Trump’s federal funding freeze causes dismay, confusion
Order likely to affect early education and antipoverty programmes, housing assistance and disaster relief
28 January 2025 - 22:01
bySteve Holland and Andy Sullivan
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A woman walks past an apartment entrance in New York, the US, January 28 2025. Picture: REUTERS/SHANNON STAPLETON
Washington — The Trump administration’s order to pause all federal grants and loans starting on Tuesday triggered confusion, with Democratic legislators saying states were having trouble accessing Medicaid funds, the massive programme that provides care for low-income Americans.
US senator Ron Wyden, the top finance committee Democrat, said his office had confirmed that the portal doctors use to secure payments from Medicaid had been deactivated in all 50 states. Medicaid, which covers about 70-million people, is jointly funded by both the states and the federal government, and each state runs their own programme.
White House press secretary Karoline Leavitt said she could not say whether the programme had been frozen, telling reporters at her first briefing since Trump took office on January 20, “I'll get back to you.”
The order was not limited to the $618bn Medicaid programme, also threatening to disrupt education, antipoverty programme, housing assistance, disaster relief and a host of other initiatives that depend on trillions of federal dollars.
The freeze followed the Republican president’s suspension of foreign aid last week, a move that began cutting off the supply of life-saving medicines on Tuesday to countries around the world that depend on US development assistance.
The Office of Management and Budget, which oversees the federal budget, said in a memo that grants and loans would be put on hold while the administration ensures they are aligned with the Republican president's priorities, including executive orders he signed ending diversity, equity and inclusion efforts.
The memo said Tuesday’s freeze included any money intended “for foreign aid” and for “nongovernmental organisations,” among other categories.
The White House said the pause would not impact Social Security or Medicare payments to the elderly or “assistance provided directly to individuals”, such as some food aid and welfare programmes for the poor.
In a second memo released on Tuesday, OMB officials said funds for Medicaid, Head Start, farmers, small businesses and rental assistance would continue without interruption.
But the order was creating chaos and confusion among an array of nonprofits as well as state and local officials on Tuesday, even before it was to take effect at 10pm GMT.
In Connecticut, the reimbursement system for Head Start — a government programme that provides early education and other benefits to low-income families — was shut down, preventing preschools from paying staff, Democratic senator Chris Murphy said on X.
Leavitt also would not specifically say whether Head Start or disaster aid would be frozen at the Tuesday briefing.
Four groups representing nonprofits, public health professionals and small businesses filed a lawsuit on Tuesday challenging the directive, saying it “will have a devastating impact on hundreds of thousands of grant recipients”.
Lawsuits
Democratic state attorneys-general were also preparing to sue the Trump administration.
The OMB order is the latest directive in the Trump administration's campaign to dramatically reshape the federal government, the nation's largest employer.
In a blizzard of executive actions, Trump has shuttered all diversity programmes, imposed a hiring freeze, sent national security officials home and sought to strip away job protections from thousands of civil servants.
As part of last week’s 90-day foreign aid suspension, the administration moved on Tuesday to stop the distribution of drugs for HIV/Aids, malaria and tuberculosis, as well as medical supplies for newborn babies, in countries supported by the USAID. The US is the largest single donor of aid globally, disbursing $72bn in 2023.
Agencies have until February 10 to submit detailed information on any programmes subject to the suspension.
The federal government provides money to a broad swathe of nonprofits, which reacted with dismay and confusion.
“From pausing research on cures for childhood cancer to halting food assistance, safety from domestic violence, and closing suicide hotlines, the impact of even a short pause in funding could be devastating and cost lives,” Diane Yentel, president and CEO of the National Council of Nonprofits, one of the four groups that sued on Tuesday, said in a statement.
Trump’s order could also cause turmoil in state and local governments that depend on federal aid for everything from highway construction to school lunches and foster care.
The memo did not appear to exempt disaster aid to areas such as Los Angeles and western North Carolina that have been devastated by natural disasters. Trump pledged government support when he visited both places last week.
The memo asserted the federal government spent nearly $10-trillion in fiscal year 2024, with more than $3-trillion devoted to financial assistance such as grants and loans. But those figures appeared to include money authorised by Congress but not actually spent — the CBO estimated government spending in 2024 at a much lower $6.75-trillion.
Trump's Republican allies have been pushing for dramatic spending cuts, though he has promised to spare Social Security and Medicare, which make up roughly one-third of the budget. Another 11% of the budget goes toward government interest payments, which cannot be touched without triggering a default that would rock the world economy.
‘Lawless move’
Democrats immediately criticised the spending freeze as unlawful and dangerous.
Senate Democratic Leader Chuck Schumer said the administration did not have the authority to prevent spending approved by Congress.
“This decision is lawless, destructive, cruel,” Schumer said in a speech to the Senate. “It’s American families that are going to suffer most.”
The US constitution gives Congress control over spending matters, but Trump said during his campaign that he believes the president has the power to withhold money for programmes he dislikes. His nominee for White House budget director, Russell Vought, who has not yet been confirmed by the Senate, headed a think-tank that has argued Congress cannot require a president to spend money.
US representative Tom Emmer, the number three Republican in the House of Representatives, said Trump was simply following through on his campaign promises.
“You need to understand he was elected to shake up the status quo. That is what he's going to do. It’s not going to be business as usual,” Emmer told reporters at a Republican policy retreat in Miami.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Trump’s federal funding freeze causes dismay, confusion
Order likely to affect early education and antipoverty programmes, housing assistance and disaster relief
Washington — The Trump administration’s order to pause all federal grants and loans starting on Tuesday triggered confusion, with Democratic legislators saying states were having trouble accessing Medicaid funds, the massive programme that provides care for low-income Americans.
US senator Ron Wyden, the top finance committee Democrat, said his office had confirmed that the portal doctors use to secure payments from Medicaid had been deactivated in all 50 states. Medicaid, which covers about 70-million people, is jointly funded by both the states and the federal government, and each state runs their own programme.
White House press secretary Karoline Leavitt said she could not say whether the programme had been frozen, telling reporters at her first briefing since Trump took office on January 20, “I'll get back to you.”
Trump administration tells funded SA HIV/Aids partners to stop work
The order was not limited to the $618bn Medicaid programme, also threatening to disrupt education, antipoverty programme, housing assistance, disaster relief and a host of other initiatives that depend on trillions of federal dollars.
The freeze followed the Republican president’s suspension of foreign aid last week, a move that began cutting off the supply of life-saving medicines on Tuesday to countries around the world that depend on US development assistance.
The Office of Management and Budget, which oversees the federal budget, said in a memo that grants and loans would be put on hold while the administration ensures they are aligned with the Republican president's priorities, including executive orders he signed ending diversity, equity and inclusion efforts.
The memo said Tuesday’s freeze included any money intended “for foreign aid” and for “nongovernmental organisations,” among other categories.
The White House said the pause would not impact Social Security or Medicare payments to the elderly or “assistance provided directly to individuals”, such as some food aid and welfare programmes for the poor.
In a second memo released on Tuesday, OMB officials said funds for Medicaid, Head Start, farmers, small businesses and rental assistance would continue without interruption.
But the order was creating chaos and confusion among an array of nonprofits as well as state and local officials on Tuesday, even before it was to take effect at 10pm GMT.
In Connecticut, the reimbursement system for Head Start — a government programme that provides early education and other benefits to low-income families — was shut down, preventing preschools from paying staff, Democratic senator Chris Murphy said on X.
Leavitt also would not specifically say whether Head Start or disaster aid would be frozen at the Tuesday briefing.
Four groups representing nonprofits, public health professionals and small businesses filed a lawsuit on Tuesday challenging the directive, saying it “will have a devastating impact on hundreds of thousands of grant recipients”.
Lawsuits
Democratic state attorneys-general were also preparing to sue the Trump administration.
The OMB order is the latest directive in the Trump administration's campaign to dramatically reshape the federal government, the nation's largest employer.
In a blizzard of executive actions, Trump has shuttered all diversity programmes, imposed a hiring freeze, sent national security officials home and sought to strip away job protections from thousands of civil servants.
As part of last week’s 90-day foreign aid suspension, the administration moved on Tuesday to stop the distribution of drugs for HIV/Aids, malaria and tuberculosis, as well as medical supplies for newborn babies, in countries supported by the USAID. The US is the largest single donor of aid globally, disbursing $72bn in 2023.
Agencies have until February 10 to submit detailed information on any programmes subject to the suspension.
The federal government provides money to a broad swathe of nonprofits, which reacted with dismay and confusion.
“From pausing research on cures for childhood cancer to halting food assistance, safety from domestic violence, and closing suicide hotlines, the impact of even a short pause in funding could be devastating and cost lives,” Diane Yentel, president and CEO of the National Council of Nonprofits, one of the four groups that sued on Tuesday, said in a statement.
Trump’s order could also cause turmoil in state and local governments that depend on federal aid for everything from highway construction to school lunches and foster care.
The memo did not appear to exempt disaster aid to areas such as Los Angeles and western North Carolina that have been devastated by natural disasters. Trump pledged government support when he visited both places last week.
The memo asserted the federal government spent nearly $10-trillion in fiscal year 2024, with more than $3-trillion devoted to financial assistance such as grants and loans. But those figures appeared to include money authorised by Congress but not actually spent — the CBO estimated government spending in 2024 at a much lower $6.75-trillion.
Trump's Republican allies have been pushing for dramatic spending cuts, though he has promised to spare Social Security and Medicare, which make up roughly one-third of the budget. Another 11% of the budget goes toward government interest payments, which cannot be touched without triggering a default that would rock the world economy.
‘Lawless move’
Democrats immediately criticised the spending freeze as unlawful and dangerous.
Senate Democratic Leader Chuck Schumer said the administration did not have the authority to prevent spending approved by Congress.
“This decision is lawless, destructive, cruel,” Schumer said in a speech to the Senate. “It’s American families that are going to suffer most.”
The US constitution gives Congress control over spending matters, but Trump said during his campaign that he believes the president has the power to withhold money for programmes he dislikes. His nominee for White House budget director, Russell Vought, who has not yet been confirmed by the Senate, headed a think-tank that has argued Congress cannot require a president to spend money.
US representative Tom Emmer, the number three Republican in the House of Representatives, said Trump was simply following through on his campaign promises.
“You need to understand he was elected to shake up the status quo. That is what he's going to do. It’s not going to be business as usual,” Emmer told reporters at a Republican policy retreat in Miami.
Reuters
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