Contrary to popular belief the President actually has two legal options.
According to the Impoundment Control Act of 1974 there are actually two different avenues that make it legal for the President to withhold funds. Those two options are called rescissions and deferrals.
Rescissions as the name suggests is where the President suggests that he would like to rescind funding for a particular program. For rescissions Congress must actually approve the rescission, and if Congress fails to do so withing 45 days, the President would be required to release the funds.
Deferrals as the name suggests would be where the President suggests that the funding for a particular program should be deferred. A President can defer spending for a whole fiscal year, but could defer it again at the start of the next year if the program is set up for multiple years. When a President defers funds, Congress would be required to pass a new law to override said deferrals.
Obviously when the President put a "hold" on all funds while they went through them, this would have been considered a deferral. By law, he is allowed to do this unless Congress actually creates a new law that requires him to pay. Obviously Congress has not created any new laws requiring the payments, so pretty much every judges order demanding the release of payments was ignoring the 1974 law in question.
Deferral of Budget Authority: An action by the executive branch that delays the obligation of budget authority beyond the point it would normally occur. Pursuant to the Congressional Budget and Impoundment Control Act of 1974, the President must provide advanced notice to the Congress of any proposed deferrals. A deferral may not extend beyond the end of the fiscal year in which the President’s message proposing the deferral is made. Congress may overturn a deferral by passing a law disapproving the deferral.
Now perhaps some might argue that there was not any notice given to congress, although that could be neatly addressed with an official notification. That being said, I am not certain that the executive order in this case did not address that as well. It would seem to be a ruling on technicality when in fact these rulings literally suggested he did not have authority to do exactly what the law gives him authority to do.
Now some would also argue that the language given to the public is that Trump is rescinding much of these contracts and such, rather than just deferring them. Certainly that is a valid point, but he would still have said authority for 45 days and as of right now, he has not even been President for 45 days, meaning not a single rescission would be considered illegal as of now and he would only be required to pay them after that 45 days is up. But that assumes that the language cannot be altered when that time comes up. If the President is smart, he will simply decide to defer these same items rather than rescind them, as he could technically defer them effectively through the end of his Presidency.
The problem, quite obviously, is that we have a runaway judicial system, especially at the district court level. The other day a judge in San Francisco ordered Trump to rehire a bunch of people who do not live in San Francisco. Why a district judge in California has authority over what happens in Washington D.C. is anyone's guess, but in the new reality, every district judge now sees themselves as an almighty court who has power over all other branches of the government and if their orders (regardless of how lawless they are) are not followed then we are entering into a "constitutional crisis".
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