Passing legislation is hard. Particularly when it comes to issues like sovereign debt, a complex and obscure matter even for well-informed voters.

Sovereign debt is the debt incurred by governments when tax revenues cannot cover necessary investments. The crises of the last four years, including COVID-19, the war in Ukraine, climate disasters, inflation, the rise in interest rates, and appreciation of the dollar, have caused the sovereign debts of low-income countries to balloon. They have brought countries to the brink of default, through no fault of their own.

Half the world’s sovereign debt is owed to private creditors—including vulture funds and their billionaire backers—and the majority of that debt is governed under the laws of the state of New York. Laws that are contributing to the global debt crisis.

This week, the movement for action on sovereign debt got a jolt of momentum with the merger of two complementary bills proposed in the New York State Legislature, now under a single banner: The Sovereign Debt Stability Act.

DROWNING IN DEBT

Right now, 39 out of 67 low-income countries and about twenty middle-income countries are struggling to pay their debts. This means governments are having to make impossible choices between paying down debt and providing the basic necessities that sustain people’s health and welfare—healthcare, schools, food, and more. These countries are home to hundreds of millions of poor people.

Their budgets are drowning in debt. In 2023, low- and middle-income countries spent an average of 29 percent of their budgets on interest and debt repayments. This was as much as they spent on education, health, and social safety net programs combined. Instead of meeting people’s basic needs, debt-burdened countries send large portions of their budgets to lenders—a process that ultimately deepens poverty in developing nations and destabilizes the global economy.

Global institutions and governments have set up a process to negotiate debt restructuring for the poorest countries (the “Common Framework for Debt Treatment”). But disputes among governments and private lenders like banks and hedge funds about how much relief should be provided and by whom has stalled progress on helping struggling countries get back on their feet.

Currently, when countries can't repay their loans, they have no bankruptcy protections to turn to. There’s no clear process to enable restructuring. Worse, some private creditors take advantage of the system: they refuse to participate in debt-restructuring negotiations alongside other lenders, and then sue countries in default for full repayment, undermining good-faith efforts to stabilize the global economy.

THE SOVEREIGN DEBT STABILITY ACT

After years of advocacy, several bills were introduced in the New York Legislature to bring the state’s governance of debt contracts up to date. But after initial progress, a flurry of misleading and false claims by lobbyists ran out the clock on the 2023 legislative session before the bills were put to a vote.

Today, the momentum is shifting: the merger of the two leading reform proposals has united key advocates under a single bill that has the support of groups representing working families across the state. The bill creates a clear process for countries in crisis to restructure their debts, alongside protections for New York’s taxpayers to ensure that governments and banks carry their fair share of the responsibility for addressing the crisis.

WHOSE SIDE ARE YOU ON?

The choice of whether to act now sits squarely with the leaders of the New York State legislature—Majority Leader Andrea Stewart-Cousins, Assembly Speaker Carl Heastie, and Governor Kathy Hochul. Together they hold in their hands the fate of millions of New Yorkers and hundreds of millions of people around the world who are bearing the crushing burdens of debt.

Only one question remains: whose side will New York’s leaders choose—poor and working class people or those who would exploit them?