The White House rescinded an order on Wednesday that froze trillions of dollars in federal grants and loans and sparked mass confusion across the country, according to two U.S. officials familiar with the matter.
The freeze, which a federal judge had temporarily blocked Tuesday, had raised concerns about how this decision would affect Washington, D.C., programs, which rely heavily on federal funding for essential services.
In a memo issued Monday, the acting director of the Office of Management and Budget had instructed federal agencies to suspend all activities related to federal financial assistance. The memo, which applied to grants and loans but exempted Social Security, Medicare, and direct payments to individuals, called for a “comprehensive analysis” to ensure federal programs complied with President Donald Trump’s executive orders. These orders included restrictions on diversity, equity, and inclusion (DEI) initiatives and clean energy projects.
Federal transfers are a critical lifeline for D.C. residents, with $6.3 billion in federal funding allocated to the District in fiscal year 2021. This funding accounted for 32.2% of D.C.’s total revenue, supporting Medicaid, Temporary Assistance for Needy Families (TANF), public schools, and infrastructure. Nearly 51% of these funds went to public welfare programs.
“This freeze could have devastating consequences for communities in D.C. that rely on federal support for education, health care, and basic services,” said a local budget expert familiar with federal funding impacts.
The memo had also stated that oversight of federal spending must be reassigned to senior political appointees, raising concerns about transparency and accountability. Agencies had been required to submit detailed lists of suspended projects by Feb. 10.
Senate Minority Leader Charles Schumer (D-N.Y.) sharply criticized the move.
“Congress approved these investments, and they are not optional; they are the law,” Schumer said in a statement. “Donald Trump must direct his administration to reverse course immediately and ensure that taxpayer money goes where it’s needed.”
The legality of the freeze had faced challenges. Experts note that while the president can temporarily defer spending, the administration must notify Congress and provide specific details about the funding being paused.
G. William Hoagland of the Bipartisan Policy Center warned of far-reaching implications if the freeze continued.
“I worry this is an effort to avoid implementing the law of the land as it relates to the budget process,” Hoagland said.