Trump unleashed chaos by freezing and unfreezing $3tn in federal grants and loans. Why? | Robert Reich

Chaos on a huge scale.

On Wednesday, Trump rescinded an order he had made late on Monday night that froze up to $3tn in federal grants and loans.

That Monday-night order had caused wild confusion across America.

Hospitals, schools, non-profits, research organizations, pre-school programs and police departments wondered if they lost federal financial support.

The Medicaid system that provides healthcare to millions of low-income Americans was interrupted.

By Tuesday afternoon, a federal judge had temporarily blocked the order in response to lawsuits claiming that Trump had no authority to freeze funds allocated by Congress.

Attorneys general in 22 states and the District of Columbia, all of them Democrats, had joined together to stop the order.

So, on Wednesday, in the midst of this chaos, Trump’s acting director of the office of management and budget (OMB), Matthew J Vaeth, notified federal agencies that the Monday-night order had been “rescinded”.

What are we to make of this?

The scale of Trump’s Monday-night order was wildly broad. It argued that federal spending must be aligned with “presidential priorities” while reviews are undertaken and gave officials until 10 February to report to the OMB.

By then, the OMB will likely be run by Russ Vought, Trump’s nominee – and, not incidentally, the chief author of Project 2025, the blueprint for Trump’s takeover of the US government.

My betting is we’ll see another version of Monday night’s order emerge once Vought is installed. It will be somewhat more detailed to avoid the confusion of the first attempt. But the Trump White House views the order as essential. It’s part of a much larger plan.

Last week, in a separate initiative, Trump barred certain spending he disagreed with, including programs involving “diversity, equity and inclusion” and non-government organizations he believes undermine the national interest.

He also ordered a 90-day freeze on all foreign aid spending, which has jeopardized congressionally authorized foreign assistance, including military aid to Ukraine and the distribution of medications in Africa and developing nations.

All of this is illegal.

Under the US constitution, Congress holds the power of the purse, and Congress approved – that is, “appropriated” – all these payments.

Trump, like any president, has the power to pause previously appropriated spending to review it, but Trump’s freezes are not really about pausing. They’re about stopping. That’s called “impounding”.

In 1974, Congress enacted the Impoundment Control Act in response to Richard Nixon’s attempts to not spend funds Congress had appropriated. The act prohibits a president from doing this.

Trump believes the Impoundment Control Act is unconstitutional. But the supreme court determines what acts of Congress are not constitutional. In the 1975 case of Train v City of New York, the supreme court unanimously upheld the constitutionality of the act.

So where is this heading?

Apparently, Trump wants the current supreme court to reverse its 1975 ruling — something that the court rarely does, especially when the original decision was unanimous.

But, as the court displayed on 24 June 2022, in Dobbs v Women’s Health Organization – which reversed the 50-year precedent of Roe v Wade, guaranteeing the right to an abortion – the current US supreme court has few compunctions about reversing itself.

Meanwhile, Trump has sent a memo to all 2.3 million federal employees that they will be paid for eight months if they resign before 6 February. Otherwise, they risk being furloughed – that is, not being paid – or fired.

The likely author of this memo is Elon Musk, the richest person in the world, whom Trump tapped to become head of the so-called “department of government efficiency”.

When Musk fired 80% of Twitter’s employees on taking over the firm in 2022, he used the same language that headed this week’s memo to federal employees: “A fork in the road.”

But make no mistake. These new initiatives are not about shrinking the size of the federal government. They’re about centralizing control of the federal government in Trump’s hands.

Trump aims to put people into these jobs who are more loyal to him than they are to the United States.

Trump’s attempted takeover of the US government is itself part of a larger strategy to replace American democracy with an oligarchy.

Concentrated power promotes concentrated wealth, just as concentrated wealth promotes concentrated power. The two are symbiotic.

Musk needs Trump as much as Trump needs Musk.

• Robert Reich, a former US secretary of labor, is a professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His newest book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com