Trump White House Rescinds Freeze on Federal Grants, Reversing Course

Federal Agency/Executive Branch Federal Litigation Office of Management and Budget (OMB)Opinions Policy White House

January 29, 2025

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(Washington Post) The budget office came under immense pressure over the impacts of a sudden pause in key government spending. -- The White House budget office on Wednesday rescinded an order freezing federal grants, according to a copy of a memo obtained by The Washington Post, after the administration’s move to halt spending earlier this week provoked a backlash.

In the memo distributed to federal agencies, Matthew J. Vaeth, acting director of the White House Office of Management and Budget, states that OMB memorandum M-25-13 “is rescinded.” That order, issued Monday, instructed federal agencies to “temporarily pause all activities related to obligations or disbursement of all federal financial assistance.”

The White House order freezing federal grants caused mass chaos and confusion across Washington, appearing to imperil government programs that fund schools, provide housing and ensure that low-income Americans have access to health care. States reported issues accessing funds under Medicaid, and even as of Wednesday, public housing authorities reported being locked out of their funding portal.

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The Trump administration withdrew the order a day after a federal judge in Washington temporarily halted its implementation until Feb. 3, allowing public health advocates, nonprofits and businesses — represented by the left-leaning group Democracy Forward — more time to challenge the directive’s legality. Separately, roughly two dozen state attorneys general filed their own lawsuit against the administration on Tuesday, arguing that the pause in federal spending has harmed their citizens.

Leavitt acknowledged that the initial budget office memo has been suspended but said the administration’s broader efforts to block spending it opposes remain in effect. Other executive orders approved by President Donald Trump but not rescinded — including a pause on foreign aid and on some clean energy funds approved by the Biden administration — appear to still be in effect, budget experts said.

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“This action should effectively end the court case and allow the government to focus on enforcing the President’s orders on controlling federal spending. In the coming weeks and months, more executive action will continue to end the egregious waste of federal funding.”

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The rescinded order reflects what is likely to be just one of many initial battles over the Trump administration’s attempts to assert far more control over the federal budget. Trump and Russell Vought, his nominee to head the OMB, have maintained that the executive branch should have far more discretion to cancel federal spending without congressional approval.

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Vought and Mark Paoletta, tapped as an attorney for the White House budget office, have said the administration will challenge a 1974 budget law that limits presidential authority to cancel spending. Paoletta has asserted that the law is “unconstitutional,” arguing it reverses presidential authority to cancel federal funds that dates back to the nation’s founding. READ MORE

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Excerpt from Reuters: The decision to rescind the Office of Management and Budget's Monday directive came shortly before a federal judge in Rhode Island was set to consider a request by 22 mostly Democratic-led states and the District of Columbia for a temporary restraining order blocking a policy that they said could have a devastating effect on their budgets.

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Such an order from Chief U.S. District Judge John McConnell in Providence could have been longer in duration than the pause U.S. District Judge Loren AliKhan imposed on Tuesday in a separate case brought by a group of nonprofits in Washington, D.C. federal court.

AliKhan paused the measure until Monday, when another hearing is scheduled.

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In suing to block the measure, the 23 attorneys general argued the policy was unconstitutional because Congress had already determined how the funds would be spent. They also said it would jeopardize disaster relief funds to help southern California rebuild from wildfires.

"The president does not get to decide which laws to enforce and for whom," New York state Attorney General Letitia James told reporters on Tuesday in announcing the suit. READ MORE

Excerpt from CNN: President Donald Trump’s dramatic pause of federal grants and loans is queuing up a Supreme Court showdown over the Constitution that will test the court’s recently muscular commitment to curb executive power.

Although the 6-3 conservative court has often sided with Trump, most notably granting him sweeping immunity from prosecution in July, the justices have also been engaged in a yearslong project of limiting the president’s ability to exercise powers usually wielded by Congress. Former President Joe Biden was often on the losing end of those fights and now the question is whether the trend will continue under Trump.

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“There’s every reason to think that, unless this memo is quickly rescinded, the litigation it is going to provoke will get to the Supreme Court in one big hurry,” said Steve Vladeck, CNN Supreme Court analyst and professor at Georgetown University Law Center.

And while the conservative court has sometimes shown support for broad executive power, he said, “There’s a long, entrenched history rejecting presidential power in this space” in part because “it would effectively deprive the legislature of its single most important constitutional power.”

Just like birthright citizenship, another blockbuster test of conventional legal wisdom that’s now on a fast track for Supreme Court review, the Trump administration appears eager to have that fight in front of the nation’s highest court.

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Incoming Trump administration officials believe the nation’s history with executive spending power is on their side. They also believe that the 1974 Impoundment Control Act, which lays out strict rules for how a president can pause spending, is unconstitutional. That law effectively requires presidents to seek congressional approval before freezing funds that lawmakers have approved.

On a Supreme Court that increasingly looks to history to decide modern controversies, it is an argument that is targeted directly at the court’s conservative justices.

“For 200 years, presidents had the ability to spend less than an appropriation, if they could do it for less, and we have seen the extent to which this law has contributed to waste, fraud, and abuse,” Trump’s pick to lead the Office of Management and Budget, Russell Vought, recently told a Senate committee about the time before the 1974 law was enacted.

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The appropriations clause of the Constitution gives Congress the power to spend federal money from the treasury.

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Sometimes the court’s conservatives have aligned with Trump – notably in July, when a 6-3 majority shielded him from prosecution. But it has also twice brushed him aside this month. A narrow majority allowed Trump to be sentenced in his New York hush money case. And the court swatted away Trump’s plea to pause the controversial ban on TikTok, allowing that law to take effect and forcing the administration to announce it would not enforce it.

On a broad level, the Supreme Court has repeatedly limited attempts by the executive branch to act unilaterally or to use regulations and executive orders to fill in spaces left blank by Congress. In the most significant recent example of that, a 6-3 majority overturned a 1984 precedent that required courts to give deference to federal agencies on how to implement ambiguous provisions of law.

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Weeks earlier, in an unrelated case involving the Consumer Financial Protection Bureau, a 7-2 majority that included both conservative and liberal justices laid out a sweeping view of Congress’ power of the purse. That opinion, heavy on pre-colonial history, was written by Justice Clarence Thomas, a leader of the court’s conservative wing.

“By the time of the Constitutional Convention, the principle of legislative supremacy over fiscal matters engendered little debate and created no disagreement,” wrote Thomas, joined by Chief Justice John Roberts and two other conservatives. “It was uncontroversial that the powers to raise and disburse public money would reside in the legislative branch.”

The most on point Supreme Court precedent came in 1975. That case, Train v. City of New York, involved President Richard Nixon’s effort to block spending Congress intended to upgrade city sewers. A unanimous court ruled that the water pollution law did not give the Nixon administration power to spend less than Congress had appropriated.

Mark Paoletta, a conservative attorney who Trump has named to serve as general counsel at the Office of Management and Budget, has countered that the court’s opinion in Train was narrowly focused on one specific law and that it dodged the broader constitutional questions involved about a president’s power to pause spending.

“The Supreme Court has not yet had occasion to squarely confront the substantive impoundment provisions of the ICA or the impoundment authority more generally,” Paoletta wrote last year.

But Andrew Rudalevige, a professor of government at Bowdoin College who has closely studied the issue, suggested the Supreme Court’s decision to avoid delving into the deeper constitutional questions in that case likely suggests the justices at the time felt they didn’t need to – because it was already settled.

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If the Trump administration attempts to submit “rescission” requests that could be reviewed by Congress under the 1974 law, he said, it might avoid the constitutional confrontation altogether. READ MORE

Excerpt from BBC: The new letter issued on Wednesday states "OMB Memorandum M-25-13 is rescinded."

It is unclear what prompted the apparent U-turn.

In a statement, White House Press Secretary Karoline Leavitt said the administration was still pursuing a freeze.

"This is NOT a rescission of the federal funding freeze. It is simply a rescission of the OMB memo," she said. "Why? To end any confusion created by the court's injunction. The President's EO's on federal funding remain in full force and effect, and will be rigorously implemented."

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"What they're basically doing is being lawless - to hurt families, to help their billionaire friends," Senate Democratic Minority Leader Chuck Schumer told reporters after the order was rescinded.

He added that Republicans will continue to attempt to block future funding, and were only stopped this time due to an "outcry" from the public.

"I don't think this would have happened, except for the outcry throughout America. And we in the Senate are working with our constituents to show that outcry. We're going to keep fighting," he added.

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On Tuesday, Leavitt had said the halt in funding would allow governments to cut back spending for "woke" gender issues and diversity programmes.

Several states had reported issues accessing funds through Medicaid, a government health insurance programme for low-income people. The White House later said the programme would not be affected.

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Although the order has been blocked for now, the White House believes that the original memo served its purpose by prompting federal agencies to take steps to comply with the president's executive order. READ MORE