I believe the issue is the government guarantees an intermediate treasury rate but there is no risk to the owner of the fund - the fund can only appreciate in value. There is a dollar cost to the government of providing the G fund, which is why Trump wants to kill it.
This is from an article:
“G Fund investors currently benefit from receiving a medium-term rate of return on what is essentially a short-term security,” the 2019 budget proposal said. “Basing the yield on a short-term T-bill rate instead of the current rate (an average of medium and long term Treasury bond rates) would reduce both the projected rate of return to investors and the cost of the fund to the Treasury.”