WASHINGTON, January 28 (Reuters) President Donald Trump's White House has put a halt to all government grants and loans beginning Tuesday, a broad decision that may disrupt education, health care and food programs, housing aid, disaster relief, and a slew of other initiatives that rely on trillions of dollars in federal funding.
The freeze came after Trump suspended foreign aid last week, shutting off the supply of crucial drugs to countries throughout the world that rely on US development support.
The Office of Management and Budget, which oversees the federal budget, said in a memo that grants and loans would be paused until the administration ensured they were aligned with the Republican president's priorities, including executive orders he signed that ended diversity, equity, and inclusion efforts.
The message stated that Tuesday's freeze encompassed any funds meant for "foreign aid" and "nongovernmental organizations," among other things.
The White House stated that the halt would not affect Social Security or Medicare payments, or "assistance provided directly to individuals." This would probably protect disability payments and the SNAP food program for the poor, but it remained unclear if health care programs for veterans and low-income people would be affected.
The OMB memo is the most recent direction in the Trump administration's attempt to drastically reorganize the federal government, the country's largest employer, since taking office on January 20.
In a flurry of executive orders, the new president has shut down all diversity initiatives, placed a hiring freeze, sent national security personnel home, and attempted to revoke job protections from thousands of federal servants.
As part of last week's 90-day foreign aid suspension, the administration announced on Tuesday that it will halt the provision of HIV, malaria, and tuberculosis drugs, as well as medical supplies for newborn newborns, in nations supported by the US Agency for International Development. The United States is the world's largest single giver of help, with $72 billion disbursed in 2023.
The OMB-ordered spending freeze takes effect at 5 p.m. ET (2200 GMT) on Tuesday. Agencies have until February 10 to submit specific information on any programs that are suspended.
The federal government funds a wide range of organizations, which reacted with dismay and perplexity.
"From halting research on cures for childhood cancer to halting food assistance, domestic violence protection, and suicide hotlines, the impact of even a brief pause in funding could be devastating and cost lives," said Diane Yentel, president and CEO of the National Council of Nonprofits.
Jenny Young, a spokesman for Meals on Wheels America, said it was unclear whether the instruction will have an impact on their food delivery programs for poor seniors.
The uncertainty is "creating chaos" for community organizations that provide meals, "which unfortunately means seniors may panic not knowing where their next meal will come from," she said.
Trump's order could also pose problems for state and local governments that rely on federal funding for everything from highway building to school lunches and foster care. That money is especially important in low-income areas like Louisiana and Mississippi, which voted overwhelmingly for Trump in the November election.
The memo did not exempt disaster relief from locations such as Los Angeles and western North Carolina that have been affected by natural disasters. When President Trump visited both locations last week, he vowed government support.
Democrats Challenge 'Unlawful' Move.
According to the letter, the federal government spent about $10 trillion in fiscal year 2024, with more than $3 trillion going to financial assistance programs like grants and loans. However, such calculations appeared to contain money authorized by Congress but not spent; the objective Congressional Budget Office predicted federal spending in 2024 at a significantly lower $6.75 trillion.
Trump's Republican friends have been pressing for big spending cuts, but his promise to protect Social Security and Medicare means that about one-third of the budget is off the table. Trump also cannot cut government interest payments, which amounted for another 11% of the budget last year, without risking a global economic collapse.
Democrats instantly blasted the spending limit as illegal and hazardous, and Democratic state attorneys general said they were preparing a legal challenge.
U.S. Senator Patty Murray, the top Democrat on the Senate Appropriations Committee, warned on Tuesday that the OMB action might have disastrous implications.
"We could see a screeching halt to resources for child care, housing, police officers, opioid addiction treatment, rebuilding roads and bridges and even disaster relief efforts," Murray told reporters.
Senate Democratic Leader Chuck Schumer stated that the administration lacked the authority to block spending approved by Congress.
"This decision is lawless, destructive, and cruel," Schumer declared in a Senate speech. "It's American families that are going to suffer most."
The United States Constitution grants Congress responsibility over spending, but Trump stated throughout his campaign that he believes the president has the authority to withdraw funding for projects he opposes. Russell Vought, his choice for White House budget director who has yet to be confirmed by the Senate, previously led a think tank that believed Congress could not compel a president to spend money.
U.S. Representative Tom Emmer, the third-ranking Republican in the House, said Trump was only carrying out his campaign pledges.
"You need to recognize that he was chosen to challenge the current quo. That is what he plans to do. "It's not going to be business as usual," Emmer told reporters during a Republican policy retreat in Miami.
However, after hearing from concerned constituents, including a woman who operates an after-school program that relies on government grant money, Republican moderate U.S. Representative Don Bacon expressed hope that the directive would be temporary.
"We've already appropriated this money," he informed me. "We do not living in an autocracy. It's a split government. "We have separation of powers."
During his first term, 2017-2021, Trump attempted to redirect funds to border enforcement, sparking a dispute with Congress that resulted in the longest government shutdown in US history. He also attempted to withhold $400 million in funding from Ukraine in order to put pressure on the country to probe his political foe Joe Biden, which resulted in Trump's first impeachment.
