UPDATE: Jan. 29, 2025: The White House budget office on Wednesday canceled the order freezing federal grants and loans following massive backlash over the proposal’s potential to upend funding for a variety of critical programs in housing, education and healthcare.
A memo distributed to federal agencies states that the Office of Management and Budget’s Monday order to pause federal assistance “is rescinded.”
Dive Brief:
- A Trump administration pause on financial assistance programs has agriculture groups scrambling to understand what it means for farmers who depend on the billions of dollars in federal funding from a number of key programs.
- The Office of Management and Budget announced a spending freeze that affects a variety of government funding programs for things like foreign aid and educational grants. The office clarified that aid to farmers and funding for the Supplemental Nutrition Assistance Program would continue uninterrupted.
- Trump’s order sets up a legal challenge on the scope of a president’s authority to refuse disbursing funds Congress has appropriated. A federal judge on Tuesday temporarily halted the spending pause in response to a lawsuit brought by four nonprofits, which will be reviewed by a court next week.
Dive Insight:
The OMB memo to agency and department heads said that the freeze of grants and loans, effective Jan. 28, is designed to review expenditures to ensure they align with the administration’s priorities. That “comprehensive analysis” is designed to check compliance of the financial assistance with Trump’s recent executive orders.
“The use of Federal resources to advance Marxist equity, transgenderism, and green new deal social engineering policies is a waste of taxpayer dollars that does not improve the day-to-day lives of those we serve,” according to a memo from Matthew Vaeth, the acting director of the Office of Management and Budget.
While the freeze does not impact aid to individuals, it’s unclear how it would affect money that flows to states, nonprofits or other groups. The OMB released a list of what it intends to examine as part of the executive order, including dozens of farm programs.
The list of programs set to be examined includes a number of initiatives to encourage sustainable agriculture practices and expand export markets for farms. The OMB also listed a number of indemnity programs that reimburse producers for significant losses following natural disasters or other events.
The U.S. Department of Agriculture did not respond to a request for comment on which programs would be impacted by a potential spending freeze.
The aid freeze is an unconstitutional exercise that will disrupt families and U.S. national security, the ranking Democratic members of the House and Senate appropriations committees wrote in a letter to Vaeth, demanding he reverse course on the aid freeze.
“This Administration’s actions will have far-reaching consequences for nearly all federal programs and activities, putting the financial security of our families, our national security, and the success of our country at risk,” Rep. Rosa DeLauro, D-Conn., and Sen. Murray wrote Monday.
“Congress approved these investments and they are not optional, they are the law,” Chuck Schumer, the Senate minority leader, wrote Monday night on Facebook. “These grants help communities in red states and blue states and support families, help parents raise kids, and lead to stronger communities.”
Trump used impoundment during his first term and the administration argues that it may be used to limit funding for certain programs that don’t align with the administration’s goals, Crowell & Moring wrote in a client alert.
“If the Trump Administration does attempt to impound funds, parties affected by the impoundment are likely to contest the Administration’s authority to do so in the courts, which will lead to further uncertainty for infrastructure projects impacted by the issue,” the firm wrote.
Steve Vladeck, a professor at Georgetown University Law Center, predicts that an impoundment case may be the first action of Trump’s second term to reach the Supreme Court within the next few weeks if the administration doesn’t rescind the memo. “If presidents can impound appropriated funds at any time and for any reason, then there’s not much point to having a legislature,” he wrote Monday on his One First newsletter.
To play this out, there will be literally dozens of lawsuits challenging what OMB is doing on the ground that it violates the Impoundment Control Act of 1974. Trump’s DOJ will argue that the Act is unconstitutional. And this will quickly get to #SCOTUS, where it will be the biggest case of the term.
— Steve Vladeck (@stevevladeck.bsky.social) January 27, 2025 at 8:53 PM
The 1974 law created a procedure for the president to request Congress consider the administration’s reason for not spending funds for as long as 45 days after such a request is made. The law exempts certain funds from the impoundment procedure, and Trump has not made any rescission request, Vladeck noted.
That reading of presidential impoundment authority would also supersede legislative veto power and constitute an effective “superveto” of all appropriations measures, according to the opinion, written by Charles Cooper, a former assistant attorney general now in private practice. “The inconsistency between such an impoundment power and the textual limits on the veto power further suggests that no inherent impoundment power can be discovered in the Constitution.”
In a 1988 opinion, the Justice Department Office of Legal Counsel concluded that “arguments in favor of an inherent impoundment power, carried to their logical conclusion, would render congressional directions to spend merely advisory.”