Rep. Steube, Sen. Young Introduce Government Bailout Prevention Act

WASHINGTON - U.S. Representative Greg Steube (R-Fla.) today introduced the House companion to Senator Todd Young's (R-Ind.) Government Bailout Prevention Act, legislation that establishes clear safeguards against federal bailouts and prevents taxpayers from being forced to rescue financially troubled state and local governments.

"Taxpayers should not be forced to foot the bill for poorly run state and local governments," said Rep. Greg Steube. "When politicians spend beyond their means and make reckless financial decisions, they shouldn't be able to turn around and expect a federal bailout. If states and local governments get themselves into a financial mess, taxpayers in other parts of the country shouldn't be stuck paying for it."

"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."

"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, Representative Steube'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.

This legislation is co-sponsored by Reps. Scott Perry (R-Pa.) and Keith Self (R-Texas).

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

The Government Bailout Prevention Act would prohibit the use of federal funds, including assistance from the Federal Reserve System and the U.S. Treasury Department, to purchase, guarantee, or otherwise support the obligations of state and local governments that have defaulted, filed for bankruptcy, or face imminent insolvency.

The legislation also prohibits the Department of the Treasury and Federal Reserve banks from providing loans, guarantees, bond purchases, or other forms of financial support. The bill preserves federal assistance provided in response to declared disasters and does not apply to discretionary appropriations, direct spending, or grants awarded by the United States government.

Background: Currently, state and local governments have been spending beyond their means, accumulating unsustainable pension liabilities and making long-term spending commitments they are increasingly unable to finance.

Compounding this problem is the implicit expectation that federal taxpayers will ultimately serve as a backstop if these governments face fiscal collapse. There is no incentive to pursue responsible budgeting at the state and local levels.

Read the bill text here.