Chicago owes $45.2 billion to current and future public-sector pensioners, but had set aside only $9.5 billion as of the city’s latest audited annual report. New Jersey and its local governments owe $122.2 billion, but have set aside just $53.7 billion. Even healthier governments, such as New York State and New York City, owe tens of billions of dollars in future health care payment obligations to retirees.

As retirement costs have grown, state and local governments have cut back on infrastructure investments. Municipal debt — the mechanism through which governments borrow to build and maintain infrastructure — is 17 percent below its 2007 level after inflation.

Republicans characterize this issue as a blue-state problem because blue states have higher taxes. But red states are struggling too. Texas owes $39.1 billion for pensions, but has set aside just $25 billion. Gulf states, including Florida and Louisiana, must invest in flood-protection measures. Houston voters approved new borrowing for such infrastructure this month — borrowing enabled by local tax deductions.

Republicans also characterize the issue as one of local mismanagement. “I don’t think it’s up to the federal government to save New York from its bad decisions,” said Mick Mulvaney, Mr. Trump’s budget director, last week. True, governments from Chicago to New Jersey have made poor fiscal decisions. In a system that grants citizens great autonomy to govern themselves at the local level, disparities in financial management are inevitable. But it is none of Washington’s business that New York’s taxes are too high.

One reality remains — somebody must pay. Three sources exist: taxpayers; public-sector retirees, via pension and health-benefits cuts; and municipal investors, via Detroit-style debt defaults in severe cases. Congress is making the first more difficult for state and local governments, and in most places, legal protections prevent governments from cutting pension benefits.

That leaves bondholders. As the Standard & Poor’s rating agency said this week, the overall impact of a tax plan that curtails state and local tax deductions “could be costly and detrimental to the credit quality of many public-finance issuers.”

Signing a bill into law that creates systemic distress for a financial market that affects the lives of all Americans is hardly the best way to improve the economy. And it may result in eventual tax increases, not tax cuts, at the federal level. Global investors may grow tired of America’s lurching from crisis to crisis and raise the cost of federal borrowing, as well.