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Rescinded: Temporary Pause of Agency Grant, Loan, and Other Financial Assistance

Update: In response to a federal judge’s order temporarily blocking this, action, OMB rescinded this order on January 29, 2025.

The White House Office of Management & Budget (OMB) issued a memo blocking the disbursement of all federal grants and loans as of the following day.  A federal judge has temporarily blocked this action until February 3, 2025.

This sweeping order was originally interpreted to have impact on more than 2,600 federal programs ranging from funding for apprenticeship and job training programs to scientific research grants to the Head Start program’s early childhood education services for low-income families. OMB issued follow-up guidance after the announcement that attempted to clarify and narrow the scope indicated in the initial announcement, and named several programs—including Medicaid and Head Start—that were not intended to be affected by this freeze. However, the initial announcement caused widespread confusion and has already had some adverse impacts on program operations.

The memo directs federal agencies to respond to a lengthy questionnaire that essentially screens each individual funding stream for alignment with the Trump administration’s extreme political ideology – including whether it has any tangential connection to issues related to the undocumented immigrant population, addressing racial or gender equity, climate crisis mitigation and other environmental protections, or abortion.

The memo also directs all federal agencies to identify a senior political appointee who can take on responsibility for oversight of the program.

Rep. Rosa DeLauro and Sen. Patty Murray have raised that this action by the Trump administration may constitute impoundment – essentially, an illegal overreach of the President’s authority to cancel or otherwise block spending government dollars that have already been allocated and approved by Congress.

The very near-term economic impacts of a federal grant freeze are still unknown but will likely be severe. In the long-run, the economic consequences of a federal funding freeze of this magnitude would be guaranteed to cause a steep recession. The federal government gives $1 trillion in grants to state and local governments alone, for everything from physical infrastructure, public safety, and health and social services. Removing this money from the economy would represent a huge economic shock. A long-term freeze on spending would also fatally compromise the valuable work done only by the federal government and heavily relied upon the by the private sector, such as medical research trials and much-needed economic data collection.