Will Your Benefits Be Affected By the Federal Spending Freeze?

By now, you’ve probably heard that the federal government has put a temporary freeze on federal spending. There’s been a lot of talk about it, and I know many of you are worried about what it could mean for you and your benefits. Let’s take some time to talk about the facts and what we know so far.

UPDATE: A federal judge has temporarily blocked the spending freeze pending further review. According to multiple sources, US District Judge Loren AliKhan has said that the Trump administration cannot halt grant funding until at least February 3rd, 2025. Another hearing will be held on that date to determine what happens next.

UPDATE 2: The White House has rescinded the memo that caused this confusion. Administration officials stated that the memo was sent by OMB without White House approval. The White House announcement states that this should effectively end the court case as well.

About the Spending Freeze

So, for those who haven’t heard about the memo, let’s take just a moment to explain what’s going on.

On Monday, January 27th, the Office of Management and Budget issued a two-page memo that ordered federal agencies to “temporarily pause all activities related to obligation or disbursement of all federal financial assistance.” This change applied to both foreign and domestic spending. The change was ordered to take effect at 5pm Eastern Time today, January 28th. 

There are over 2,000 other government programs that are administered by the federal government. Most of those are now paused, pending review.

Are Your Benefits Affected?

The memo’s wording was very vague, which has created a lot of complicated questions about SNAP, LIHEAP, WIC, Medicaid, and other critical programs that so many people rely on. 

That’s why so many different news outlets are conflicting in what they say about the impact of this memo. Some say SNAP is affected, others say it’s not. Some say that Medicaid is stopping, others say it’s not. There was a lot of confusion about this, especially when the memo was first issued, and not a lot of outlets are updating their posts to reflect the most up-to-date guidance. 

I spent a lot of time digging into this today so that we could sort out what is and is not affected by these changes. I even found a clarifying memo written by OMB and published by the National Grants Management Association that clearly explains how your benefits will be impacted. You can read it here.

That clarifying memo clearly states 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.”

So, without further ado, let’s talk about how this is going to affect you:

• Social Security: The original memo specifically said that Social Security would NOT be affected.
• Medicare: The original memo specifically said that Medicare would NOT be affected.
• Medicaid: The OMB’s clarifying memo said that Medicaid would NOT be affected. However, some states are having trouble accessing their Medicaid portals at this time.
• VA Benefits: Veteran’s compensation will NOT be affected by this order because it is not related to any of the executive orders that have been issued.
• SNAP: The OMB’s clarifying memo clearly stated that SNAP would NOT be affected. The order is not intended to apply to benefits that provide direct payments to individuals.
• Rental Assistance: Rental assistance will NOT be paused, per the OMB’s clarifying memo.
• PELL Grants: Pell Grants are NOT impacted.
• Student Loans: The Department of Education has stated that Direct Loans will NOT be impacted by this order.
• Head Start: The OMB’s clarifying memo clearly states that Head Start will NOT be paused.
• LIHEAP: This program will most likely not be affected because it provides direct assistance to individuals, but it is unclear.

There is still some confusion about programs like Meals on Wheels. These programs are funded by grants to organizations, which then spend the money on meals and other things to provide their services. It is not clear if programs like Meals on Wheels will be impacted by the freeze. I don’t think they will be, but I’ve seen some convincing arguments that they could be, so I don’t feel comfortable calling that for sure. 

We do know that this change could still have a substantial impact, especially at the local level. NBC New York estimates that states receive about 30% of their revenues from the federal government on average. The majority of that money is used for Medicaid, which OMB has said will not be impacted by this change, but the money also flows into other programs as well. It’s not clear what local programs may be impacted by these changes.

What Happens Next

Several lawmakers are pushing back on this because as we’ve explained in other videos, it is the legislative branch of government that has primary control of the federal budget. One of the questions at issue is the 1974 Impoundment Control Act, which limited a President’s ability to refuse to spend money on things that Congress had approved. Both President Trump and his nominee for the Office of Management and Budget have indicated that they believe the Impoundment Control Act is unconstitutional. 

As a result, some organizations that were going to receive the now-frozen funds have already filed lawsuits challenging this change. Many experts expect that this issue will be escalated all the way to the Supreme Court. That means it will take some time before we know whether or not this new change will stand and exactly what the implications will be.

Relief Recap

Although there is a lot of mixed messaging about this funding freeze, it appears that most of the pivotal programs that low income Americans rely on will remain intact. This includes programs like Social Security, SNAP, Medicaid, and Medicare. It is unclear if other programs like TANF and Meals on Wheels will be exempted at this time, but we will continue to update this post as we learn more.