There is a basic rule of thumb when it comes to the federal budget. The government should spend heavily during times of crisis — recessions, wars, pandemics — and then get its fiscal house in order when the crisis passes.

The tax and spending bill passed by the House of Representatives last month turns that rule on its head, adding trillions to the debt when unemployment is low and the economy is solid by most measures. That could make it much harder for the government to come to the rescue in the next downturn.

The Senate this week is expected to take up the bill, which would extend most of the tax cuts enacted during President Donald Trump’s first term, and would add billions of dollars in new tax breaks for tipped workers, business owners and other groups. It would cut spending, too, but not by nearly as much. In total, the bill would add trillions to the national debt over the next decade, according to congressional scorekeepers.

That comes on top of a sea of red ink that has swelled to near-record levels in recent decades. In 2000, after years of strong economic growth and spending cuts under President Bill Clinton, the federal debt load was about a third the size of annual economic output. Since then, after decades of tax cuts and spending increases, this measure of the debt burden has roughly tripled, to about 100% of gross domestic product, the highest level since World War II and at a rate of growth that experts across the political spectrum say is unsustainable.

“I’m extraordinarily concerned about the fiscal implications of this,” said David H. Romer, an economist at the University of California, Berkeley, who has studied the impact of government deficits. “We’re starting from high levels of debt, high levels of deficits, projected growing budgetary pressure from an aging population. And the investors are already jittery about this, so this is not just hypothetical.”

The worry, long expressed by Romer and other economists, is that investors will eventually balk at lending the government money or will demand punishingly high interest rates for doing so. That could set off a downward spiral in which rising interest payments add further to the debt, making investors increasingly reluctant to lend and eventually driving up the cost of government borrowing even higher.

Tipping point

No one knows exactly when that will happen. But economists warn that by increasing the debt during a period of relative economic strength, the government is running the risk that the tipping point will come at the worst possible moment, when the government needs to run large deficits to respond to a war or another crisis.

Already, the federal government spends more each year on interest on the debt than it does on national defense. If the House bill becomes law, federal debt could exceed 125% of GDP by 2034, according to independent projections. That would be the highest since the country’s founding.

“We don’t want to exhaust our credit line before we hit some bad times,” said Douglas W. Elmendorf, a Harvard University economist and former director of the Congressional Budget Office. “If we borrow too much outside of those periods then we will hinder our ability to respond to those needs.”

That could mean that the economic downturn associated with any forthcoming crisis is steeper than would otherwise be the case and the recovery far shallower, leaving Americans and the global economy on the whole worse off.

“All the things that the government should or wants to do when the economy gets bad or we’re hit with a crisis just get harder,” said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research. “It adds to the debt, and it pushes up the cost of borrowing for everybody, which limits the economy’s recovery, and in circles you go.”

Losing Faith?

Budget hawks have issued similar warnings for decades, only to see their dire predictions repeatedly proved overblown. The government ran huge deficits in the wake of the 2008 financial crisis, but interest rates actually fell as investors poured their money into the perceived safety of U.S. Treasurys. And the government had no difficulty finding buyers for the trillions of dollars in debt that it issued to finance aid during the coronavirus pandemic in 2020 and 2021.

Even now, fiscal experts say there is no doubt that the government has the capacity to meet its obligations.

But the bond market, like all markets, relies on confidence, not just financial reality. If investors lose faith in the government’s commitment to meeting its obligations — or even if they just become convinced that other investors are losing faith — they could decide to sell their holdings before others do the same.

Signs of trouble

There are signs that investors’ appetite for U.S. government debt could at last be waning. Yields on long-term government debt have risen in recent weeks as investors have expressed mounting concerns about the cost of the Republican tax bill when Trump has waged trade wars with nearly all the countries with which the United States does business. Typically a safe haven that investors flock to during times of stress, the U.S. dollar has continued to drop against a basket of its peers even as the stock market has wobbled.

“The reaction in financial markets shows that we should not take our financial position for granted, that the U.S. government and U.S. economy are not impervious to worries about whether we are making the right choices,” Elmendorf said.

It isn’t clear exactly how much the heavy U.S. debt load will limit policymakers’ options in the next recession. Most economists believe the government will still be able to borrow what it needs to help households and businesses, although doing so may be costlier than in the past. And the Federal Reserve will still be able to cut interest rates and buy bonds, as it has in response to past crises.

But while Congress and the Fed might still be able to respond aggressively, some economists worry they will be more constrained than would otherwise be the case. Sticky inflation, they warn, may lead the Fed to be more cautious than it was during other recent downturns. And a future Congress might be reluctant to add to the debt when it is already so high.

A break with history

The federal government has long run large deficits during recessions, when layoffs and bankruptcies lead to lower tax revenues, and spending on unemployment insurance and other aid programs rises. In recent crises, Congress has also authorized billions of dollars in tax cuts and direct assistance to help prop up the economy and provide support to households and businesses.

The response to the 2008 financial crisis — which included a huge bailout to the country’s biggest banks and the auto industry — added hundreds of billions of dollars to the federal debt. The response to the pandemic was even larger: about $5 trillion from the government that took the form of expanded unemployment benefits, checks to households, support for small businesses and other programs.

In past decades, however, periods of big deficits were followed by periods of relative frugality. President Ronald Reagan oversaw a huge tax cut early in his term, when the country was undergoing a severe recession. But he signed a large tax increase later in his term, once the economy was on more stable footing. Clinton, working with a Republican-controlled Congress, balanced the federal budget during the economic boom late in his tenure.

More recently, deficits have grown in good times and bad. Trump oversaw a huge, deficit-financed tax cut in 2017 despite an economy that was strong by most measures. President Joe Biden continued to run large deficits even after the pandemic crisis had passed, although he proposed budgets that would have, at least in theory, reduced the deficit in future years. And now Trump and the Republican-controlled Congress are poised to add trillions to the debt.

In a paper published last year, two economists at the University of California, Berkeley, found that in past decades, when projections of future deficits rose, Congress responded by cutting spending, raising taxes or both.

Not anymore.

“The only thing they seem to agree on is not to do anything painful,” said Alan J. Auerbach, one of the paper’s authors.