Government Bailout Prevention Act

Key Points

• This bill would ban the federal government from using taxpayer money to bail out state governments, cities, counties, or school districts that have gone bankrupt or are at risk of defaulting on their debts, starting from January 1, 2026.
• The Treasury Department would be blocked from using general fund revenues or borrowed money to buy or guarantee any assets or obligations of financially struggling state and local governments or school districts.
• The Federal Reserve would also be prohibited from providing any funds, loan guarantees, credits, or financial instruments to any government entity with taxing or bonding authority, including purchasing their bonds.
• The bill includes key exceptions: federal disaster relief is still allowed, and regular government grants and standard appropriations to state and local governments would continue as normal.
• The bill was introduced by Sen. Young with Sen. Cotton as a cosponsor and has been referred to the Senate Banking, Housing, and Urban Affairs Committee. It covers all 50 states, D.C., and U.S. territories.