In Brief:
- The White House rescinded its order to freeze federal grants and loans. The order had received legal and political blowback — but not from Republicans.
- Most GOP governors stayed silent on the issue, but a few issued statements praising the idea of reviewing federal spending. Some did worry that the projected pause could have disrupted programs had it lasted too long.
- This may be a prelude to budget debates to come. Red states are particularly reliant on federal aid and Republican leaders may object to cuts that hurt their constituents.
Last week, Texas GOP Gov. Greg Abbott sent a letter to congressional leaders asking for $11 billion to reimburse his state for its efforts to secure the border during the Joe Biden administration. “The burden that our state has borne is a direct result of a refusal by the federal government to do its job,” he wrote.
On Tuesday, Andrew Mahaleris, Abbott’s spokesperson, released a statement supporting the Donald Trump administration’s plans to freeze all federal grants and loans, many of which flow directly into state coffers. “This pause in funding will bring transparency to federal spending and is long overdue,” he said.
On Wednesday, the Office of Management and Budget rescinded its freeze order, which had been put on hold the day before by a federal judge. It had been blasted by Democratic officials, who variously claimed that Trump was acting like a king, that he caused a constitutional crisis and that he wanted to impose cuts that would harm the most vulnerable citizens.
By contrast, Republican state leaders had kept mostly silent about the intended pause or applauded it. “President Trump is doing what an executive should do at the beginning of a term, which is find out where the money is and where it’s going, not unlike what we did at the beginning of our term here in Virginia when we identified $1.4 billion in appropriated but unspent taxpayer money,” GOP Gov. Glenn Youngkin said on Tuesday.
Such acquiescence may have seemed surprising. All states rely heavily on federal money, which makes up more than a third of all state revenue. But red states are often more reliant than blue states. Nine of the 10 states most dependent on federal funds as a share of their total revenue voted for President Trump last fall and have Republican-dominated legislatures.
But the few statements coming from Republican governors while the freeze was a live issue were supportive. “President Trump was elected on a mandate to cut government waste and increase the impact of every federal taxpayer dollar, a goal we wholeheartedly embrace,” Louisiana Gov. Jeff Landry said in a statement along with other top state GOP leaders.
Louisiana is the state most reliant on federal dollars, with 50.5 percent of its revenues coming from Washington. Landry and his colleagues did urge the Office of Management and Budget (OMB) to offer states a “responsible runway” to untangle themselves from bad policies “without jeopardizing the financial stability of the state.”
All of this suggests that the failed freeze may serve as a trial run for arguments to come during budget debates in Congress this year. Republican leaders were supportive of a pause — but if grants they rely on are seriously threatened, it might be a different story.
“If what actually happens is the dollars get cut, period, I would expect you might get more of a hue and cry,” says Tony Woodlief, executive vice president of State Policy Network, a consortium of conservative think tanks.
What Trump Intended
Woodlief says that the freeze was part of the new administration’s effort to unearth and end various policies promoted by the Biden administration. Priorities such as transgender rights and racial equity were embedded into policies and departments throughout the federal government. The OMB memo outlining the freeze called for the end of federal resources used “to advance Marxist equity, transgenderism, and green new deal social engineering policies.”
“What happens when you want to unwind that is that it’s been pushed through every agency and sub-agency in Washington,” Woodlief says. “There’s no playbook you can go to that shows you every agency that implements DEI," or diversity, equity and inclusion.
The tradition in Congress is to keep funding items indefinitely and ratchet them up for inflation, says David Carney, a political consultant who works with Gov. Abbott and other Republican clients. There are “idiotic programs” in every agency, he says, and the administration wants to ferret them out.
“If they were killed forever without any notice, states would have a problem operating,” he says. “But a review is not a cancellation, it’s a pause.”
Little GOP Pushback
Within hours of the OMB memo’s release, nearly two-dozen Democratic attorneys general, among other groups, filed suit to block the freeze. That’s not unusual. State attorneys general from the party that doesn’t control the White House now sue administrations habitually.
But usually those suits are rooted in policy disputes in areas such as environmental protections and health. This dispute was about money promised to states — all states. No Republican attorney general joined in the action, however.
The administration’s move threatened one of Congress’ key powers, the ability to set federal spending levels. But congressional Republicans either said they fully supported the freeze or that they trusted that money would start flowing after a “commonsense” review.
Congressional Republicans have every political incentive to support Trump (and may have been hoping that the courts would block unpopular spending cuts).
Republican leaders at the state level are also placing a high-stakes bet. The administration’s sweeping order, although now a dead letter, indicated Trump is more than willing to go after targets that range far beyond the traditional GOP hit list of NPR, the Environmental Protection Agency and the like. “Most states don’t have anything approaching a realistic contingency plan for loss of federal funds,” says Woodlief of the State Policy Network.
To pay for tax cuts, spending cuts as high as $2 trillion for Medicaid — by far the largest single source of federal funds for states — are being bandied about on Capitol Hill. That would blow enormous holes in state budgets.
OMB's decision to backtrack seems to end the debate, for now. But some real cuts, Carney says, will become the order of the day.
“This is exactly what the country voted for — no more status quo,” he says. "You can’t control spending if you don’t stop something.”
