White House rescinds federal funding freeze after judge blocks order

The Trump administration has rescinded its controversial memo ordering the freezing of up to $4.8 trillion in federal grants and loans.

White House Press Secretary Karoline Leavitt speaks to reporters. Picture: AFP.

The Trump administration has rescinded its controversial memo ordering the freezing of federal grants and loans, according to US media.

It came after federal US agencies were blocked at the last minute from implementing the contentious temporary freeze on up to $US3 trillion ($4.8 trillion) in ­financial assistance, in the first major challenge to President Donald Trump’s signature “America First” agenda.

Amid concerns the pause had generated widespread confusion and was unconstitutional, ­District Court judge Loren AliKhan in Washington issued a stay on the funding freeze minutes before it was due to take effect on Tuesday after its validity was challenged by groups representing the interests of grant recipients.

White House press secretary Karoline Leavitt, the youngest person to hold the job at 27, took several questions about the scope of the temporary halt after states warned they had lost access to the Medicaid funding portal. She also unveiled new rules allowing podcasters, social media influencers and content creators greater access to the Trump White House.

Democrats argued that Mr Trump had pushed beyond the limits of his presidential authority by undermining the ability of the US Congress to ensure funding through the appropriations process. Senator minority leader Chuck Schumer accused Mr Trump of having “plunged the country into chaos” and described the freeze as lawless, destructive, dangerous and cruel.

Democratic senator Chris Murphy told CNN the funding freeze was “grossly unconstitutional” and accused Mr Trump of trying to “seize control of government spending”.

He earlier posted on X that Mr Trump was trying to “collapse our democracy”

Speaking in her first White House press briefing, Ms Leavitt defended the funding freeze by saying that Mr Trump was moving quickly to deliver on his campaign promises, including a fresh attitude toward the media.

She said the Trump administration was more attuned to the “new media landscape” of 2025 and made clear she would more robustly hold journalists to ­account over their reporting, warning that trust in mass media had “fallen to a record low”.

Ms Leavitt said millions of Americans had turned from TV and newspapers to social media and blogs, and that a “new media seat” would be created for White House press briefings at the front of the room.

“We welcome independent journalists, podcasters, social media influencers and content creators to apply for credentials to cover this White House,” she said.

“While I vow to provide the truth from this podium, we ask that all of you in this room hold yourselves to that same standard.

“We know for a fact there have been lies that have been pushed by many legacy media outlets in this country … and we will not accept that. We will call you out when we feel that your reporting is wrong or there is misinformation about this White House.”

Addressing the funding freeze on federal grants and loans, Ms Leavitt said Mr Trump was “just trying to ensure that the tax money going out the door in this very bankrupt city actually aligns with the will and the priorities of the American people.”

“This is not a blanket pause on federal assistance in grant programs from the Trump administration,” she said. “I want to make that very clear to any Americans who are watching at home … if you are receiving individual assistance from the federal government, you will still continue to receive that.”

A memo issued the previous day by Matthew Vaeth, the Acting Director of the Office of Management and Budget, said that “to the extent permissible under applicable law, Federal agencies must temporarily pause all activities related to obligation or disbursement of all Federal financial assistance, and other relevant agency activities that may be implicated by the executive orders, including, but not limited to, financial assistance for foreign aid, non-governmental organisations, DEI, woke gender ideology, and the green new deal.”

The memo added: “This temporary pause will provide the Administration time to review agency programs and determine the best uses of the funding for those programs consistent with the law and the President’s priorities. The temporary pause will become effective on January 28, 2025, at 5:00 PM.”

State and local government officials were scrambling to come to terms with the order on Tuesday (Wednesday AEDT) which made clear that it should not “impact Medicare or Social Security benefits.”

Ms Leavitt tried to contain the fallout, posting on the X social media platform later in the day that the White House was aware of the Medicaid portal outage but that “no payments have been affected – they are still being processed and sent. We expect the portal will be back online shortly.”

Amid confusion about which programs were captured, the OMB provided a clarification on Tuesday afternoon local time to make clear that Medicaid would continue along with reimbursements for other schemes including the early childhood education program, Head Start.

On Tuesday, Judge AliKhan heard arguments from Justice Department lawyers as well as the National Council of Nonprofits. She issued a stay on the funding freeze to “preserve the status quo” so a hearing into its legality could take place at 11am next Monday local time.

In her press briefing, Ms Leavitt defended the immediate executive actions taken by Mr Trump including the declaration of a national emergency at the southern border, the end of catch and release policies and the push to complete the border wall.

Mr Trump had “sent a loud and clear message to the entire world” that America would “no longer tolerate illegal immigration, and this President expects that every nation on this planet will co-operate with the repatriation of their citizens.”

This was evident after the Colombian government “agreed to all of President Trump’s demands” on deportation flights after he threatened to impose tariffs of up to 50 per cent on the country. The stand-off was ignited over the weekend when Colombia turned away two US military aircraft carrying deported Colombian migrants.

“America is once again respected on the world stage,” she said. “As you saw, the Colombian government quickly folded … Flights are underway.”

She also provided an update based on information from Mr Trump regarding the New Jersey drones, declaring that “after research and study, the drones that were flying over New Jersey, in large numbers, were authorised to be flown by the FAA (Federal Aviation Administration) for research and various other reasons.”

“Many of these drones were also hobbyists, recreational and private individuals that enjoy flying drones,” she said.