Christmas 2024: Visions of St. Nick and money for nothing and chicks for free, but the specter of the DOGE grinch looms

Throughout the land during this Christmas season, children are having visions of St. Nick, while favored nonprofits and businesses listen to Dire Straits “Money for nothin’, chicks for free.” Still, the DOGE Grinch raises the lurking specter of recissions.

The Biden Administration is furiously pushing grant funds out in the remaining days of the President’s term. Earlier this month, the Administration reached the threshold of $100 billion awarded under the Inflation Reduction Act (IRA) and announced plans to obligate more than 80% of available Fiscal Year 2024 IRA grant funding before Trump takes office on January 20. There have been delays in grant making under the IRA due to the complexity of the regulatory and administrative structures that had to be built given the sheer size of awards under the program. The incoming Trump Administration has vowed to clawback all unspent IRA funds, in addition to unobligated funds from other Biden-era funding initiatives.

Obligated funds are generally protected by executed contracts between funding agencies and grantees. These usually can’t be clawed back except in cases of sub-par grantee performance and/or corruption. But, presidents can attempt rescissions (the elimination of previously approved, but not obligated, spending), as we wrote about in 2011 during the Obama administration. While recissions usually don’t impact obligated funds, the blizzard of large spending bills like the IRA, the CHIPS and Science Act, and the Infrastructure Investment and Jobs Act (IIJA) are fat targets for clawbacks.

Hundreds of billions of FY 2025 and FY 2026 dollars of funding under the IRA, IIJA, CHIPS, and Science Act and other programs are at risk under a number of scenarios. The incoming Administration can use agency rule-making processes to suspend, delay or change rules related to the implementation of legislation. Legislative changes to these programs could swap out intended priorities of the Ancien Régime for those favored by the incoming nouveau riche (French Revolution references for you history buffs). Competitive wage provisions, specific environmental standards, and DEI/Community Benefit requirements are likely to be easy targets. A common practice is for incoming administrations to freeze any pending regulations under a spending program or to delay or withhold awards, running out the clock on the future appropriations while the recission is formally pursued.

In addition to grants, the IRA and other programs provide authority for significant loans and tax credits to businesses in favored sectors like EV batteries, chip makers, etc., supposedly to support tech sectors and the expansion of clean energy. Being a cynic and experienced grant writer, I view these as being more like party favors (remember Obama’s Solyndra fiasco).

Tax credits are harder to rescind than grants or loans, as they don’t require specific appropriations, but rather a change to tax law. The Act’s tax credits for electric vehicles are a particular source of scorn, but a case can be made that such tax credits have spurred billions in investments to support additional manufacturing capacity and related jobs. Many of these are in red states, so the tax credits in IIJA and CHIPS and Science Act have enjoyed more widespread bipartisan support than the IRA and may face less opposition by the incoming Administration. Still, many of these giant grants/loans/tax credits were cooked up by naïve federal political appointees (Under Assistant Secretary for Obscure Programs) and lobbyists—I’m pretty sure DOGE will be on these like a pit bull on a pork chop.

Any President can propose recissions under the Impoundment Control Act of 1974 (ICA), which also authorizes deferrals of budget authority (temporary delays in the release of funds for obligation). In 1972, President Nixon vetoed spending on an environmental project he disliked. Congress overrode his veto and in response, he attempted to “impound” the funds, prompting lawsuits and the eventual passage of the ICA in 1974. Nixon signed the bill with little protest due to the Watergate scandal that was in full swing at the time of passage.

Once the President requests a recission, Congress considers a “recission bill,” which examines the impact of the project or function related to the funding in question. Simultaneously, the judicial branch considers whether the proposed recission is subject to review by the courts. Trump has stated publicly that the ICA is “unconstitutional.” Some observers think that the Supreme Court’s July 2024 judgment that Presidents enjoy broad immunity may have carved new possibilities for Trump to decline to enforce the IRA or other Biden-era programs. Trump would need the cooperation of Congress to dismantle the IRA tax breaks altogether. Congress can also assist in undoing the IRA and other Biden spending priorities using the budget reconciliation process, which can quickly enact fiscal changes through simple-majority votes in both houses rather than the 60-vote threshold usually required for passage in the Senate. The Trump administration and Republican leaders are planning at least one budget reconciliation bill in 2025.

Will any of this happen? Who knows, but get the popcorn and movie candy* ready, as it should be quite a show.

*My approved movie candy: Boston Baked Beans, Peanut M& M’s, Milk Duds, Whoppers, and Junior Mints.