Trump’s Spending Halt Spawns Day of Chaos Before Getting Blocked

President Donald Trump came into office promising to shake up Washington. A chaotic 24 hours gives a sense of how that may play out.

The president’s surprise announcement Monday night that he would halt trillions of dollars in federal spending to make sure government agencies’ outlays are aligned with his Make America Great Again agenda sowed panic in Washington and among local officials across the country.

Before the directive was temporarily put on hold by a judge, lawmakers fielded calls from concerned constituents, Democrats decried what they saw as an unconstitutional power grab and even some of Trump’s GOP allies expressed unease with the scale and suddenness of the moves. Were elderly cancer patients going to be cut off from treatment? Would school kids have to go without lunch?

The order seemed to touch on a wide swath of programs running the gamut from anti-poverty initiatives to medical research, as well as other forms of aid to states, cities and schools. Amid the questions and confusion, the White House was compelled to issue a second memo that made clear only a somewhat narrower scope of programs would be affected, leaving Medicaid, Social Security and rental assistance intact.

That eased some of the panic, only for fears to flare again as some states reported difficulty accessing portals for Medicaid and other social programs, while a non-profit in Colorado said it was locked out of systems used to access funds for healthcare and housing.

The scale of chaos and confusion served as another reminder of the impact of Trump’s desire to move fast and act decisively in the first few days of his administration as he seeks to remake the government to align with his vision. The order is in line with Trump’s repeated pledges to target initiatives that his administration thinks have been corrupted by left-wing ideologies on gender, diversity and healthcare.

“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,” Matthew Vaeth, the acting director of the Office of Management and Budget, wrote in the memo.

The White House received broad, if incomplete, support among GOP lawmakers for Trump’s sweeping order even though it essentially cedes the legislative branch’s control of spending to the presidency.

“I don’t have concerns,” House Speaker Mike Johnson told reporters late Tuesday at a GOP conference at Trump’s Doral resort in Florida. “I fully support it.”

Other influential Republicans including John Thune, Joni Ernst and Tom Cole backed it. Some of the president’s allies have argued that Trump should attempt to cut government spending by simply not distributing funds.

“The brakes are gone,” said Brian Riedl, a senior fellow at the Manhattan Institute and former chief economist for Republican Senator Rob Portman.

The order served as a test of how far Republicans would go in supporting Trump’s agenda. In the past, lawmakers have been strident in asserting control over the government’s purse springs, so it came as somewhat of a surprise that they were willing to abide the White House’s unilateral decision to stop the spigot. Their acquiescence could signal how pliable the party has become when it comes to Trump’s initiatives, and pave the way for his administration to push the envelope in other matters.

The directive would seem to clash directly with a 50-year-old law that limits when the executive branch can control funds, an interpretation that Trump’s allies reject. The drama marks the second coming of the impoundment wars in Washington, a rehash of Nixon-era disputes over how much control the executive branch has over federal outlays that have been approved by lawmakers.

Read more: What Trump’s Vow to ‘Impound’ Appropriations Means: QuickTake

In 2023, federal grants to state and local governments totaled $1.1 trillion, or 18% of all outlays, according to an April report from the Peter G. Peterson Foundation, a research group. New York City anticipates receiving $9.6 billion in federal grants in the 2025 fiscal year which ends on July 1, according to Comptroller Brad Lander, amounting to about 8.3% of the budget. In San Francisco, roughly 11% of the city’s $15.9 billion budgetcame from federal funding.

Democratic lawmakers in states including New York, Illinois and Oregon reported issues Tuesday accessing portals for Medicaid and other social programs, hours after the memo was released. Massachusetts Attorney General Andrea Campbell said the state tried to withdraw almost $40 million from Medicaid on Monday and hasn’t yet received the payment.

Leavitt said in a social media post that the White House is aware of the Medicaid website portal outage, but no payments have been affected. Later in the day, spokespeople for several state Medicaid agencies said the system was back online after earlier disruptions.

‘Test of His Power’

Even as Democratic officials worried about the impact, Republican supporters saw the policy as reflecting the will of Trump’s voters.

Thune, the Senate majority leader, shrugged off the historic freeze, calling it “normal practice at the beginning of an administration.” Cole, who chairs the committee that oversees all government funding, called the move “prudent.”

“I don’t think suspending things and saying ‘whoa, whoa, whoa, we want to have a look at them’ is anything inappropriate,” Cole said.

Senator Kevin Cramer, a North Dakota Republican, predicted early Tuesday that it’d be challenged in courts.

“It’s a test of his power,” Cramer said of Trump.

Congressional Democrats said Trump’s order is an unconstitutional end-run around Congress’s power of the purse. Senator Patty Murray, the top Democrat on the Appropriations Committee, said the order has unleashed “sheer panic” among schools, community health centers and other organizations reliant on federal loans and grants.

“Calls are flooding in,” she told reporters early Tuesday.

Some Exceptions

The panic somewhat abated in the afternoon after the White House’s second memo saying that the instructions from budget office were not intended as an “across-the-board” freeze. The document said officials “may grant exceptions” on a case-by-case basis, and exempted direct transfers to individuals.

Secretary of State Marco Rubio has approved some waivers for emergency food aid and some salaries after Trump’s order to halt and reevaluate all foreign development assistance prompted an outcry among aid groups around the world. The State Department statement on Tuesday evening did not provide any details about the fate of billions of dollars of assistance to Ukraine, or foreign military financing to other US partners, such as Taiwan.

US District Judge Loren AliKhan temporarily blocked the Trump administration from enforcing the new directive late Tuesday during a hearing in Washington. The order was in response to a lawsuit filed by a coalition of organizations challenging the payment freeze. The suit claims that even a temporary halt in funding could immediately “deprive people and communities of their life-saving services,” including health care, small business support and programs for the LGBTQ community.

The memo also gets to a potentially thorny constitutional issue — whether the executive branch has any ability to halt spending that has already been approved by lawmakers. The US Constitution explicitly grants Congress control over how much the government can spend.

In the early 1970s, President Richard Nixon impounded tens of billions of dollars of congressional appropriations for assorted programs, including subsidized housing, disaster relief and water projects. In response to the fracas, Congress passed the Impoundment Control Act in 1974 to reassert its power over spending. During the campaign, Trump vowed to challenge it.

The outcome of the impoundment wars could determine whether Trump’s big plans for spending cuts, including via the so-called DOGE effort led by Elon Musk, can bypass Congress to enact a sweeping overhaul of the federal bureaucracy. It also comes with Congress already facing a March 14 deadline to fund the government, with Democratic votes needed to overcome a Senate filibuster.

(Updates with State Department statement)

--With assistance from Jack Fitzpatrick, Zoe Tillman, Kriston Capps, Justin Sink, Laura Nahmias, Shruti Date Singh and Sri Taylor.

To contact the reporters on this story:
Steven T. Dennis in Washington at sdennis17@bloomberg.net;
Alicia Diaz in Washington at adiaz243@bloomberg.net;
Maeve Sheehey in Arlington at msheehey3@bloomberg.net

To contact the editors responsible for this story:
Pratish Narayanan at pnarayanan9@bloomberg.net

Megan Scully, Brendan Walsh

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