A Sneaky Administration Assault You Probably Haven't Heard About
It's Likely a Major Part of Our Economic Struggle Too [4 min read]
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There’s something going on that deserves way more attention than it’s getting: President Donald Trump has frozen not the $12 billion in foreign aid that an Appeals Court found that he was illegally withholding,1 not the $5 billion that he wants to cancel via a “pocket recission,”2 but more than $400 billion in federal funds that Congress directed the administration to spend.
[side note: I started my career as a congressional staffer 25 years ago on a summer fellowship for the House Committee on Appropriations, Democratic Staff (English translation: that’s the committee in the U.S. House that hands out all the money that the federal government spends, and I worked for the Democrats). So it was kind of fun to call them up a few minutes ago and track down the information on this from someone doing the same job I once had]
That is a jaw-dropping figure. And it is highly significant both for the economy and for Americans’ well being. There are three things that are Worth Knowing about it.
This is flagrantly illegal. Presidents have tried to “impound” funds like this before, though never at anything close to this scale. Thomas Jefferson refused to spend what would have been a little over $1 million in today’s dollars to buy Navy gunboats for the Mississippi river. Most famously, Richard Nixon went so far in asserting his ability to impound funds that Congress passed a law in 1974 overhauling the entire federal budget process and specifically requiring the President to spend funds as directed by Congress.3
That law set up a clear process—if the President wants to spend less than Congress directed, he (or someday she) has to ask formal permission of Congress to rescind those funds. The fact that Trump is trying to use that law and create a “pocket recission” (basically, asking for permission so late that there’s not enough time to act before the authorization for the funds runs out) shows that he and his lawyers are 100% aware of the law, they know that impounding funds is simply illegal, and they are just doing it anyway.
It is affecting WAY more than foreign aid and DEI. The early talking point from the Trump administration when the media (me included) were focused on Elon Musk and DOGE was that the main targets were anything that involved foreign assistance or that hinted at “wokeness.” But that’s not what’s happening. Take a quick scan of the list of targeted funds.4 Sure, there’s funds on there that an AI filter might flag for containing MAGA no-no words like “sustainability” or “conservation.” But the bulk of it is hitting farmers, investments in the electric grid to keep prices down, police, public health, scientific research, education, worker retraining…the list goes on and on. In other words, every state in the nation and every corner of the economy is getting hit. These are funds that people’s duly elected representatives said should be spent on them: the food they grow, the energy they use, and research they’re doing to make people’s lives better.
It is probably part of the reason that the economy is sputtering. Econ 101 reminder: GDP is made up of four elements—consumption, investment, government spending, and net exports. Government spending is about one-quarter of U.S. GDP. That’s why whenever the government looks to do a fiscal stimulus, it tries to spend more and/or cut taxes so people will consume more.
Out of a the $30 trillion U.S. economy, $400 billion in unspent federal funds is a little over 1%. That doesn’t sound like a lot, but suddenly evaporating it tamps down growth. And bear in mind that every dollar that the government spends can have ripples through the economy—more people hired, more money in those people’s pockets, more spending, etc.—that economists call a multiplier effect. Those multipliers are often more than 1, depending on what kind of spending is involved, meaning that losing a dollar of government spending on, say, the electric grid can reduce economic activity by $2.
The bottom line is that by blocking all of these funds, Trump has shaved 1-2% of GDP from government spending. That is definitely going to show up—and probably is showing up—as part of the recent run of awful economic indicators. Which is yet another way that Trump is trashing oureconomy.5
Look, of course not all government spending is good. Some of the funds on the Trump hit list may be ineffective or could be better used elsewhere. But that’s up to the people we elected to Congress. That’s what the law says. And that’s the whole idea of not having a king with unitary power who rules by his own whim.
One closing point: if you’re just hearing about this for the first time it means that a) the mainstream media is utterly failing to cover a major government, economic, and public policy story, and b) I hope you’ll share this publication with a friend, because the whole idea of this Substack is to bring you information that is Worth Knowing and that isn’t being adequately covered the way it should be.
https://www.reuters.com/world/us/trump-administration-asks-us-supreme-court-halt-foreign-aid-payments-2025-08-26/
https://thehill.com/homenews/senate/5482563-trump-rescission-congress-disagreement/
https://history.house.gov/Historical-Highlights/1951-2000/Congressional-Budget-and-Impoundment-Control-Act-of-1974/#:~:text=The%20law%20also%20shifted%20the,its%20power%20of%20the%20purse.%E2%80%9D
https://democrats-appropriations.house.gov/weeks-away-end-fiscal-year-trump-blocking-410-billion-funding-owed-communities-nationwide
To be fair, economists would definitely have good faith arguments about whether public spending crowds out some spending from the private sector, so there might be a case to be made that the impact of evaporating $400 billion in government spending is less than that in overall GDP. But it is clearly significant.