U.S. Senators Young, Cotton introduce bill to prevent government bailouts, protect taxpayers

Friday, May 22, 2026 at 11:00 PM

U.S. Senators Todd Young (R-Ind.) and Tom Cotton (R-Ark.) introduced the Government Bailout Prevention Act to ensure that federal dollars cannot be used to help insolvent state, territory, or local governments pay off their obligations.

Under the bill, no arm of the federal government – including the Federal Reserve System and the U.S. Treasury Department – can pay or guarantee state and local obligations if that state or local government entity has filed bankruptcy, has defaulted on its debts, or is at risk of bankruptcy or default.

“When state and local governments spend more money than they bring in or rack up dangerous levels of debt, hard-working Americans shouldn’t be forced to bail them out,” said Senator Young. “It is unfair to expect Hoosiers to bail out fiscally irresponsible states or communities outside of Indiana. Our bill will ensure federal taxpayer dollars aren’t used to reward these bad fiscal choices.”

“Arkansas taxpayers shouldn’t be responsible for reckless spending in other states. Our bill would ensure federal tax dollars aren’t used to bailout bankrupt state and local governments,” said Senator Cotton.

The Government Bailout Prevention Act has been endorsed by the National Taxpayers Union.

“With numerous states and localities marching towards insolvency, taxpayers shouldn’t be forced to bail out fiscally irresponsible jurisdictions that have spent beyond their means for years. Thankfully, Senator Young’s Government Bailout Prevention Act establishes clear safeguards against federal rescues of insolvent governments, reduces moral hazard, and protects hardworking Americans from assuming the costs of poor financial management. We look forward to helping this important legislation reach President Trump’s desk before it’s too late,” Thomas Aiello, Vice President of Federal Affairs at National Taxpayers Union.

Text of the legislation is available here.