A White House memo ordering a broad freeze on federal grants and loans by 5 p.m. Tuesday has ordinary Americans who depend on such aid, as well as seasoned budget experts, scratching their heads.
The memo suspending the federal funding was vague in its wording, causing confusion within federal assistance programs, at nonprofits and among Americans receiving government aid. Adding to the whiplash, a federal judge on Tuesday temporarily blocked the freeze as she considers arguments from the U.S. government and the plaintiffs in the case.
“If this was being undertaken pursuant to the executive orders on [diversity, equity and inclusion], why would the administration issue such broad, unclear and confusing directions?” Tad DeHaven, a policy analyst focusing on economic and fiscal policy issues at the libertarian Cato Institute, told CBS MoneyWatch.
“I don’t really understand it, and I think even people who are in positions of power don’t really understand it,” added Wendy Edelberg, director of The Hamilton Project at Brookings, a liberal-leaning public policy research group.
What programs aren’t affected by the funding freeze?
The memo, from the U.S. Office of Management and Budget (OMB), indicated that Social Security and Medicare programs would be exempt from the suspension in federal funding. Additional guidance released Tuesday further specified that “any program that provides direct benefits to Americans is explicitly excluded from the pause.”
“In addition to Social Security and Medicare, already explicitly excluded in the guidance, mandatory programs like Medicaid and SNAP will continue without pause,” the updated guidance said.
The memo adds that funds for small businesses, farmers, Pell grants, Head Start, rental assistance and other similar programs are also exempt.
But even if the order ends up being more narrowly tailored, it could still have serious financial implications for the millions of Americans who receive federal assistance, experts said.
“If it’s resolved quickly, the aggregate economic effects for the first quarter will be modest, but it will matter a whole lot to people on the other side of these expected payments,” Edelberg said. “It could be the difference between having a job and not, getting evicted or affording food — and the economic numbers won’t fully reflect how individuals are going to feel this.”
Here’s what to know about who may be affected by the proposed pause in federal funding.
Will I still get SNAP benefits?
The freeze does not apply to all federal financial assistance, according to an Office of Management and Budget memo on Tuesday. The agency indicates that Supplemental Nutrition Assistance Program (SNAP) benefits, better known as food stamps, are excluded, specifying that “… any program that provides direct benefits to Americans is explicitly excluded from the pause and exempted from this review process.”
“In addition to Social Security and Medicare, already explicitly excluded in the guidance, mandatory programs like Medicaid and SNAP will continue without pause,” the memo reads.
SNAP serves roughly 41 million low-income Americans.
Yet while the program appears to be exempt from the freeze, “You are still going to be really worried in the near term whether the federal government is going to make good on those promises,” Edelberg said. “And that kind of uncertainty is not good for the economy.”
Are meals for seniors affected?
The Older Americans Act Nutrition Program, a federal initiative that supports community-based senior nutrition programs like Meals on Wheels, could be affected by the proposed funding pause.
If the order includes the Older Americans Act, it “would halt service to millions of vulnerable seniors who have no other means of purchasing or preparing meals,” Meals on Wheels said in a statement to CBS MoneyWatch. “The lack of clarity is creating chaos for Meals on Wheels providers not knowing whether they should be serving meals today.”
Is housing assistance at risk?
The OMB memo added that rental assistance and other similar programs will not be paused. Still, the National Low Income Housing Coalition (NLIHC) expressed concern that Department of Housing and Urban Development programs could be covered by the freeze.
“Even a short pause in funding could cause significant harm to low-income families and their communities,” NLIHC Interim President and CEO Renee Willis said in a statement. “The longer the freeze continues, the greater the risk that low-income households receiving federal rental assistance could face eviction, and in the worst cases, homelessness — homeless shelters may be forced to close their doors, and nonprofit organizations may have to lay off staff.”
Are student loans affected?
The federal funding freeze does not apply to student loans and Pell grants, according to the Department of Education. The funding pause “only applies to discretionary grants at the Department of Education,” DOE spokesperson Madi Biedermann said in a statement to CBS MoneyWatch.
Still, an advocate for students with government loans said they are worried about the impact of the freeze.
“Any kind of freeze to federal financial aid across the board is incredibly harmful to working families just trying to pay for college,” Aissa Canchola Bañez, policy director at Student Borrower Protection Center, told CBS MoneyWatch, adding that “Lots of questions remain about what the freeze applies to and what programs it does not,”
Meanwhile, many student borrowers rely on different kinds of government assistance to cover costs beyond tuition, Bañez noted.
“There are other types of federal work-study grants that go directly to colleges and universities, and supplemental education opportunities that go to some of the lowest-income students. People really rely on federal financial aid, and you could see families having to drop out of college or figure out how they will cover this gap,” she said.
The OMB memo also indicated that Head Start, a preschool program serving nearly 800,000 low-income children that receives federal health funds, is not impacted by the pause.
But the National Head Start Association (NHSA) said that the OMB memo has already “created panic among Head Start grant recipients who are currently not able to draw down any funds.”
“While we understand that this is an evolving story, this disruption, at best, will slow down Head Start agencies’ ability to pay hundreds of thousands of staff, contractors, and small businesses who support Head Start operations in every corner of the country,” NHSA Executive Director Yasmina Vinci said in a statement. “At worst, this means that hundreds of thousands of families will not be able to depend on the critical services and likely will not be able to work.”
Despite the updated guidance issued Tuesday stating that programs including Medicaid are excluded from the funding pause, state Medicaid programs on Tuesday said they were locked out of the Department of Health and Human Services system used to track and disburse money.
The Payment Management Services web portal displayed a message reading: “Due to Executive Orders regarding potentially unallowable grant payments, PMS is taking additional measures to process payments. Reviews of applicable programs and payments will result in delays and/or rejections of payments.”
The National Association of Medicaid Directors is seeking clarification on the interruption from the White House, according to a spokesperson.
contributed to this report.
