Trump's funding freeze creates widespread confusion

In a significant policy move, President Donald Trump has initiated a comprehensive freeze on federal financial assistance, aiming to align government spending with his administration’s priorities. This directive, issued by the Office of Management and Budget (OMB), halts the disbursement of federal grants and loans as the administration reviews existing programs.

Scope and Rationale

The freeze encompasses a wide array of federal financial assistance programs, including grants to state and local governments, educational institutions, and non-profit organizations. Essential services such as Social Security benefits and food aid are exempt from this pause. The administration asserts that this measure is necessary to ensure that federal spending aligns with the president’s executive actions and to promote responsible fiscal management.

White House attempts to clarify affected programs

It’s not clear exactly which programs will be halted, but OMB also sent a document to agencies asking for details on more than 2,600 programs, including school meals for low-income students, U.S. Agency for International Development foreign assistance, mine inspections, the WIC nutrition program for pregnant women and infants and a reintegration program for homeless veterans.

In addition to information about the disbursement of funds, the OMB spreadsheet had questions more specific to the Trump agenda, including:

Does this program provide funding that is implicated by the directive to end discriminatory programs, including illegal DEI and “diversity, equity, inclusion, and accessibility” (DEIA) mandates, policies, programs, preferences, and activities, under whatever name they appear, or other directives in the same EO, including those related to “environmental justice” programs or “equity-related” grants?
Does this program promote gender ideology?
Does this program promote or support in any way abortion or other related activities identified in the Hyde Amendment?

OMB asked for the information to be submitted by Feb. 7.

A senior administration official said the action is not a freeze on funding but a pause to give agencies time to review whether federal grants and loans are in compliance with recent executive actions taken by Trump. The official said OMB has already been working with agencies to exempt certain programs and that the pause would take effect at 5 p.m. Tuesday.

“It means no more funding for the green new scam that has cost American taxpayers tens of billions of dollars,” White House press secretary Karoline Leavitt said Tuesday at her first news briefing. “It means no more funding for transgenderism and wokeness across our federal bureaucracy and agencies.”

Funding for programs that provide direct assistance to Americans would be excluded from the pause and exempt from the review process, the senior administration official said. Those programs include Medicaid, food stamps, small business assistance, Head Start, rental assistance and federal Pell Grants for college students, according to a memo sent out Tuesday afternoon by OMB.

“If you are receiving individual assistance from the federal government, you will still continue to receive that,” said Leavitt. “However, it is the responsibility of this president and this administration to be good stewards of taxpayer dollars.”

When asked specifically about Medicaid, which provides health insurance to more than 70 million low-income and disabled Americans, Leavitt said she would get reporters a full list from OMB.

The OMB memo sent out Monday evening said the funding review would be related to “activities that may be implicated by the executive orders, including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal.”

Nonprofits unable to access funds

The memo set off a flurry of confusion and panic Tuesday among nonprofit organizations, which said they were unable to access federal government systems used to withdraw previously awarded federal funds.

“While we understand that this is an evolving story, this disruption, at best, will slow down Head Start agencies’ ability to pay hundreds of thousands of staff, contractors, and small businesses who support Head Start operations in every corner of the country,” Yasmina Vinci, executive director of the National Head Start Association, said. “At worst, this means that hundreds of thousands of families will not be able to depend on the critical services and likely will not be able to work.”

A message at the top of one website used by health care and early childhood education providers to access their federal funds warned of possible payment delays.

“Due to Executive Orders regarding potentially unallowable grant payments, PMS is taking additional measures to process payments. Reviews of applicable programs and payments will result in delays and/or rejections of payments,” the message said.

Local housing organizations were also unsure if they would have the funding available to help pay rents due Feb. 1 for thousands of low-income households in subsidized housing across the country, said Ann Oliva, CEO of the National Alliance to End Homelessness. She said her organization has heard from several members that the system used to draw down funds to reimburse their housing expenses was unavailable on Tuesday.

“What we are hearing this morning is, honestly, a pretty good amount of panic by grantees,” Oliva said. “These programs exist in red states and blue states alike, and there are vulnerable people that are going to be impacted in many, many communities and in every state across the country.”

If those funds aren’t made available in the next several days, organizations will be unable to pay rents to landlords and some tenants could face eviction.

The fallout could also affect health programs, said Dr. Erin Sorrell, a senior scholar at the Johns Hopkins Center for Health Security. She said a halt in funding to the National Institutes of Health could affect ongoing clinical trials for critical infectious and chronic diseases.

“People travel across the country to participate in these trials, some lifesaving trials,” Sorrell said. “The pause doesn’t just impact the researcher, their work, their livelihoods; it impacts the patients themselves, potentially life-threatening impacts.”

Medicaid confusion

Medicaid payments appeared frozen Tuesday as access to online portals was blocked across the country.

The Medicaid websites manage the federal health funds used to help provide coverage to nearly 80 million people in the United States.

Leavitt confirmed Tuesday in a post that the portals were down but said no payments have been affected.

Nearly 80 million people in the United States are enrolled in Medicaid, a public health insurance program that covers people with low incomes, making it the largest federally funded health care program, according to government data.

The program is jointly funded by states and the federal government. States first cover the upfront cost and then are reimbursed by the federal government for part of that cost — at least 50%.

States are required to provide information to the federal government on how much they’re spending to get reimbursed, said Larry Levitt, executive vice president of health policy at KFF, a nonprofit group that researches health policy issues.

“If federal money for Medicaid doesn’t show up, states are left holding the bag, and then ultimately hospitals, nursing homes and doctors,” Levitt said.

Levitt said estimated Medicaid payments to states typically come on a monthly basis — although it can vary — meaning action needed to happen quickly before it could potentially affect providers and patients.”

If there were continuing uncertainty about the federal government’s paying its part of Medicaid and states’ not being able to pay their bills, doctors could very well start turning away patients, Levitt said.

Pushback to the OMB directive

A lawsuit was filed Tuesday against OMB in federal court in Washington, D.C., by the National Council of Nonprofits and the American Public Health Association, seeking a temporary restraining order to “maintain the status quo until the Court has an opportunity to more fully consider the illegality of OMB’s actions.”

The National Low Income Housing Coalition urged its members to call members of Congress to “push back against the Trump administration’s extreme order to withhold federal investments.”

“It’s super terribly written, and for that reason, it’s unclear exactly what it impacts, which is why you’re going to see absolute chaos today and the ensuing days, unless they further clarify it,” a former official in President Joe Biden’s administration said.

On Capitol Hill, lawmakers scrambled to figure out what the funding freeze would mean for their constituents.

“The scope of what you are ordering is breathtaking, unprecedented, and will have devastating consequences across the country,” the Democratic leaders of the House and the Senate appropriations committees — Rep. Rosa DeLauro, D-Conn., and Sen. Patty Murray, D-Wash. — wrote to OMB, going on to say that the pause is unconstitutional and unlawful.

At a news conference Tuesday morning, Murray said that the Senate Appropriations Committee had been trying to get in touch with the agencies to fully understand the impacts.

Senate Minority Leader Chuck Schumer, D-N.Y., told reporters Tuesday morning: “This is a dagger at the heart of the average American family — in red states, in blue states, in cities, in suburbs, in rural areas. It is just outrageous.”

A Republican operative noted that a broad effort to reorient the federal government’s mission has long been a goal of the party — but that Trump was taking it all on at once was notable.

“Some of this stuff has only been talked about at cocktail parties at the Heritage Foundation in jest,” the operative said. “And they’re actually doing it all.”

In an interview at the House Republicans’ issues conference at Trump National Doral Miami, House Appropriations Committee Chairman Tom Cole, R-Okla., defended Trump’s freeze on aid, arguing that it’s a way for Republicans to immediately stop spending they disagree with.

“I think they’re doing the right thing. They’re getting control of the situation,” he said. “There’s a lot of money moving out right at the end of the Biden administration. That’s, you know, pretty typical. So I think they want to get control of that and make sure nothing’s moving along that they don’t agree with. And they’re well within their prerogative to do that.”

Legal Challenges and Judicial Intervention

The sweeping nature of the freeze has prompted legal challenges. A federal judge temporarily blocked the suspension of federal funding for domestic and international aid programs, citing concerns over the administration’s authority to unilaterally halt congressionally approved funding. This judicial intervention underscores the tension between the executive branch’s policy objectives and legislative control over federal expenditures.

Political Reactions

The funding freeze has elicited strong reactions across the political spectrum. Democratic leaders have criticized the move as an overreach of executive power, arguing that it undermines the constitutional authority of Congress to control federal spending. They express concern that the freeze could disrupt essential services and programs that rely on federal funding. Conversely, the administration defends the action as a necessary step to review and realign federal expenditures with its policy goals.

Implications and Next Steps

The temporary nature of the judicial block means that the future of the funding freeze remains uncertain. The administration is expected to provide further clarification on the implementation of the freeze and its impact on various programs. Stakeholders, including state and local governments, educational institutions, and non-profits, are advised to monitor developments closely as the situation evolves.