‘chaos And Confusion’ Follow Trump's Order To Freeze Federal Dollars

The Trump administration’s sprawling, government-wide spending freeze sparked widespread frustration and confusion Tuesday — with tens of thousands of programs potentially in jeopardy and no clarity on what is coming under the knife.

The order could produce particular pain for the states, local governments and companies counting on many billions of dollars in grants and loans already agreed to by federal agencies, while disrupting programs that benefit households throughout the country. Democrats warn that potential targets include the country’s most expensive transportation initiative — the $16 billion Gateway rail and tunnel project connecting New York and New Jersey — as well as myriad programs to prevent fire, combat drought and research the causes of disease.

People in the mortgage, tech, broadband and health industries also sounded the alarm.

More fundamentally, the freeze threatens to permanently alter the balance of power between the White House and the Capitol — with the Office of Management and Budget declaring in a memo Monday that “financial assistance should be dedicated to advancing Administration priorities.” And some recipients may not know for a week or longer if their promised dollars from Washington were getting the ax.

Those alarms remained even after a federal judge temporarily blocked the freeze late Tuesday.

“It may be depicted as temporary but it’s going to do permanent harm,” Sen. Richard Blumenthal said earlier in the day about the spending halt. “No one can plan when their funding is on the chopping block.”

The Connecticut Democrat said the lack of clarity is “creating chaos and confusion” in every aspect of grants and funding. “[I am hearing from] addiction programs, veterans programs, road building, just across the board. Nobody knows what will be funded,” he said.

Even some Republicans expressed confusion.

“We need to understand what the memo means, and then we'll know if it's overbroad or not, but it appears that way,” Sen. John Boozman (R-Ark.) told POLITICO, adding that Republicans are communicating their concerns to the White House.

Boozman said he is hearing from constituents about the uncertainty and need for clarification, because the memo is “pretty broadly written.”

North Dakota Republican Sen. Kevin Cramer predicted the action will surely be challenged in court — which itself would provide a major test for President Donald Trump’s powers. Cramer acknowledged Tuesday that an all-encompassing freeze on grant programs and appropriations “can't long endure.”

“He's testing his own authority,” Cramer said. “He's getting some guidance that presidents have more authority than they've traditionally used. Some presidents have used a lot of it. Some have used less.”

The White House attempted to dampen the uproar on Tuesday, clarifying that the pause is not “across-the-board” but limited to the sort of “DEI,” “green new deal” and other programs that Trump had targeted in a series of executive actions last week. Those included an order issued hours after Trump’s inauguration in which he told agencies to pause disbursements under former President Joe Biden’s infrastructure and climate laws.

"This is not a blanket pause on federal assistance and grant programs from the Trump administration," White House press secretary Karoline Leavitt told reporters at a briefing Tuesday. She said it won’t affect assistance that goes directly to individuals, including Social Security, welfare, food stamps and Medicare benefits.

Medicaid funding to states was also frozen Tuesday due to a nationwide outage in government payment processing systems. Congressional Democrats said Trump’s actions pausing federal spending had caused the problem, but the White House denied that was the case.

“We have confirmed no payments have been affected — they are still being processed and sent,” Leavitt posted on X.

OMB’s Monday memo ordered a pause on “all federal financial assistance” that could be targeted under Trump’s earlier executive actions. The administration followed up on Tuesday with a second demand to federal agencies outlining specific programs that agencies must examine.

That left thousands of programs and projects up in the air Tuesday without clear directives from agencies, ranging from large-scale infrastructure and energy projects to environmental and tribal programs and scientific research and health services.

Trump has telegraphed his aim to scrutinize Biden’s spending priorities, including saying he would “rescind” unspent funds from the former president’s landmark climate law.

And he’s repeatedly contended that as president he has the authority to withhold congressionally approved spending that he considers wasteful — a practice known as impoundment that Congress prohibited in a 1974 law amid a fight with President Richard Nixon. The actions taken this week could open the door to an eventual court ruling granting that power.

This week’s actions also raise the prospect that Trump is attempting to interrupt spending that agencies have contractually obligated. Besides being potentially illegal, such a move would imperil many of the efforts that Biden’s aides took to attempt to Trump-proof their hundreds of billions of dollars in energy, climate and infrastructure spending.

Cramer said he expects the administration will offer more details about the spending it objects to.

“Not all spending is created equal, and they'll go through it, probably item by item, line by line, budget by budget,” the GOP senator said. “Who knows how they'll do it? But for now, it's a pretty major test of separation of powers.”

Meanwhile, Democratic Minnesota Sen. Tina Smith said, she and many of her constituents are at a loss of what the White House is doing.

“Who the hell knows what it means right now? It’s up to them to clarify it,” she said. She added: “We’ve been getting a huge number of calls into my office: Doctors, federal workers, farmers and others who are saying, ‘What’s going to happen, I’m scared, I don’t know what to do.’”

Officials in the previous administration said they expect Trump’s actions to play out in court — but that itself could stall or complicate pending dollars and programs.

"The Trump Administration's steps to freeze disbursement for signed award agreements is unprecedented, illegal, and wasteful,” said Zealan Hoover, a former senior official in Biden’s Environmental Protection Agency, in an email.

Hoover said EPA alone "has funded over 38,000 grants in the past 8 years that draw down on a regular basis (e.g., weekly) to meet their ongoing needs."

“While I have full confidence that the courts will quickly order the federal government to uphold its legal obligations to pay its grantees, any work stoppages that result in the interim will drive up costs and delay the delivery of new infrastructure, cleaner air and water, and other public services across the country," Hoover said.

The OMB’s commands went out to a federal workforce that is already on edge because of Trump’s efforts to lessen some senior employees’ job security, while putting some workers on leave and outright firing others. That could cause some employees to err on the side of holding back any spending that could conceivably fall on the White House’s hit list.

One person familiar with actions at the Energy Department said staff there are “stopping everything” to evaluate programs, including preparing to defend projects in their portfolios.

“There just hasn't been really clear guidance, and it's better just to be more cautious than not,” said the person, who was not authorized to speak publicly.

The person added that small companies or startups that are getting federal dollars are potentially most at risk, as they rely on the government money to meet payroll and other key milestones.

Already, the uncertainty of the pause is forcing some grant recipients, especially small nonprofits, to consider drastic measures as they remain unsure whether they can rely on long-finalized grants. Some states have already been locked out of federal funding disbursals for some EPA programs, said Sam Ricketts, co-founder of S2 Strategies, a consulting firm that works with states on clean energy and climate issues.

Jennifer Szaro, president and CEO of the Florida-based Association of Energy Services Professionals, which provides workforce training for the energy industry, said her organization may be forced to lay off staff if it cannot continue drawing from a $700,000 grant it received from the Energy Department.

“As a small 501c3 with an annual budget of roughly $3 million, I cannot simply absorb this,” she said in an email. “We have contracts in place with our subcontractors and we have a legal obligation to honor them regardless of what is happening with the federal government.”

Jeff Allen, the executive director of Forth Mobility, a nonprofit based in Portland, Oregon, that received a $1.2 million grant for its work on electric mobility projects, said organizations such as his cannot wait months for a pause or a lawsuit to wind its way through the courts.

“We can’t carry the federal government's accounts payable for 90 days,” Allen said.

Forth’s grant is to develop and test models for providing individuals with low-interest loans to buy electric vehicles.

The freeze has also set off a scramble in the mortgage industry as lobbyists seek clarity on which programs are included and has raised questions about microchip, innovation, broadband and artificial intelligence spending programs across agencies. “There is widespread panic in the housing world right now,” said a mortgage industry leader who was granted anonymity so they could frankly discuss the fallout.

St. John’s Community Health, a network of community health centers in Southern California, has had nearly $18 million in federal funding frozen, the group’s president and CEO, Jim Mangia, told POLITICO.

“We’re doing the best we can to continue services,” he said in a text message. “But yes, if this freeze is permanent there will be substantial cuts.”

Elsewhere, Rutgers University in New Jersey issued a campus-wide advisory voicing uncertainty about the effects the directive would have on research and teaching activities, writing that federal funding makes up a “substantial part of our university’s budget.” Still, the university assured students on federal financial aid they would be able to have an “uninterrupted academic journey” and encouraged researchers to continue grant-sponsored work unless their grant specialist explicitly communicated otherwise.

The Biden administration in its final months attempted to get as much money out the door for its sprawling infrastructure, technology and energy projects, in part to protect it from potential rollback from the new administration.

But the sweeping nature of the order and the uncertainty it’s brought has been disruptive, experts and recipients told POLITICO. And Democrats quickly pounced on the confusion Tuesday — including calling to postpone committee action on Russ Vought, the president's pick for White House budget director.

“Which am I most outraged about? Am I more outraged about the Head Start program and the kids that can get locked out, or am I more outraged about the hospitals — especially rural hospitals who can see their cash flow disrupted?” said Sen. John Hickenlooper (D-Colo.). “It’s a pretty hard list to choose from. They are all essential.”

Sen. Angus King, an Independent from Maine who caucuses with Democrats, said he has heard from people concerned about agriculture grants for small farmers, Defense Department grants for small businesses and veterans’ program grants for suicide prevention.

“I am shocked any one in the administration would advise the president this is constitutional or advisable,” he said. “This should be a bipartisan response because this is an institutional issue, not a political issue. If this precedent is allowed to stand it will be they [Republicans] who will regret it two years from now, four years from now.”

Defenders of the action said a pause on spending is traditional practice for any new administration to evaluate what’s going out the door.

“Listen, we're going to evaluate everything in our country, because if we don't cut spending, we're not going to have a country,” Sen. Tommy Tuberville (R-Ala.) said Tuesday. “How better way to do it than look at every program?”

Bill Hoagland, a senior vice president at the Bipartisan Policy Center and a former GOP staffer on Senate Budget, said he read the OMB memo as an initial step that could lead to deferral of spending or requests to Congress to rescind programs.

Hoagland noted that the memo specifies that agencies temporarily pause obligating and disbursing money "to the extent permissible under applicable law" — a potential reprieve for some entities parsing the language to see if their projects will be ensnared.

But Kennedy Nickerson, vice president of energy at the investment research firm Capstone and a former Energy Department loan office staffer, noted that particular risks exist for projects with phased funding that require administrative sign-off.

“If the Trump administration doesn't believe that those projects align with the administration's policy priorities, they could in theory use those reviews to halt any future spending,” she said.

At least one agency — the Energy Department — has informed funding recipients that it will modify existing and signed contracts, according to a Monday memo obtained by POLITICO.

Sara Wilson, the acting head of contracting activity for DOE’s Office of Energy Efficiency and Renewable Energy, ordered recipients to immediately cease all department-funded work “involving or relating to” diversity, equity and inclusion, as well as community benefits plans and initiatives covered by the Biden administration’s Justice40 program to provide benefits to disadvantaged communities.

“Costs incurred after the date of this letter will not be reimbursed,” Wilson wrote. “Recipients who have DEI and CBP activities in their awards will be contacted by their Grants Officer to initiate award modifications consistent with this Order.”

A DOE spokesperson said the department is “conducting a department-wide review, which includes funding such as grants and loans, to ensure all activities are consistent with President Trump’s executive orders and priorities.”

Ry Rivard, Eden Teshome, Katy O’Donnell, Jennifer Scholtes, Robert King and Kelly Hooper, Marcia Brown and Ben Lefebvre contributed to this report.