It was a profoundly confusing Tuesday in Washington.
After ostensibly ordering federal agencies to freeze vast swaths of government spending, the White House partially walked back its move in the afternoon, claiming it had only meant to pause a more narrow set of operations for review. By evening, a federal judge had blocked the funding halt from officially going into effect.
At the same time, some spending for programs such as Medicaid and Head Start appeared to be at least temporarily clogged, as lawmakers, state officials, and reporters scrambled to understand what exactly was going on.
The good news is that, at least for now, most Americans do not seem to be directly impacted by the circus. Student loan and health insurance payments are still flowing, and may not be impacted at all, despite initial fears that they might be. Here’s what to know for now.
On Monday night, the White House Office of Management and Budget circulated a memo calling on agencies to conduct an immediate review of “all Federal financial assistance programs,” amounting to $3 trillion in federal grants and loans, to make sure they were “consistent” with President Trump’s recent blizzard of executive orders on issues such as foreign aid, immigration, climate and energy policy, ending diversity, equity, and inclusion programs, and “gender ideology.”
The letter also directed agencies to temporarily pause payments for programs that might be affected by Trump’s orders. Critically, it did not include a list of specific programs to halt, leading to widespread questions about whether schemes like Medicaid, federal student lending, or the Supplemental Nutrition Assistance Program were about to be put on ice — since all of them fit the technical definition of “federal assistance.”
The memo did state in a footnote that Medicare, Social Security, and “assistance received directly by individuals” would not be affected. But because programs like Medicaid and student loans deliver benefits through middlemen like state governments and colleges, their fate remained unclear.
By the afternoon, the White House had issued a clarification, in the form of a Q&A, stating that officials were not ordering an “across the board” pause on federal assistance and that the freeze would be “expressly limited to programs, projects, and activities implicated by the President’s Executive Orders, such as ending DEI, the green new deal, and funding nongovernmental organizations that undermine the national interest.”
Spending for programs such as Medicaid and SNAP, as well as supports like Head Start, rental assistance, and Pell Grants would also continue, it added. (Separately, a Department of Education official said student loans were unaffected).
However, reports quickly began trickling in that state health officials had been locked out of the federal website that allows them to manage their federal Medicaid reimbursements.
“My staff has confirmed reports that Medicaid portals are down in all 50 states following last night’s federal funding freeze,” Oregon Sen. Ron Wyden posted to X. “This is a blatant attempt to rip away health insurance from millions of Americans overnight and will get people killed.”
White House Press Secretary Karoline Leavitt later wrote that the administration was aware of the problem, was working to get the Medicaid site back working, but that payments weren’t being affected. At the same time, other grant programs appeared to encounter trouble; Illinois Sen. Dick Durbin posted that some Head Start programs had already laid off workers because they could not access their federal funding; Pennsylvania Sen. John Fetterman wrote that his office had “just received calls from over a dozen PA organizations” serving low-income families that could not withdraw their money.
White House press secretary Karoline Leavitt speaks during a briefing at the White House on Tuesday in Washington. (AP Photo/Evan Vucci) · ASSOCIATED PRESS
On Tuesday evening, a federal trial judge in Washington, D.C., blocked the spending freeze from going into effect. But in the meantime, the entire befuddling sequence of events seemed to preview a broader political and legal showdown.
During his presidential campaign, Trump promised that he would attempt to cut the federal budget by executive fiat, using a maneuver known as “impoundment” to unilaterally withhold money for certain programs. Congress tried to effectively bar presidents from attempting such actions when it passed the Impoundment Control Act of 1974. But Trump vowed to challenge the law’s constitutionality, potentially setting up a mammoth legal struggle over control of government spending.
In its Q&A Tuesday, the White House said it was not attempting an impoundment. Instead, the pause was merely meant to “give agencies time to ensure that financial assistance conforms to the policies set out in the President’s Executive Orders, to the extent permitted by law.”
But critics argue that even that would be unlawful, and that Trump appears to be testing the limits of his power.
“It is not legal to pause funding for policy disagreements,” Michael Linden, a former OMB official in the Biden administration, told Yahoo Finance.
Jordan Weissmann is a senior reporter at Yahoo Finance.
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