HE REAL DANGER in the misconceived and

misnamed "All Savers Certificate" was never the question--now resolved--of the tax exemption. It was, and is, the damage that it does to the deteriorating market for municipal securities. Those are the bonds that communities like the Washington suburbs float to build their schools, buy their park land and improve their sewerage systems. In its hasty and inept attempt to bail out the savings and loan associations, Congress has succeeded mainly in making it harder--and more expensive-- to finance local government.

The brief flurry over the tax exemption was a piece of comedy. The sharp-pencil crowd almost out-sharped themselves. A number of banks and S&Ls began offering spectacularly high interest for the next few weeks as bait to people who would then buy All Savers Certificates on Oct. 1, when they become legal. Some of the fun went out of the promotion last weekend when the Internal Revenue Service suggested that it might jeopardize the crucial tax exemption of the certificates. That is now settled. The IRS has ruled that the banks and S&Ls can continue to offer both their premium rates and their tax-exempt certificates, so long as one isn't conditional on the other.

That takes care of everybody except the local governments. Without fully realizing what it was doing, Congress has now created, for the first time, an investment that is, like a municipal bond, tax exempt--but, unlike a municipal bond, one that is short-term and consequently carries no risk of capital losses to the investor. A bond's price drops whenever interest rates rise.

Municipalities now stand at the back of the long line of big borrowers, as Henry Kaufman of Salomon Brothers pointed out last month. Worried about inflation and fluctuating interest rates, the big buyers of securities want either shorter maturities or adjustable returns. The federal government and the industrial borrowers are accommodating them by shifting to shorter-term debt. But municipalities don't have that kind of flexibility.

This new constraint on local finances comes at the same time as severe cuts in the federal budget and at the expense of, among other things, the grants to state and local governments. Financing local government has never been easy in recent years. Now it's going to get more difficult than ever, with the help of the All Savers Certificate. For most towns and cities it will mean an aging structure of public facilities, and less capacity than ever to respond to change.