Cities such as New York and Chicago are in deep financial trouble. Broadly speaking, they have two options: Make the difficult but appropriate choice to raise taxes and reduce the scale of government, or continue to live in a state of denial, increasing their pension obligations while also promising their residents more services.

I am sad but not surprised to report that they are choosing the latter. Even though both cities — as well as New York and Illinois — face major budget shortfalls, high taxes and declining populations, they are doubling down on irresponsibility. Illinois has made Chicago’s pension benefits more generous, and New York is considering its own version of the Illinois bill. Either these governments have become completely detached from reality, or they are counting on a federal bailout.

The numbers are sobering. Chicago faced a $1.2 billion gap in this year’s $16 billion budget, and New York City is staring down a $4.5 billion gap in its $127 billion proposal for next year. And yet last year the Illinois state legislature passed a bill that will increase the pensions of Chicago firefighters and police officers hired since 2011. It’s expected to increase pension costs by $11.1 billion through 2055, and would render the city’s already underfunded pensions insolvent.

In New York, the bill under consideration would apply to all public safety, education and municipal workers hired in the city since 2010. It would allow retirement at 55 with full benefits, relieve workers from the obligation to make contributions after 10 years, slash contributions for the years they do pay in, and allow overtime pay to count toward pension benefits.

It gets worse: Estimates of enhanced pension benefits tend to underestimate their true cost. Pension benefits are especially expensive because they tend to be guaranteed by state constitutions; once they are extended, they can’t be reduced. The only way to reform pensions is to reduce benefits for future workers, which is why these laws affect only workers hired after a certain date. Previous lawmakers tried to slow out-of-control pension costs, but this recent legislation would undo those efforts.

The New York State pension reform would blow a huge hole in the city’s budget. Pensions are set by state law, not collective bargaining. But financing pensions requires bigger contributions from each county in the state. Meanwhile, New York City Mayor Zohran Mamdani has promised all sorts of expensive benefits, including free child care, free buses and cheaper food. But New York can hardly afford to keep its existing promises, let alone extend more — and more generous pensions, too.

New York City’s debt outlook was just cut to negative, and Chicago’s was downgraded to BBB+. A fiscal crisis seems all but inevitable for both cities. Yet politicians in both cities, as well as in Albany and Springfield, are behaving like a spendthrift on the verge of bankruptcy: Their debt is so great they know they can never pay it back, so they figure they might as well spend while they can.

It is hard to believe lawmakers could be so out of touch with both basic math and the harsh discipline of bond markets. Perhaps they genuinely believe that taxes on wealthier citizens will pay for everything. (If so, they are badly mistaken.) Still, they must know that even if the corporations, billionaires and centimillionaires don’t move, there won’t be enough tax revenue to pay for everything they are promising.

So are they counting on a federal bailout? It has happened before, when the Central States Pension fund, the multi-employer Teamster pension, received a generous bailout under President Joe Biden. It would be awkward, if not impossible, for the government to bail out Teamsters but not police officers, firefighters or teachers. If that is the bet state lawmakers are making, it is a risky gamble, especially if Republicans are in power when they need a bailout.

It is generally true that in times of fiscal stress, pensioners get paid first, followed by bond holders — and in the meantime, public services are cut. If mayors were serious about delivering more services for their constituents, they would be fighting laws that increase pensions. Then again, if your theory of governing is that someone else will pay for everything, then maybe you think it doesn’t matter.

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This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Allison Schrager is a Bloomberg Opinion columnist covering economics. A senior fellow at the Manhattan Institute, she is author of “An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk.”

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