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The White House's 'American heroes week' has not gone according to plan

  • This was not a big week for making America great again.
  • In the end, the Obamacare failure will probably be good for the GOP, which faced the prospect of tens of millions losing insurance and others facing higher premiums and deductibles.
  • But in the short term, Trump just suffered a humiliating political defeat.

If you went into a lab to design a terrible week for the Trump administration, you would have a hard time topping what just happened.

In brief review: The administration released an "update" on tax reform that included basically nothing new; the freshly hired communications director was quoted using colorful expletives to eviscerate two of the president's top aides; the seven-year effort to repeal and replace Obamacare and deliver on the president's top campaign promise collapsed in spectacular fashion; and second-quarter growth came in short of expectations and well off Trump's promise of 3 percent-plus growth for years to come.

This was not a big week for making America great again.

The biggest loss by far came early Friday when the Senate, thanks largely to Arizona Republican John McCain's dramatic "no" vote, failed in its effort to pass a "skinny" Obamacare repeal and send the bill to the House for further negotiations.

Trump exhorted Republicans on Thursday night to advance the bill. They rebuked him. And after promising over and over again on the campaign trail that he would replace Obamacare as soon as he took office, the president is left with nothing. Obamacare remains the law of the land and is likely to stay that way.

There are many reasons for this, including the complete lack of Republican consensus on what to do on health care despite having seven years to come up with a plan. The GOP, including the president, also made no sustained effort to explain their plans on health care to the public. They couldn't do this, in part, because they didn't really have any plan.

And in the end, Obamacare wound up being far more popular than any of the GOP's multiple efforts at repeal. The Affordable Care Act broke over 50 percent popularity for the first time in the Gallup poll in April, jumping to 55 percent. A Kaiser poll in July found that 61 percent of Americans opposed GOP efforts to repeal the ACA.

In the end, the Obamacare failure will probably be good for the GOP, which faced the prospect of tens of millions losing insurance and others facing higher premiums and deductibles. Expanded entitlement programs like the ACA are often unpopular when first passed and then much more popular when people begin to rely on them.

But in the short term, Trump just suffered a humiliating political defeat. His new approach, telegraphed on Twitter, is to let Obamacare marketplaces collapse. But that's not politically tenable either as Republicans would almost certainly shoulder the blame.

The only path forward now is a bipartisan approach to shoring up the exchanges. Perhaps down the road, Trump will be able to claim he cut a deal with Democrats to "save" health care. That's his best option. But Democrats may not go along without exacting serious concessions.

On the West Wing drama front, Anthony Scaramucci's extraordinary comments to The New Yorker, which the communications director says were supposed to be off the record, simply laid bare what insiders already knew. The West Wing is a reality TV free-for-all with aides constantly trying to kill each other in the press. None of this is likely to change unless Trump hires a chief of staff with real authority to clamp down and install a traditional policy process. It's not clear Trump has any interest in this.

That does not bode well for tax reform, which will require a sustained and coherent messaging strategy once Republicans come up with a unified plan.

The odds are much better on taxes than health care because there is general GOP agreement on slashing corporate and individual rates and allowing corporations to repatriate trillions of dollars held abroad at a lower rate.

But with the death of the border tax, Republicans remain well short of the revenue needed to make a big cut to the corporate rate without blowing up the deficit and forcing any tax relief to be temporary, something nobody wants.

And Friday's GDP report showing decent but below expectations growth of 2.6 percent in the second quarter underlines the importance to the White House of getting tax reform done.

The president desperately needs a political win this year and he will need fiscal stimulus to get even close to his economic growth promises as the Federal Reserve continues to tighten policy.

Oh, and Congress needs to fund the government and raise the debt limit when it gets back from summer break. It's not close on either subject.

This was a terrible week for Trump but there could be even worse weeks ahead.

— Ben White is Politico's chief economic correspondent and a CNBC contributor. He also authors the daily tip sheet Politico Morning Money. Follow him on Twitter @morningmoneyben.

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