Trump White House rescinds memo freezing federal money after widespread confusion

[January 30, 2025]  By CHRIS MEGERIAN, ZEKE MILLER and LISA MASCARO

WASHINGTON (AP) — President Donald Trump's budget office on Wednesday rescinded a memo freezing spending on federal loans and grants, less than two days after it sparked widespread confusion and legal challenges across the country.

The memo, which was issued Monday by the Office of Management and Budget, had frightened states, schools and organizations that rely on trillions of dollars from Washington.

Administration officials said the pause was necessary to review whether spending aligned with Trump's executive orders on issues like climate change and diversity, equity and inclusion programs.

But on Wednesday, they sent out a two-sentence notice rescinding the original memo. The reversal was the latest sign that even with unified control of Washington, Trump’s plans to dramatically and rapidly reshape the government have limits.

Administration officials insisted that despite the confusion, their actions still had the intended effect by underscoring to federal agencies their obligations to abide by Trump’s executive orders.

“The Executive Orders issued by the President on funding reviews remain in full force and effect and will be rigorously implemented by all agencies and departments,” White House press secretary Karoline Leavitt said, blaming the confusion on the courts and news outlets, not the administration. “This action should effectively end the court case and allow the government to focus on enforcing the President’s orders on controlling federal spending.”

The vaguely worded order, legal pause and eventual cancellation left organizations confused and worried again about what might be next.

Nourishing Hope, which runs foods pantries, home meal delivery and an online food market in Chicago, gets roughly 20% of its food budget comes from the federal government. CEO Kellie O’Connell said the biggest issue when the memo surfaced was getting clear and accurate information so they could figure out how to plan for the coming months.

If their federal funds were frozen, O'Connell said, they could make it a few weeks. But the wider concern was the possible end of assistance, like food stamps, which would increase demand on her organization.

“If that were to significantly diminish or get eliminated, it will be nearly impossible for the charity food system to step up,” she said of food stamps. “It would be potentially catastrophic for our communities.”

On Tuesday, Trump administration officials said programs that provide direct assistance to Americans, including Medicare, Social Security, student loans and food stamps, would not be affected.

However, they sometimes struggled to provide a clear picture. Leavitt initially would not say whether Medicaid was exempted from the freeze, but the administration later clarified that it was.

The White House's change in direction caught Congress off guard, particularly Trump’s Republicans allies who had defended him throughout the brief saga.

“This is Donald Trump. He throws hand grenades in the middle of the room, and then cleans it up afterwards,” said Sen. Kevin Cramer of North Dakota. “I just think the guy’s a genius.”

Cramer acknowledged the initial memo may have generated too much political heat, with red and blue states raising alarms over the funding freeze. But the senator suggested Trump “maybe didn’t understand the breadth” of what had been proposed.

But Democrats said the White House had overreached beyond what Americans want.

“Most people voted for cheaper eggs,” said Sen. Martin Heinrich of New Mexico. “They did not vote for this chaos.”

President Donald Trump speaks before signing the Laken Riley Act in the East Room of the White House, Wednesday, Jan. 29, 2025, in Washington. (AP Photo/Evan Vucci)

The funding pause was scheduled to go into effect at 5 p.m. Tuesday. It was stayed by a federal judge until at least Monday after an emergency hearing requested by nonprofit groups that receive federal grants.

An additional lawsuit by Democratic state attorneys general was also pending, and a hearing was held Wednesday in federal court in Rhode Island. Chief Judge John J. McConnell said he was inclined to issue an order blocking any attempt at a funding pause, saying there was the possibility of “irreparable harm.”

After the initial memo was distributed Monday, federal agencies were directed to answer a series of yes or no questions about each program by Feb. 7. The questions included “does this program promote gender ideology?” and “does this program promote or support in any way abortion?”

Although Trump had promised to turn Washington upside-down if elected to a second term, the effects of his effort to pause funding were being felt far from the nation’s capital. Organizations like Meals on Wheels, which receives federal money to deliver food to the elderly, were worried about getting cut off. Even temporary interruptions in funding could cause layoffs or delays in public services.

Barbara Teed, 73, of Bloomington, Minnesota, said she felt “panic, absolute panic” when she learned the freeze could affect her.

Teed lives with her 38-year-old son, Ryan, who has Down syndrome. Both receive meals from Bloomington-Eden Prairie Meals On Wheels.

“This is sometimes my only meal of the day. So it’s really, really important to me,” said Teed.

Reynier Prieto, whose 5-year-old son, Liam, attends the Head Start program at Easterseals South Florida, said the program is helping address speech development issues so that Liam can hopefully attend public school next year.

“It’s the most important thing for our life right now,” Prieto said. “That’s the way that we can go out of our home and work, and we know that he’s in good hands.”

Losing a program like Head Start could be bad for many families, and government officials should take the time to examine each one that receives federal money, Prieto said.

“Programs like this, they need to review it and make sure that it’s not cut because this actually helps the community,” Prieto said.

Democratic critics of the order celebrated the memo's rescinding.

“This is an important victory for the American people whose voices were heard after massive pressure from every corner of this country," said Sen. Patty Murray of Washington. She said Trump had “caused real harm and chaos for millions.”

Senate Democratic leader Chuck Schumer of New York said, “Americans fought back and Donald Trump backed off."

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Associated Press writers Sophia Tareen in Chicago, Mark Vancleave in Minneapolis, David Fischer in Miami and Michael Casey in Boston contributed to this report.

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