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HomeBusiness & MoneyThe initial disputes between Trump and Musk regarding spending might just be...

The initial disputes between Trump and Musk regarding spending might just be a preview of more turmoil ahead.

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Some high-profile fights in the early weeks of the Trump administration are linked together by the question of presidential spending authority.

And it could be just a small taste of what’s to come.

At issue is whether a president can take spending laws passed by Congress as suggestions instead of edicts. The debate has centered on multiple topics, from a short-lived plan for a federal spending “freeze” to Elon Musk’s effort to reorganize entire agencies.

The latest front is the Senate floor, where Democrats launched an effort Wednesday afternoon to hold the upper chamber “all night” over an outspoken nominee on the issue.

“I see this as simply the start of what’s going to be a long, drawn-out effort,” said William Hoagland of the Bipartisan Policy Center in a recent interview about early developments.

The tactic at issue goes by the technical name of “impoundment,” a reference to what happens when congressionally appropriated money simply isn’t spent by the president’s executive branch.

It’s a concept that Trump made part of his 2024 campaign — and Musk embraced during the transition — and is likely to end up before the Supreme Court.

BROWNSVILLE, TEXAS - NOVEMBER 19: U.S. President-elect Donald Trump and Elon Musk watch the launch of the sixth test flight of the SpaceX Starship rocket on November 19, 2024 in Brownsville, Texas. SpaceX’s billionaire owner, Elon Musk, a Trump confidante, has been tapped to lead the new Department of Government Efficiency alongside former presidential candidate Vivek Ramaswamy. (Photo by Brandon Bell/Getty Images)
Then President-elect Donald Trump and Elon Musk watch the launch of a test flight in November 2024. (Brandon Bell/Getty Images) · Brandon Bell via Getty Images

The impoundment issue is also part of the back and forth over cutting foreign aid as well as plans for scaling back green energy projects. It’s even an element of the opposition to access that Musk’s team has gained to a sensitive $5 trillion payments system at the US Treasury Department.

“There is real danger,” Senate Minority Leader Chuck Schumer said Tuesday, that Musk’s team “will not only have access to Americans’ private information but they will use that to cut programs left and right.”

Democrats are planning to hold the Senate floor for 30 hours starting on Wednesday afternoon to protest the nomination of Russell Vought — who has called a law limiting impoundment unconstitutional — to lead the Office of Management and Budget.

Vought, after the Democratic hold runs out on Thursday, is expected to be easily confirmed. The fight over the White House’s early spending “freeze” likewise faded quickly.

But the impoundment debate could become more akin to a long-term crisis if — or perhaps when — Trump’s team tries to stretch its powers further and unilaterally and permanently cancel money set aside by Congress.

That would be a crossing of a significant legal rubicon, which many on the left contend is already happening, and one that could overshadow even the high drama of what we’ve seen so far.

WASHINGTON, DC - FEBRUARY 4: Senate Minority Leader Chuck Schumer (D-NY) speaks at a press conference with House Minority Leader Hakeem Jeffries (D-NY) on Democratic efforts to combat DOGE in Washington, DC on February 4, 2025. (Photo by Nathan Posner/Anadolu via Getty Images)
Senate Minority Leader Chuck Schumer speaks at a press conference on Democratic efforts to combat DOGE in Washington, DC on February 4. (Nathan Posner/Anadolu via Getty Images) · Anadolu via Getty Images

A coming fight around a Watergate-era law

The core of the issue is a law called the Impoundment Control Act of 1974.

Following abuses by then-President Richard Nixon, the law was passed to enact a process that the president must follow if he or she wishes to diverge from congressionally mandated funding.

In short: It mandated that a White House needs to go back to ask permission for such a move through what is known as a rescission resolution. The law was then further solidified by a Supreme Court ruling in 1975.

In a 2023 campaign video, then-candidate Trump called the law a “blatant violation of the separation of powers,” adding, “With impoundment, we can simply choke off the money.”

Trump also clashed with the law in his first term — his delay of congressionally mandated funds to Ukraine was part of the basis of his first impeachment — but he also sent rescission resolutions in other instances.

He has staked out a more defiant position this time.

(Original Caption) President Nixon poses in his White House office after making public a three month old U.S. peace plan calling for simultaneous Vietnam troop withdrawals and prisoner release within six months and the resignation of President Thieu of South Vietnam in advance of a new election.
President Nixon is seen at the White House in 1972. (Getty Images) · Bettmann via Getty Images

Hoagland has held discussions with incoming Trump administration officials — including Vought — and said the Trump team’s public and private positions are aligned and crystal clear.

“It was clear from them … that they felt that the Impoundment Control Act was unconstitutional,” Hoagland said of his conversations.

The moment Hoagland is watching for is when Trump and Vought turn to challenge the law directly.

“My sense here is that if they do not submit that rescission resolution, then that’s when the action will take place and get it into the courts,” he says.

It’s not a power grab’

Many in Washington say the constitutional crisis over impoundment is already here as Musk and his DOGE compatriots brag that they are breaking government contracts and ending what the billionaire calls “illegal payments.”

Others see some of Trump’s day-one actions, specifically an early executive order on energy that held back spending on the Biden-era green energy priorities, as the first salvo on impoundment.

Democrats have tried to seize on spending issues as ones with particular political salience. They’ve held protests outside of government agencies and often return to a moment when Trump’s spending freeze led to a short-term shutdown of the Medicaid portal.

WASHINGTON DC, DISTRICT OF COLUMBIA, UNITED STATES - 2025/02/04: A protester holding a placard gather outside of the United States Office of Personal Management (OPM) headquarters to stand against what they called a
A protester holds a placard gather outside of the United States Office of Personal Management (OPM) headquarters to stand against what they call a “coup” by Elon Musk and his aides to seize the department’s data. (Michael Nigro/Pacific Press/LightRocket via Getty Images) · Pacific Press via Getty Images

It was an opening — one that frustrated some Republican allies of Trump and galvanized Democratic opposition — that saw the impoundment debate moving from legal circles to everyday lives.

And Republican lawmakers are being challenged on the issue, with House Speaker Mike Johnson asked Wednesday whether Republican lawmakers are ceding their “power of the purse” to let Trump act unilaterally.

On the apparent Trump plan to end the Department of Education, Johnson rejected the premise that Congress was being undercut. He wouldn’t say if a new law was needed to codify such a move and called what is happening now a “pause.”

“Right now, I think they’re acting within the scope of their authority,” he said of the Trump administration. “It’s not a power grab.”

Others plainly disagree. Bobby Kogan, a budget expert at the left-leaning Center for American Progress, said the larger dynamic here is that “Congress doesn’t have the votes to do what Trump proposed” in terms of some of his more intense cutback ideas.

He cited an internal memo from House Budget chief Jodey Arrington that floated deep cuts but saw lawmakers immediately distance themselves from the more controversial ideas.

WASHINGTON, DC - FEBRUARY 05: U.S. Speaker of House Mike Johnson (R-LA) speaks at a press conference at the U.S. Capitol February 5, 2025 in Washington, DC. Johnson spoke on the House Republicans plans to advance President Trump's agenda and the need to pass a government funding bill by March 14 to advert a government shutdown. Johnson was joined by Rep. Tom Emmer (R-MN) (C) and House Majority Leader Rep. Steve Scalise (R-LA).  (Photo by Win McNamee/Getty Images)
Speaker of House Mike Johnson speaks at a press conference at the U.S. Capitol on February 5. (Win McNamee/Getty Images) · Win McNamee via Getty Images

“They clearly want to do this,” said Kogan of Republican congressional leaders, “and the benefit for them is if Trump can do it unilaterally, then they don’t have to attach their name to it.”

That internal document, which outlined various options for an upcoming reconciliation and was obtained separately and reviewed by Yahoo Finance, shows Arrington proposing an array of reforms, including ones to Medicaid that would cut up to $2.8 trillion from the program in the decade ahead.

But as the political fights continue to play out, there’s one final outcome largely agreed upon.

The Impoundment Control Act “is going to go before the Supreme Court,” Kogan said. “100% for sure that’s happening.”

Ben Werschkul is Washington correspondent for Yahoo Finance.

Every Friday, Yahoo Finance’s Rick Newman and Ben Werschkul bring you a unique look at how U.S. policy and government affects your bottom line on Capitol Gains. Watch or listen to Capitol Gains on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.

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Trump’s 2.0 trade war is already ‘fundamentally different’ from 1.0

The hectic kick off to Donald Trump’s tariffs in recent days is making one thing abundantly clear: This is very different from Trump 1.0.On an array of issues — from the speed of the duties and the wider array of consumer staples caught in the middle to Trump’s plan to use tariffs for “getting everything else you want” — the president is offering a new and unpredictable approach.After announcing historic duties on America’s top three trading partners over the weekend, Trump then shocked markets again on Monday with a quick pivot on two of them.As of Tuesday morning, 10% duties on China are in place, and the world’s second-largest economy has already hit back. The 25% duties on Canada and Mexico are on hold for a month as talks continue.Meanwhile, the rest of the world is also approaching the issue differently. In just one example, China threatened Tuesday to use probes into Google (GOOGGOOGL) and Nvidia (NVDA) as leverage in the coming face-off.At a Politico event on Tuesday morning, Trump’s senior counselor for trade and manufacturing Peter Navarro said the president’s call with Chinese leader Xi Jinping will take place today and that a tariff pause will be on the table.The unpredictable mix is clearly flummoxing Wall Street and the rest of corporate America.”It is fundamentally different,” former US trade representative general counsel Greta Peisch said in an interview, noting that Trump is now “breaking new ground in what is a trade authority, what are they used for, and how expensive the transactions will be.”President Donald Trump speaks as Treasury Secretary Scott Bessent, left, and Commerce Secretary nominee Howard Lutnick listen as Trump prepares to sign an executive order in the Oval Office of the White House, Monday, Feb. 3, 2025, in Washington. (AP Photo/Evan Vucci)President Donald Trump, flanked by Treasury Secretary Scott Bessent and Commerce Secretary nominee Howard Lutnick, answered questions from reporters on a range of topics, including tariffs, on Monday. (AP Photo/Evan Vucci) · ASSOCIATED PRESSHow Trump is differentTrump is approaching the tariff issue this time around at a different speed and promising duties at higher levels. The current “blanket tariffs first” approach in evidence this week was absent from 2017-2020.Trump invoked a 1977 law allowing a president to declare an emergency and act immediately as he enacted duties this week.Trump used different — and much more gradual — authority last time. He also started talks with China and signed tariff-related executive orders in the early months of 2017 but then held off on key new duties for an entire year.It wasn’t until Jan. 22, 2018, that Trump levied duties on solar panels and washing machines. Then, in March 2018, he moved on to tariffs for steel and aluminum.Now, during the start of his second term, the order is reversed. Trump has imposed the new duties on China even as he promises talks with China will come later this week.In remarks to reporters on Monday, Trump called his 10% duties on China the “first salvo” in talks.Story ContinuesView Comments (1.6k)Terms and Privacy PolicyPrivacy & Cookie Settings

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EY chief economist Greg Daco has taken a macroeconomic look and estimated that US GDP would contract by 1.5% in 2025 and 2.1% in 2026 if the tariffs stay in place.

On the other side of the ledger, the nonpartisan Committee for a Responsible Federal Budget estimates that the duties are likely to raise up to $1.5 trillion for the US Treasury over the coming decade if they are made permanent.

WARSAW, POLAND - 2025/01/28: Canada's Prime Minister Justin Trudeau speaks at a press conference with PM Donald Tusk (not in view) in Warsaw. The Canadian Prime Minister Justin Trudeau visited Poland and met with Donald Tusk - Poland's PM in Warsaw. The Prime Ministers talked about strong support and how to strengthen Ukraine in the war, security issues and trade exchange between Poland and Canada. The Prime Ministers also discussed Canada's participation in projects related to Poland's energy security and signed an agreement on nuclear energy cooperation. (Photo by Attila Husejnow/SOPA Images/LightRocket via Getty Images)
Canadian Prime Minister Justin Trudeau speaks at a press conference during a visit to Poland earlier this week. (Attila Husejnow/SOPA Images/LightRocket via Getty Images) · SOPA Images via Getty Images

The White House has meanwhile tried to downplay possible economic effects while disputing any link between inflation and price increases.

White House Press Secretary Karoline Leavitt on Friday avoided a question about whether the administration would reverse tariffs if they do increase prices accusing the media of looking at the issue “in a microscope rather than looking at the whole of government economic approach that this president is taking.”

Other voices on Saturday offered praise for the move.

The top GOP tax official on Capitol Hill — House Ways and Means Committee Chairman Jason Smith — praised the move, saying Trump “is delivering on his promise to take bold action to protect our communities, secure our borders, and bring in additional revenues to the federal government.”

But other Trump allies were critical.

“Tariffs are simply taxes,” wrote Sen. Rand Paul, who is a vocal Trump advocate on other fronts. “Taxing trade will mean less trade and higher prices.”

The Canadian Chamber of Commerce added its own blistering statement that called Trump’s move “profoundly disturbing” and added that it “will have immediate and direct consequences on Canadian and American livelihoods.”

Technical details of the duties

Trump imposed the new duties using a presidential authority granted in a 1977 law that allows them to be in place quickly.

The use of the International Emergency Economic Powers Act does give Trump considerable latitude to move quickly but could also open him to legal challenges.

The law also only asks for consultation with Congress “in every possible instance.”

Overall, Saturday’s move is seen as a likely restarting of trade wars that marked Trump 1.0 but at a higher volume with the president now promising to go even further in the weeks and months ahead.

Trump’s actions between 2017 and 2020 were often wide-ranging — covering well over half of Chinese imports, for example — but often limited and focused on specific sectors like steel and aluminum.

This time around, Trump has acted first on large umbrella tariffs which the Tax Foundation estimates will hit about $1.4 trillion worth of imports, compared to $380 billion during Trump’s first term.

And additional sector specific tariffs could be in the offing soon and Trump himself listed many goods Friday that could be in store for additional duties in the months ahead.

It was a sizable list of industries from semiconductors to steels to copper to pharmaceuticals. He also outlined a plan to “absolutely” impose tariffs on the European Union in the future.


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Daniel Alison
Daniel Alison
Daniel is a dynamic radio news presenter with a passion for delivering compelling stories that inform and inspire. Known for a clear, engaging voice and a knack for breaking down complex topics, Daniel brings energy and insight to the airwaves. Outside the studio, they are an avid cryptocurrency enthusiast, exploring the evolving world of blockchain technology and digital assets. Whether discussing global news or the latest trends in crypto, Daniel combines curiosity and expertise to keep audiences informed and entertained.

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