Trump Rejects Iran Deal, Targets Blue States Over ‘Corruption’ - Newsweek
Balancing the United States' budget would not come from a deal with Iran, but with a focus on what he viewed as "corruption and crime" in Democratic-run states, President Donald Trump said on Thursday.
In a post to Truth Social, Trump said he asked Vice President JD Vance to "focus his complete and total attention" on the alleged corruption in states including Minnesota, California and Illinois, as well as others, calling them "poorly run, corrupt disasters."
Trump did not provide proof for the alleged corruption but said billions of dollars were being stolen each month and that the money could be recovered rather than striking a deal with Iran.
"Our Budget could be quickly BALANCED with the correction of this large scale criminal activity," Trump wrote. "CORRUPTION is in the Democrat Leadership’s blood! We don’t need a deal with Iran. Those days have long since passed. We’ve got their money, Hundreds of Billions of Dollars, and we’ve got their Strait!"
Vance has been leading White House efforts to investigate alleged fraud and corruption within the federal government and elsewhere, including in the immigration system.
Minnesota has been embroiled in a fraud investigation relating to federal funding, with around $250 million from a children's nutrition program allegedly stolen.
Newsweek reached out to the Government Accountability Office (GAO), and the governors' offices in California, Illinois and Minnesota for comment Thursday morning.
In his post, Trump said the U.S. already holds Iran's money and the Strait of Hormuz, so a deal with the country is not necessary.
Trump has gone back-and-forth over whether a deal could be reached or is needed to end the war that began with joint Israeli-U.S. strikes on February 28. The war, framed around preventing Iran from having nuclear weapons, saw the Strait of Hormuz blockaded, prompting a spike in global oil prices.
Iranian officials have said that at least $100 billion of their assets is frozen abroad, but other estimates run lower.
Earlier this week, Trump said the U.S. was "keeping it the status quo" with Iran, and that the war was militarily "effectively over," but strikes on vessels in the Strait have continued.
The war is also viewed as having a major impact on the Republican Party's performance in the midterm elections, in part because of its impact on gas prices and the wider cost of living. Vance acknowledged it on X after the results came in, but Trump and Defense Secretary Pete Hegseth have defended the administration's actions.
According to the GAO, between $223 billion and $521 billion is lost annually in federal government losses to fraud, based on fiscal years 2018 through 2022. That works out to roughly $19 billion to $43 billion per month.
A report first published on July 23 said that around $1.2 trillion in federal funding was spent on 20 programs in fiscal year 2025, including Medicaid, SNAP and disaster assistance. Because the programs at the state level can rely on third-party contractors, the GAO said, leaving them open to fraud.
Examples of fraud ranged from a consultant convicted of falsifying permits in a $4.3 million airport improvement project, to households underreporting income when claiming benefits.
While some instances of federal funds being lost can be attributed to fraud, they are also lost due to eligibility errors and insufficient documentation.
The GAO report did not specify that Democratic-run states were the sole sources of instances of fraud.
There have been cases of fraud in some blue states, including Minnesota, where the Feeding Our Futures program has become the focus of investigations at the state and federal levels.
The scandal saw funds for the child nutrition program syphoned off by some of those meant to be administering the funds, including Somali Americans. While investigations and prosecutions had already been underway, conservative influencer Nick Shirley's reporting on the matter in late 2025 led to the sweeping federal immigration crackdown in Minneapolis and St. Paul.
Prosecutors said in August that 26 people had been sentenced in the case so far, but there remains no clear evidence that Democratic leaders, including Governor Tim Walz, participated in the fraud.
In Illinois, a state audit in fiscal year 2025 found 53 instances of serious control failures, including weaknesses or noncompliance, within its systems, but they did not necessarily link to potential fraud or corruption cases. The main issue, the report said, was that the state lacked adequate processes for timely and accurate reporting on federally awarded funding.
California, also in 2025, reported that it failed to comply with certain requirements in one of the 13 major programs examined. Auditors said the other programs complied.
A separate state auditor investigation found more than $5 million in waste, misuse or unreported benefits, including $4.6 million in charges for unused mobile devices and an employee overpayment of more than $170,000.
The federal deficit was around $1.8 trillion in fiscal year 2025, while federal spending totaled $7 trillion. Social Security, Medicare and net interest alone represented enormous structural costs, per the Congressional Budget Office.
To erase a $1.8 trillion annual deficit, the government would need to find around $150 billion per month in savings or additional revenue.
Most state budgets also operate differently from the federal budget. California, for example, requires the governor to propose, the Legislature to pass and the governor to sign a balanced budget. Federal grants frequently sit outside the state general fund and can be spent only as they are received.
Trump points to a real national problem but has focused his efforts on tackling waste and fraud toward Democratic states rather than all state-level budgets and programs, and it remains to be seen how Vance will approach the issue.
This is a breaking news story. Updates to follow.
Contact Newsweek editors on this story: Samantha Beech and Dave Siminoff.
