What a Federal Grants Pause Could Have Meant for Social Security and Medicare

White House with social security card overlay — (Image credit: Getty Images)

Retirees can breathe a sigh of relief, at least for now. While the White House budget office ordered a pause on all federal grants and loans effective as of 5:00 pm on Tuesday January 28, the short-lived action was rescinded Wednesday after it caused chaos and confusion. While Social Security and Medicare were excluded from the list, other programs that provide support to older adults could have lost temporary funding.

“OMB Memorandum M-25-13 is rescinded. If you have questions about implementing the President’s Executive Orders, please contact your agency General Counsel,” a memo obtained by CNN read.

It's not surprising that the White House backtracked. In addition to a federal judge Tuesday temporarily blocking the funding freeze, according to the Associated Press (AP) , the move faced fierce criticism.

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Even after the OMB Memorandum was rescinded, questions remained about the federal funding pause after comments made by White House Press Secretary Karoline Leavitt on X who wrote: "This is NOT a rescission of the federal funding freeze. It is simply a rescission of the OMB memo. Why? To end any confusion created by the court's injunction. The President's EO's on federal funding remain in full force and effect, and will be rigorously implemented."

Her comments added to the confusion, as it was the rescinded memo and not the executive orders that described a temporary pause in funding. It's not clear what the White House will do next.

When announcing the funding freeze, Matthew J. Vaeth, acting director of the Office of Management and Budget (OMB) wrote in a memorandum that of the close to $10 trillion spent by the federal government, over 30%, or $3 trillion, went to federal financial assistance, such as grants and loans.

“Financial assistance should be dedicated to advancing administration priorities, focusing taxpayer dollars to advance a stronger and safer America, eliminating the financial burden of inflation for citizens, unleashing American energy and manufacturing, ending ‘wokeness’ and the weaponization of government, promoting efficiency in government, and Making America Healthy Again,” wrote Vaeth.

Vaeth said that taxpayer dollars should not be used for programs that do not "improve the day-to-day lives of those we serve" or are ideological in nature.

Vaeth said the pause would give the Administration time to review agency programs and determine the best use of the funding in line with the laws and President Donald Trump’s priorities. In a footnote, Vaeth said, “Nothing in this memo should be construed to impact Medicare or Social Security benefits.”

It’s unclear what impact a spending pause would have had on many federal financial assistance programs. Still, Democrats said it could impact disaster relief, aid to the nation’s seniors and school lunch programs, among many other programs.

Originally all agencies had until February 10 to submit detailed information to the OMB on any of the programs, projects and activities subject to the pause. Any funding not aligned with President Trump’s executive orders and agenda could be on the chopping block. The memo did make clear that in addition to Social Security and Medicare, the pause would not have included assistance provided directly to individuals.

In a letter to Vaeth, Senate Appropriations Committee Vice Chair Patty Murray and House Appropriations Committee Ranking Member Rosa DeLauro raised the alarm on what they called President Trump’s unlawful executive orders and the new memoranda issued by OMB directing agencies to withhold vast swaths of approved federal funding.

“As leaders of the House and Senate Committees on Appropriations, we write with extreme alarm about the Administration’s efforts to undermine Congress’s power of the purse, threaten our national security, and deny resources for states, localities, American families, and businesses,” wrote the legislators. “The scope of what you are ordering is breathtaking, unprecedented, and will have devastating consequences across the country. We write today to urge you in the strongest possible terms to uphold the law and the Constitution and ensure all federal resources are delivered in accordance with the law.”

Bottom line

Since President Trump began his second term he has signed a flurry of executive orders to better align the government with his vision for America. So far Social Security and Medicare has been untouchable, which is good news for retirees relying on these important benefits.

Donna Fuscaldo is the retirement writer at Kiplinger.com. A writer and editor focused on retirement savings, planning, travel and lifestyle, Donna brings over two decades of experience working with publications including AARP, The Wall Street Journal, Forbes, Investopedia and HerMoney.