Updated: Trump’s Willingness to Use Impoundment Power Creates Huge Political Leverage in Debt Ceiling and Spending Fights

Perhaps after President Trump signed the high-political-priority Executive Orders (EOs) in the first days of his second Presidency, the EO that will be the most historically and politically significant is the one that stopped the disbursement of funds authorized and appropriated by the passage of the Inflation Reduction Act and the Bipartisan Infrastructure Law.

By stopping the Executive Branch from spending funds already authorized, appropriated, and signed into law by President Biden, President Trump has effectively given himself a political and fiscal tool far more powerful than, say, a line-item veto, which, if it existed, would be exercised before a bill is signed into law, not after spending has already begun.

Hill’s title for this morning’s story on this EO is Trump’s move to freeze Biden-approved funding draws howls from Democrats.

Howls.

Impoundment power is like what the Treasury Dept. does when it takes “extraordinary measures” during the political haggling to increase the debt limit once the authority to borrow more money has lapsed or become very limited by borrowing nearly up to the statutory debt limit.  The Treasury stops paying some bills, government pensions, and the like, which amount to about 335 billion dollars.   Essentially, impoundment power does the same thing, except instead of not paying parts of the U.S. government, impoundment power would not pay American citizens, either in contracted work or benefits.

The Democratic-controlled House has been rife with plans to use their vote to increase the debt limit in return for concessions from Trump to protect social programs and other Dem spending priorities.

However, this leverage will be lost if President Trump uses impoundment power to cut the equivalent of what the U.S. government borrows yearly — $2 Trillion — because no progress has been made on raising the debt limit.

In other words, if faced with a situation of breaching the debt limit (because Congress has not passed a debt limit increase) and throwing the U.S. and global economy into chaos and crisis because of a U.S. government default, then in order to avoid a default, President Trump would have to make WIDESCREEN use of impoundment powers.

This would trigger a legal action by elected Democratic officials or their allies, and would likely take about a year, perhaps longer, to be adjudicated in the Supreme Court — which would make it one of the most momentous Supreme Court cases ever.

The Democratic party is, on impoundment powers of the President, believing their own propaganda — they ridicule it, dismiss it and reject it.

Except Impoundment power just stopped key spending from Biden’s two biggest domestic victories — the Inflation Reduction Act and the Bipartisan Infrastructure Law.

In the 1987 film The Princess Bride, the character Inigo Montoya, portrayed by Mandy Patinkin, delivers the memorable line: “You keep using that word. I do not think it means what you think it means.” This remark is directed at Vizzini, played by Wallace Shawn, who repeatedly exclaims “Inconceivable!” in situations that are clearly happening, thereby misusing the term:  here is the clip quoted above.

By Trump exercising it, he will keep the Democratic party on their back foot, and force them to make a deal on the debt ceiling to stop Trump from using the debt ceiling as a justification for expanded use of impoundment power.

There are competing legal theories on the question of impoundment, with the nominee for the Office of Budget and Management taking a much broader view of the current state of the President’s powers to impound spending, versus the absolutist view of the Democratic Congress.

Given the fact that Trump has just acted to impound spending, and could do much, much more in the face of a debt limit crisis, the political and fiscal utility of impoundment power has just been made clear by the President’s action — it is now a de facto power until the Supreme Court says otherwise.

Will any judge or panel of judges, prevent impoundment powers from being used by any President if they are told it must be used to prevent a default by the U.S. government — and the resulting global economic chaos and costs?

My guess is, very, very few judges would want to seen as the cause of a U.S. government default.

Meaning, ultimately, the courts side with the President’s broad use of impoundment power to prevent default.

Given the status of the debt limit now, the U.S. Treasury has already announced has begun to take extraordinary measures (not paying some intra-government bills) to avoid breaching the debt limit.

Late yesterday, the Democratic Party has responded to Trump’s first act of impoundment with this letter to the Acting Director of the Office Management and Budget, which reads in part:

 “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.”

“The President has issued a number of Executive Orders to unilaterally freeze or contravene critical funding provided in bipartisan laws, sowing chaos across states, families, and communities. In that vein, you have now issued a series of Office of Management and Budget (OMB) memoranda that only further disarray and inefficiency—in particular, M-25-13, pursuant to which agencies will be ordered to stop vast swaths of federal financial assistance to states, families, and communities as of 5:00 PM ET on Tuesday, January 28,” continued Murray and DeLauro. “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.”

Here is the House and Senate Minority Appropriations media release about the letter quoted above.

Well, that did not take long –House Democrats are holding an “emergency virtual caucus meeting” TOMORROW [January 29th, 2025] at 1 pm over the “Illegal Republican Funding Freeze,” per a notice that just went out to members.

While there is no news of what the Democratic House and Senate caucus spoke about during their emergency meeting as of 2 :15 PM January 29th, this morning the Office of Management and Budget rescinded the order.

Two new pieces of news on January 30th, 2025 — first, the Trump Administration on January 29th recinded their Office of Budget and Management order to stop paying any federal loans or grants.

Then, after rescinding the order, the Trump Administration announced the freeze in paying federal loans and grants is still in force.

Also on January 29th, the Democratic Party had their “emergency meeting” to discuss Trump’s federal spending freeze, and vowed a messaging blitz, with judicial and legislative strategies to push back on the spending freeze.