The Trump administration is systematically exploiting loopholes to effectively keep much of the president’s blanket spending freezes in place, accounts by officials and court filings show, despite restraining orders from judges who have told agencies to disregard the directives.
The administration’s strategy is to have political appointees embedded in various agencies invoke other legal authorities to pause spending, while posturing as if those officials had undertaken the efforts independent of President Trump’s original directives.
In short, critics say, administration officials are paying lip service to complying with the letter of the court orders while violating their spirit. The tactic shows how aggressively and nimbly the Trump administration is working to keep funds jammed up, and the complexity judges face if they want to compel the administration to unblock the money.
The White House press office did not respond to a request for comment.
The clearest explanation of this tactic emerged from the administration itself, in a declaration filed late Tuesday by Pete Marocco, the Trump appointee who has been leading the president’s effort to dismantle the U.S. Agency for International Development. The disclosure came in a lawsuit over Mr. Trump’s executive order imposing a freeze on nearly all foreign aid spending.
In the declaration to Judge Amir H. Ali of the Federal District Court in Washington, Mr. Marocco said U.S.A.I.D. officials were told not to enforce a directive, issued under Mr. Trump’s freeze order, that had required them to suspend paying out contracts and awards.
But that does not mean the money is flowing again. The agency’s payments system, known as Phoenix, is still nonfunctional, according to more than a dozen employees of the agency and the aid organizations that rely on its funding. That means it has been impossible in practice to fulfill the administration’s stated policy of allowing programs that provide lifesaving humanitarian aid to keep functioning, they said.
Mr. Marocco said the administration had developed a new payment procedure with tighter controls, including requiring written evidence that a senior official has validated that any particular payment complies with administration policies. It is also carrying out a comprehensive review process to ensure there is no basis to terminate each grant or contract, he said.
“Payments will be released as they are processed” through this new system, he added.
And as a basis for continuing to block the disbursement of foreign aid funds, he cited not Mr. Trump’s order but various other statutes, regulations and grant and loan agreements. Those are “authorities that the department understands were not enjoined” by Judge Ali’s restraining order, he said.
Invoking that kind of loophole is not limited to the freeze on foreign aid spending. It has also arisen in litigation over an order by Mr. Trump’s Office of Management and Budget instructing agencies to halt as much as $3 trillion in domestic grants, loans and contractual spending.
The White House later rescinded that order, and judges have blocked the government from complying with it. But groups that were awarded domestic grants have also reported that in practice, the systems that allow them to draw down on the funds have remained inaccessible.
In response, one of the judges who intervened, John J. McConnell Jr. of U.S. District Court for the District of Rhode Island, declared on Feb. 10 that the continued “pauses in funding violate the plain text” of his order. He said the administration “must immediately take every step necessary” to restore all the withheld funds.
But almost immediately, the Trump administration came back with an argument that confounded that seemingly simple directive. It said that it wanted to freeze payments to New York City for a FEMA-run program that had helped defray the cost of putting up migrants in hotels and providing services to them. The stated rationale was based not on the O.M.B. memo but on concerns that the city was not complying with the conditions of the grant.
In a slightly testy order, Judge McConnell agreed that the administration could, on its own, withhold that spending because the cited justification was “authority in the applicable statutory, regulatory or grant terms” separate from the O.M.B. directive. The administration proceeded not just to cut off the grant, but to claw back $80 million from the city’s bank accounts.
The administration’s success in blocking spending on the migrant program in New York could become a model for justifying a continued freeze on many other domestic grants. In the same court filing, the Justice Department said the administration had “identified this FEMA funding as one (of potentially many) sources of funding” that it intended to freeze under other specific legal authorities.
It remains to be seen whether judges will decide that this approach is a pretext, and that the continued withholding of funds across the government is happening because Mr. Trump’s orders, while enjoined, made clear to subordinate officials what they are expected to do.
On Feb. 12 — the same day that Judge McConnell said the administration could withhold spending so long as it cited some specific authority other than the O.M.B. memo — budget officers at the Agriculture Department received an email with a “halt spending flowchart” to help them determine which programs could continue and which must be blocked.
The flowchart, a copy of which was obtained by The New York Times, flatly declared that certain spending Congress had approved, including through the Biden-era Inflation Reduction Act and the bipartisan Infrastructure Investment and Jobs Act, should be frozen, as well as foreign assistance that was not already committed before Mr. Trump’s inauguration.
“Do not obligate or outlay,” the flowchart said, citing no specific legal authorities.
At U.S.A.I.D. and the State Department, officials and aid groups say aid operations remain frozen, and programs in the field continue to wither, despite the restraining order imposed Feb. 13 by Judge Ali.
On Thursday, senior officials at U.S.A.I.D. sent an email to agency employees, obtained by The Times, taking note of Judge Ali’s order but noting that its terms did not prevent the agency from reviewing contracts or grants and terminating them under their contractual language.
Numerous work contracts continue to be terminated “for convenience,” invoking a standard clause that is written into most or all contracts, former contractors for the agency said. One termination letter sent to a contractor on Wednesday had that phrase, according to a copy obtained by The Times.
In his declaration, Mr. Marocco also mentioned the “convenience” clause as an independent source of authority to terminate foreign assistance contracts. He said the State Department had already terminated 25 such contracts and issued stop-work or suspension orders for at least 711 additional contracts.
As justification, he cited statutory authorities granted to Secretary of State Marco Rubio — whom Mr. Trump has made acting head of U.S.A.I.D. — and “terms included in the contracts themselves.” Mr. Trump has moved to fold the agency into the State Department, in violation of a law in which Congress established the agency as an independent entity.
Mr. Marocco also said the department had ended 733 foreign assistance-funded grants, also pursuant to their terms, he wrote, which “permit awards to be terminated if they no longer effectuate the program goals or agency priorities.” And it has suspended about 6,824 grants while a case-by-case review continues, he said, again citing authorities other than Mr. Trump’s foreign aid freeze order.
Officials at the agency said that the Trump administration also appeared to be moving forward with preparations to repatriate the bulk of U.S.A.I.D. foreign service officers to the United States, despite a temporary restraining order by Judge Carl J. Nichols of the Federal District Court in Washington that no such employees can be involuntarily evacuated from their host countries for now.
That order, which Judge Nichols has already extended once, is set to expire on Friday. On Tuesday, U.S.A.I.D. foreign service officers who logged into their official travel portals discovered that they had been assigned a date of March 7 to return to the United States, according to six people who received the orders.
Two of the people said that the U.S. embassies in their host countries had informed them it was merely a place holder — but with no official caveat, many worried that it signaled that they would be forced to pack up their lives in little more than two weeks.
Karoun Demirjian, Nicholas Nehamas, Stephanie Nolen, Linda Qiu and Edward Wong contributed reporting.
