to reach its lofty policy goals.

"If health care fails it makes it harder to do bigger tax reform," James Pethokoukis, an analyst from the American Enterprise Institute of Economic Policy, told CNBC Friday.

The fact that the Republicans fail to pass a health-care reform bill makes the odds that they will pass a border adjustment provision much smaller, and the odds of getting a bigger stimulus plan will drop, too, he added.

Tax reform and the health-care proposal were "intimately connected for precise reasons," Jared Bernstein, a senior fellow from the Center on Budget and Policy Priorities, said in an interview.

Trump once suggested achieving growth of 2 to 4 percent, but this might look more like 1 to 2 percent now because of budgetary constraints, he added. Now, the government has less money available to hit "high revenue targets," Bernstein said.

Investors "won't get to see cuts to a 15 to 20 percent tax rate" in corporate and marginal tax rates such as those Trump has proposed, Pethokoukis said.

Instead, it will likely be closer to what Obama worked toward — something closer to a 30 percent tax rate, he said. It raised the specter of more discontent among Trump's longtime supporters, considering he campaigned on that specific promise.

Pimco: What's happening in DC isn't too surprising
Pimco: What's happening in DC isn't too surprising

Not everyone thinks the death of the American Health Care Act should come as a surprise, though.

"Health care was going to be heavy lifting regardless," Libby Cantrill, head of public policy at Pimco, told CNBC in an interview on Friday.

This is something that took Obama — someone who had higher approval ratings than Trump — 14 months to pass, she said, and the GOP replacement bill was just introduced 18 days ago. "This is not surprising."

"It's unrealistic to expect that health care would've gotten done by [Congress'] April recess," Cantrill said. "I think the markets should take this as a lesson, [health care] should be deliberate, and it should take a long time."

In the meantime, Trump may have his hands full with a rebellious GOP Congress. The president's own party just "rolled" the President, Lindsey said.

— CNBC's Ylan Mui contributed to this report.