The rule change that could gut the Left’s federal funding machine

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It’s no coincidence that conservative presidential candidates have been on an unprecedented 6-0 run in Latin America since President Donald Trump shut down the U.S. Agency for International Development and its financial spigot. The American taxpayer is no longer funding enemies south of the border. That means candidates who like America win.

Now, Trump is about to do the same to leftist causes domestically.

His Office of Management and Budget’s notice of proposed rulemaking will shut down millions in federal spending on leftist mischief throughout the country. It’s the regulatory accompaniment to many executive orders the administration has issued since coming into office. With this sweeping rules change, OMB proposes codifying many of the executive orders, and doing to leftist programs what he has done to NPR and PBS.

The OMB NPRM, issued on May 29 and open for comments until July 13, will dry up funding for DEI, critical race theory, disparate impact, and all other types of racial and sexual discrimination disguised as social justice programs. It will even stop funding projects with communist China.

And it will hand ultimate decision-making on project funding to political appointees. That kind of adult supervision will make sure that the taxpayer is funding the activity that he votes for at election time.

OMB says the rules aim to improve transparency, accountability, and oversight of federal awards, ensure that taxpayer dollars are not misused, and reduce compliance burden on recipients.

All of this is true, but the rule would cut down further the power of an elected bureaucracy to do what it wants, no matter what the electorate wants. This is giving the Left heartburn, as it should.

Over the years, the Left had built itself a neat system in which government handed federal financial assistance to leftist projects, whose participants then turned around and gave political contributions to the candidates who supported these projects.

For the Left, it was win-win. Of course, they’re upset.

Since Trump effectively closed down USAID, conservative, pro-American candidates have won presidential elections in Ecuador, Bolivia, Honduras, Chile, Costa Rica, and, most recently, Peru. In Colombia, a very Trump-like candidate won the first round of elections on May 31 with 44% of the vote, and looks good to win the second round on June 21.

The Left has reacted with violent mayhem on the streets of Santiago de Chile and several cities in Bolivia. There will be similar gnashing of teeth here.

Here, after all, is what the OMB NPRM proposes.

Diversity, Equity, and Inclusion

The OMB rule proposes that, when administering federal awards, federal agencies and pass-through agencies that act as middlemen “ensure that the Federal award is not used to fund, promote, encourage, subsidize, or facilitate ‘Diversity, equity, and inclusion’ (DEI) or ‘diversity, equity, inclusion, and accessibility’ (DEIA) policies, principles, or practices that violate any applicable Federal anti-discrimination laws.”

This includes activities “where race or intentional proxies for race will be used as a selection criterion for employment or program participation.”

The rule even integrates DEI considerations into pre-award review, not just compliance after a program has been funded. It seeks to establish a new pre-issuance review process consistent with Executive Order 14332 of last August, “Improving Oversight of Federal Grantmaking.”

The rule orders that senior political appointees, not career bureaucrats, “conduct these reviews and apply specific principles when evaluating proposals. These principles include ensuring that discretionary awards advance the president’s policy priorities” and “prohibit the use of funds for discriminatory” purposes.

In proposing to take these steps, the administration explicitly stated that it was attempting to undo the draconian DEI regime imposed by the Biden administration from its first day in office, when it issued Executive Order 13985.

As the Trump OMB rule says, “that order instructed Federal agencies to set aside the decision-making processes used in previous years, which generally aimed to ensure that all Americans were treated equally, and to instead focus on remaking the system of grants administration with divisive identity-based DEI policies imposed throughout.”

Russell Vought, Office of Management and Budget director, listens as he addresses members of the media outside the West Wing of the White House, Monday, Sept. 29, 2025. (AP Photo/Evan Vucci)

The rule quotes four times from a paper I co-authored with my former Heritage colleagues David Ditch, Hans von Spakovsky, and Erin Dwinell (“President Biden’s `Equity Action Plans’ Reveal Radical, Divisive Agenda”), published a year after the original Biden executive order, when his administration was embedding these ideas throughout federal programs. These equity action plans were co-authored with officials from Black Lives Matter, as we pointed out in our paper.

What our paper demonstrated is what the rule plainly states: “Federal programs and funding opportunities were designed to advance unlawful identity-based ‘Diversity, Equity, and Inclusion’ (DEI) policies and preferences across the country.”

As one of the rules’ bitterest critics, Lisa Needham at Public Notice, put it just last week, our paper was the authority for that citation.

Gender theories

The rule also proposes that federal agencies and pass-through agencies ensure that federal awards are not used to “fund, promote, encourage, subsidize, or facilitate any type of gender ideology as defined in Executive Order 14168.

“Gender ideology includes theories or ideologies that deny the biological reality of sex or the sex binary in humans, or endorse or advocate for the notion that sex is a chosen or mutable characteristic,” it says.

The government can also not fund so-called sexual transitions of anyone under 19, “including the chemical and surgical mutilation of children.”

Disparate impact

The rule proposes prohibiting the use of federal awards to promote or support the theory of disparate-impact liability. This doctrine holds that any policy or practice that produces outcomes that are disparate between members of racial and sexual groups or any category that is deemed marginalized, say, a merit-based system of promotion, or rules that establish school discipline, is the result of unlawful discrimination and is therefore illegal.

The adoption of disparate impact liability has created obstacles to progress from the classroom to the factory floor or office. As the OMB rule points out, this presumption of discrimination “would apply even if there is no facially discriminatory policy or practice, there is no discriminatory intent involved, and equal opportunity is provided.”

What results is, perversely, racism. As the rule says, “Disparate-impact liability effectively mandates consideration of federally protected characteristics, such as race or sex, and incentivizes racial balancing, contrary to principles of equal treatment and merit-based opportunity.”

The rule, therefore, establishes what it calls a General prohibition: “To the maximum extent permitted by law, Federal agencies must eliminate the use of disparate-impact liability in all contexts relevant to Federal awards.”

China

Finally, the rule seeks to safeguard national security interests by prohibiting “the obligation or expenditure of Federal funds to support certain foreign collaborations involving covered foreign countries or covered foreign entities.”

To make sure that no one is confused as to what this means, OMB reminds us that federal statutes already direct agencies “to restrict the use of appropriated funds for bilateral or multilateral activities with foreign adversaries.”

“Most notably,” it adds, the Wolf Amendment already prohibits the use of appropriated funds to “participate, collaborate, or coordinate bilaterally with China or any Chinese-owned company, absent specific statutory authorization.”

HATE BIG PHARMA ALL YOU LIKE, IT STILL MIGHT SAVE YOUR LIFE

It was all too much for critics. To Needham at Public Notice, for example, the rule is based on a Trump “rant about forbidden DEI, racist stuff about China, and transphobia galore.” To Ryan Quinn at Inside Higher Ed, the rule “raises alarms about political interference in science.”

No, what it does is put the people in charge.