As the White House continues to take up all our attention with its ongoing tariff war against the world, a little ways down Pennsylvania Avenue, Congress is preparing a budget bill that could prove to be almost as consequential. If lawmakers renew President Donald Trump’s 2017 tax cuts, enact all his newly proposed ones and do not cut spending, they will add up to $9 trillion to the national debt over 10 years (according to the nonpartisan Peter G. Peterson Foundation.) At that point, America would likely be running among its largest deficits as a percentage of gross domestic product in history — and that’s in peacetime with no pandemic. At the same time, Washington is raising tariffs on almost all the country’s imports. We might have the makings of a perfect storm in the global economy.

That’s what Kenneth Rogoff, a renowned Harvard University economist, worries about. One of his past books presciently warned about the dangers of a financial crisis. (It was published in 2009 while the global financial crisis was unfolding but was researched and written well before it began.) His new book, “Our Dollar, Your Problem,” worries that we are jeopardizing the dollar’s pivotal role in the global economy. That should matter to all Americans because we benefit enormously from what has been described as the “exorbitant privilege” of having the world’s reserve currency. “It allows us to borrow more cheaply whether it’s mortgages, car loans, or credit card debt,” Rogoff explained to me, estimating that the discount Americans get on their loans because of the dollar is probably between 0.5 and 1%.

It’s sometimes hard to discern the signal amid the buzz of noise that surrounds us these days, but, Rogoff says, focus on interest rates. The key fact is that, after decades of falling and low interest rates, they are now up to historically normal levels and will stay up. That is what makes the United States’ debt burden dangerous.

Interest on the debt now approaches $1 trillion per year, more than total defense spending. Economic historian Niall Ferguson has suggested that when this happens, a great power risks that it will no longer be great. Rogoff predicts an economic storm — and one that will come a good bit sooner because of Trump’s economic policies. He believes that, unless these policies are drastically reversed, there is a 50% or more chance of a financial crisis or spiraling inflation or both by the end of this presidential term.

Some of the pressures we face are because of events outside America’s control. Other countries have always resented the dollar’s exalted status, especially once the U.S. began to weaponize it. Washington has promiscuously imposed sanctions on dozens of countries, often unilaterally, and these sanctions work only because of the dollar’s special status. The Europeans, the Chinese, the Russians and mostly every large country is quietly making efforts to wean themselves off their dependence on the dollar. It’s a slow process but it is moving in only one direction — away from the dollar. And while there is no single substitute for America’s currency, Rogoff believes the dollar will lose share to a basket of other currencies as well as alternatives, such as bitcoin.

This is not all about Trump. Rogoff argues there has been a bipartisan recklessness in U.S. fiscal policy for decades, with Republicans cutting taxes and Democrats spending — both without restraint. (It is worth noting, however, that the math is clear: Tax cuts are responsible for the vast majority of the increase in the debt-to-GDP ratio over the last 25 years.) He is also profoundly worried that the Federal Reserve’s independence is being compromised both from the right and from the left (though it is worth noting that Trump is the first president to routinely attack the Fed, threaten to fire its chair and challenge the legality of such independent institutions in court.) “Much of the dollar’s role comes from our reputation for good, stable, predictable policy, from the Fed’s independence from political pressures, from our trustworthiness as the world’s superpower. You can’t trash all that and expect the dollar to be unaffected,” Rogoff says.

There are solutions, of course, but none are painless. The U.S. DOGE Service has been an abject failure: Of the $165 billion it claims to have saved, estimates of its actual, verifiable savings are around $65 billion, and even that might be an exaggeration. That’s 3% or less of the $2 trillion that Elon Musk confidently predicted he would cut from the federal budget. That leaves us where we always were. The path to reducing the deficit is to cut the big programs such as Medicare, Social Security and national defense and also to raise taxes. We are on track to do the opposite — enact huge tax cuts and jack up defense spending by, if Trump’s proposal is accepted, a whopping 13%.

“We have been smart and lucky for the past few decades,” Rogoff says, which has allowed us to run up deficits with no visible cost. But, he adds, our economic policy is now “dumb; the worst in my lifetime.” And our luck might have run out.

Email: fareed.zakaria.gps@turner.com.