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‘Grant purgatory’ is a growing risk to crisis response, and the government shutdown isn’t helping

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2 months ago

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State officials on the front lines of preparing for natural disasters and responding to emergencies say severe cuts to federal security grants, restrictions on money intended for readiness and funding delays tied to litigation are posing a growing risk to their ability to respond to crises.

It’s all causing confusion, frustration and concern. The federal government shutdown isn’t helping.

“Every day we remain in this grant purgatory reduces the time available to responsibly and effectively spend these critical funds,” said Kiele Amundson, communications director at the Hawaii Emergency Management Agency.

The uncertainty has led some emergency management agencies to hold off on filling vacant positions and make rushed decisions on important training and purchases.

Experts say the developments complicate state-led emergency efforts, undermining the Republican administration’s stated goals of shifting more responsibility to states and local governments for disaster response.

In an emailed statement, the Department of Homeland Security said the new requirements were necessary because of “recent population shifts” and that changes to security grants were made “to be responsive to new and urgent threats facing our nation.”

A new wrinkle tied to immigration raids

Several DHS and FEMA grants help states, tribes and territories prepare for climate disasters and deter a variety of threats. The money pays for salaries and training, and such things as vehicles, communications equipment and software.

State emergency managers say that money has become increasingly important because the range of threats they must prepare for is expanding, including pandemics and cyberattacks.

FEMA, a part of DHS, divided a $320 million Emergency Management Performance Grant among states on Sept. 29. But the next day, it told states the money was on hold until they submitted new population counts. The directive demanded that they omit people “removed from the State pursuant to the immigration laws of the United States” and to explain their methodology.

The amount of money distributed to the states is based on U.S. census population data. The new requirement forcing states to submit revised counts “is something we have never seen before,” said Trina Sheets, executive director of the National Emergency Management Association, a group representing emergency managers. “It’s certainly not the responsibility of emergency management to certify population.”

With no guidance on how to calculate the numbers, Hawaii’s Amundson said staff scrambled to gather data from the 2020 census and other sources, then subtracted he number of “noncitizens” based on estimates from an advocacy group.

They are not sure the methodology will be accepted. But with their FEMA contacts furloughed and the grant portal down during the federal shutdown, they cannot find out. Other states said they were assessing the request or awaiting further guidance.

In its statement, DHS said FEMA needs to be certain of its funding levels before awarding grant money, and that includes updates to a state’s population due to deportations.

Experts said delays caused by the request could most affect local governments and agencies that receive grant money passed down by states because their budgets and staffs are smaller. At the same time, FEMA also reduced the time frame that recipients have to spend the money, from three years to one. That could prevent agencies from taking on longer-term projects.

Bryan Koon, president and CEO of the consulting firm IEM and a former Florida emergency management chief, said state governments and local agencies need time to adjust their budgets to any kind of changes.

“An interruption in those services could place American lives in jeopardy,” he said.

Grant programs tied up by litigation

In another move that has caused uncertainty, FEMA in September drastically cut some states’ allocations from another source of funding. The $1 billion Homeland Security Grant Program is supposed to be based on assessed risks, and states pass most of the money to police and fire departments.

New York received $100 million less than it expected, a 79% reduction, while Illinois saw a 69% reduction. Both states are politically controlled by Democrats. Meanwhile, some territories received unexpected windfalls, including the U.S. Virgin Islands, which got more than twice its expected allocation.

The National Emergency Management Association said the grants are meant to be distributed based on risk and that it “remains unclear what risk methodology was used” to determine the new funding allocation.

After a group of Democratic states challenged the cuts in court, a federal judge in Rhode Island issued a temporary restraining order on Sept. 30. That forced FEMA to rescind award notifications and refrain from making payments until a further court order.

The freeze “underscores the uncertainty and political volatility surrounding these awards,” said Frank Pace, administrator of the Hawaii Office of Homeland Security. The Democratic-controlled state received more money than expected, but anticipates the bonus being taken away with the lawsuit.

In Hawaii, where a 2023 wildfire devastated the Maui town of Lahaina and killed more than 100 people, the state, counties and nonprofits “face the real possibility” of delays in paying contractors, completing projects and “even staff furloughs or layoffs” if the grant freeze and government shutdown continue, he said.

The myriad setbacks prompted Washington state’s Emergency Management Division to pause filling some positions “out of an abundance of caution,” communications director Karina Shagren said.

A series of delays and cuts disrupts state-federal partnership

Emergency management experts said the moves have created uncertainty for those in charge of preparedness.

The Trump administration has suspended a $3.6 billion FEMA disaster resilience program, cut the FEMA workforce and disrupted routine training.

Other lawsuits also are complicating decision-making. A Manhattan federal judge last week ordered DHS and FEMA to restore $34 million in transit security grants it had withheld from New York City because of its immigration policies.

Another judge in Rhode Island ordered DHS to permanently stop imposing grant conditions tied to immigration enforcement, after ruling in September that the conditions were unlawful — only to have DHS again try to impose them.

Taken together, the turbulence surrounding what was once a reliable partner is prompting some states to prepare for a different relationship with FEMA.

“Given all of the uncertainties,” said Sheets, of the National Emergency Management Association, states are trying to find ways to be “less reliant on federal funding.”



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Rivian CEO says it’s a misconception EVs are politicized, with a 50-50 party split among R1 buyers

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December 10, 2025

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If Rivian’s sales are any indication, owning an electric vehicle isn’t such a partisan issue, despite President Donald Trump’s rollbacks of mandates, incentives, and targets for EVs.

At the Fortune Brainstorm AI conference in San Francisco on Tuesday, Rivian CEO RJ Scaringe said it’s a misconception that electrification is politicized, explaining that most customers buy a product based on how it fits their needs, not their ideology. The questions car buyers ask, he said, are the same whether they’re purchasing one with an internal-combustion engine or a battery: “Is it exciting? Are you attracted to the product? Does it draw you in? Does the brand positioning resonate with you? Do the features answer needs that you have?”

Buyers of Rivian’s R1 electric SUV are split roughly 50-50 between Republicans and Democrats, Scaringe told Fortune’s Andrew Nusca. “I think that’s extraordinarily powerful news for us to recognize—that this isn’t just left-leaning buyers,” he added. “These are people that are saying, ‘I like the idea of this product, I’m excited about it.’ And this is thousands and thousands of customers. This is statistically relevant information.”

Buying an EV was once an indication of left-leaning politics, but the politics got scrambled after Tesla CEO Elon Musk became the top Republican donor and a close adviser to Trump. That drew some new customers to Tesla, and turned off a lot of progressive EV buyers, with many existing owners putting bumper stickers on their Teslas explaining that they bought their cars before Musk’s hard-right turn. Trump and Musk later had a stunning public feud, in part over the administration’s elimination of EV and solar tax credits.

But Scaringe said he started Rivian with a long-term view, independent of any policy framework or political trends. He also insisted that if Americans have more EV choices, sales would follow. Right now, Tesla dominates a key corner of the market, namely EVs in the $50,000 price range. Rivian’s forthcoming R2 mid-size SUV will represent a new choice in that market, with a starting price of $45,000 versus the R1’s $70,000.

Ten years from now, Scaringe said he hopes—and believes—that EV adoption in the U.S. will be meaningfully higher than it is today across the board, explaining that the main constraint isn’t on the demand side. Instead, it’s on the supply side, which suffers from “a shocking lack of choice,” especially compared to Europe and China, he added. EV options in the U.S. are limited by the fact that Chinese brands are shut out of the market.

More choices for U.S. EV buyers would presumably create more competition for Rivian—and indeed, the flood of low-priced Chinese EVs in other auto markets has created a backlash, with countries such as Canada imposing steep tariffs on them. But Scaringe appears to view more competition as positive for the market overall.

“I do think that the existence of choice will help drive more penetration, and it actually creates a unique opportunity in the United States,” he said.



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Powell warns of a ‘very unusual’ economy as inflation remains high amid a weakening job market

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December 10, 2025

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Federal Reserve Chair Jerome Powell on Wednesday described the U.S. economy as “very unusual,” saying policymakers are navigating a rare combination of tariff-driven goods inflation and a labor market that may already be weaker than official data suggests.

The Fed cut interest rates for the third consecutive meeting, a quarter-point reduction Powell framed not as a confident pivot toward easier policy, but as a defensive move meant to keep the labor market from slipping further. He repeatedly emphasized risks to employment have risen “in recent months,” and noted that behind the headline numbers, job creation may already be negative.

Powell made the striking admission the Fed believes the official payroll figures—which have slowed sharply since the summer—are overstating job growth by roughly 60,000 per month. 

“Forty thousand jobs could be negative 20,” he said, adding this dynamic is not well understood by the public because unemployment claims remain historically low—something both economists Mark Zandi and Claudia Sahm recently toldFortune could be giving people a false sense of security about the job market.

“I think a world where job creation is negative… we need to watch that very carefully,” Powell said. 

It is this weakening backdrop Powell said makes the current moment “very unusual”: Inflation remains elevated, but most of the remaining overshoot comes from goods categories directly affected by tariffs, as opposed to domestic economic overheating, which he said the Fed has worked hard to cool since its 2022 highs; inflation excluding tariff-affected goods is “in the low [two percent],” he said. Services inflation is cooling, wage pressures are easing, and neither the labor market nor business surveys suggest a “Phillips-curve” kind of inflation threat, Powell said, referring to the inverse relationship between inflation and unemployment. 

Instead, Powell said, the bulk of the problem is a “one-time price increase” pushing up goods categories as import levies work their way through supply chains. Goods inflation, he noted, should peak around the first quarter of 2026, assuming no additional tariff rounds.

Those crosscurrents have fractured the Fed. Three officials formally dissented from the rate cut on Wednesday, and several others offered what Powell described as “soft dissents,” when an official’s personal projection falls out of what they ultimately voted for. There were six such “soft dissents” this time, during one of the deepest divides inside the FOMC in years, driven by disagreement over how to weigh the risks of lingering inflation against the possibility that job growth is weaker—and much more fragile—than reported.

Powell stressed that policymakers cannot simply choose one mandate to prioritize. 

“There is no risk-free path,” he said, a refrain he’s repeated for months. “When both sides of the mandate are threatened, you should be kind of neutral.” 

He characterized the current stance as being at the “high end” of neutral, allowing the Fed to “wait and see” how the data evolve.



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Top economist Diane Swonk: Jerome Powell risks losing the Fed’s credibility on a gamble about AI and immigration

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December 10, 2025

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Federal Reserve Chair Jerome Powell warned Wednesday afternoon that the U.S. labor market may be significantly weaker than the official data suggest. But according to KPMG chief economist Diane Swonk, the Fed may be drawing the wrong conclusion—and in doing so, risks undermining its hard-won credibility on fighting inflation.

In a new analysis shared with Fortune, Swonk argues that Powell is treating the slowdown in hiring as a sign of weakening demand that must be offset with lower interest rates. But if that weakness is being driven instead by structural forces—specifically, AI adoption and sharp declines in immigration—then cutting rates won’t fix the underlying problem and could worsen inflation.

“Powell risks the Fed’s inflation-fighting credibility if the weakness in employment is due more to AI and curbs in immigration than weak demand,” Swonk wrote.

That warning comes after one of the most contentious Federal Open Market Committee meetings in years. The Fed cut rates by a quarter point for the third meeting in a row, taking the federal funds rate down to 3.5%–3.75%, but the vote fractured the committee. Swonk notes it was the first time since 2019 that there were three dissents, and they came “in opposite directions.”

Governor Stephen Miran — currently on leave from the White House Council of Economic Advisers — voted for a half-point cut, while Kansas City Fed President Jeff Schmid and Chicago Fed President Austan Goolsbee voted to hold rates steady.

Swonk highlights that the Fed’s statement resurrected language meant to indicate a pause: “In considering the extent and timing of additional adjustments… the Committee will carefully assess incoming data, the evolving outlook and the balance of risks.” Powell reinforced that stance, saying “We are well positioned to see how the economy evolves” and emphasizing that policymakers would need to “be a bit skeptical” of data distorted by the government shutdown.

But the bigger issue, Swonk argues, is that Powell kept pointing to imminent downward revisions to employment, revisions she warns may not mean what the Fed thinks they do.

If job growth is negative because automation is replacing workers or because the labor force is shrinking due to immigration policy, then monetary policy can’t solve the problem. That’s because rate cuts can stimulate demand, but they cannot create workers or reverse automation decisions already made by firms. 

“The challenge is if that weakness is due to AI and curbs on immigration, then rate cuts will not do much to shore up the labor market. More could show up in inflation,” she wrote.

Powell, during the conference, acknowledged that AI may be “part of the story” behind the cooling labor market, citing major employers like Amazon that have linked hiring freezes and job cuts to automation. But he stressed that it’s “not a big part of the story yet,” and said it’s too early to know whether this wave of technological change will ultimately destroy more jobs than it creates.

He also noted that labor supply has “come down quite sharply” due to a drop in immigration and participation.

A misread could become especially dangerous given the fiscal backdrop. Swonk notes that “expansions to tax cuts last year will show up as a record high tax refunds in early 2026,” warning that the windfall could “further entrench inflation much like we saw in the wake of the pandemic.” 

At the same time, federal debt is projected to surpass GDP for the first time since World War II, marking a level of issuance that is “a lot of debt for bond markets to absorb.”

Swonk also flags mounting risks to credibility inside the Fed itself.

Six participants wanted to hold rates steady, and the market openly dismissed Powell’s attempt at a hawkish spin: investors “priced in more cuts after the meeting,” she notes. Powell now appears to be one of the more dovish voices on the committee, raising questions about the direction of policy if the administration installs a new chair aligned with Miran’s more aggressive easing stance.

Swonk expects the Fed to pause early next year, but warns that if inflation fails to cool as expected, “the bond market could grow more skittish about rate cuts.”



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