Senators are still talking, Mulvaney told "Squawk on the Street." "I don't think they can go home without doing something. I think that the health-care discussion is very much alive despite the vote last night."
The Senate has already delayed its recess until the third week of August. And now House GOP leaders said they might delay theirs if senators are able to pass something on health care. The House was set to leave for its recess Friday afternoon.
In a dramatic early Friday morning floor vote, the Senate blocked the latest Republican attempt to dismantle Obamacare, the so-called skinny repeal measure. Three GOP defections, including Sen. John McCain, sank the measure 49 to 51.
In the light of day, it doesn't look like McCain is going to change his mind.
The Arizona Republican said released a statement around noon ET on Friday, again calling for a bipartisan approach to health care. "The vote last night presents the Senate with an opportunity to start fresh. It is now time to return to regular order with input from all of our members — Republicans and Democrats — and bring a bill to the floor of the Senate for amendment and debate," the senator said.
After the failed vote, President Donald Trump tweeted his disappointment.
3 Republicans and 48 Democrats let the American people down. As I said from the beginning, let ObamaCare implode, then deal. Watch!
Mulvaney, formerly a congressman from South Carolina and member of the hard-line conservative Freedom Caucus, said, "It's a disappointing day. There is no other way to look at it."
But he argued, "We have to get rid of Obamacare in order to get the additional, probably 0.1 percent GDP growth, just from repealing Obamacare."
The director of the Office of Management and Budget said repealing Obamacare and reforming the tax code, including tax cuts for corporations and Americans, are key to achieving sustained 3 percent economic growth. "So they do tie in together," he added.
That 3 percent growth threshold is a key pillar of what he calls MAGAnomics (a mashup of Trump's slogan "Make America Great Again' and the word economics).
However, the U.S. has not seen annual 3 percent gross domestic product growth since 2005, according to the government.
The Commerce Department said on Friday that GDP increased 2.6 percent in its first look at the second quarter, meeting expectations.