Federal government debt held by the public is currently over $28 trillion, and the debt level is projected to represent an all-time record share of the U.S. economy within the next two years. Interest payments are the fastest-growing part of the government budget, according to the nonpartisan Committee for a Responsible Federal Budget.

Still, U.S. Treasurys are considered among the safest forms of debt out there. But a new paper makes the intriguing case that U.S. government debt is riskier than widely appreciated. Marketplace’s senior economics contributor Chris Farrell spoke with “Marketplace Morning Report” host Sabri Ben-Achour about this. The following is an edited transcript of their conversation.

Sabri Ben-Achour: The general warning around having too much debt is that it can snowball, and it does snowball, and that at some point there could be a financial crisis. That hasn’t happened yet. Why not?

Chris Farrell: Big numbers on their own, they don’t matter. I mean, look, yes, the federal government’s fiscal story has been one of adding several trillion dollars here, another trillion dollars there, with trillions more on the way. But look, the U.S. is the world’s dominant economy, and by many traditional economic measures, among the healthiest in the world. So U.S. Treasurys have been rightly considered the closest thing to a risk-free security in the world.

Ben-Achour: Risk free, as in, you lend the government money and the government doesn’t have any issue paying you back. The government always pays people back, even during recessions, yeah?

Farrell: Right. This basic dynamic, look, it’s held for decades. Here’s the thing, when we had the global financial crisis back in 2008, 2009, the epicenter was the U.S., and yet, what happened? Global investors from around the world, they poured money into U.S. Treasurys for safety. But that kind of response, which has held for decades, it broke down during the COVID-19 pandemic. And that’s the message of this paper by three economists, “Government Debt and Mature Economies: Safe or Risky?” And they find that during COVID, Treasurys were not trading as if they were the world’s safest asset of choice. Instead, they argue the federal government has become a risky debt regime.

Ben-Achour: What was different about all the COVID borrowing? What was different this time around?

Farrell: Investors were unsettled by these large increases in government spending that weren’t matched by current or expected future taxes. The combination of higher inflation and increased government spending promises pushed down the value of the entire portfolio of outstanding Treasurys by an inflation-adjusted 26% — that’s one of the biggest drops since World War I. And what’s really striking is, unlike the global financial crisis, investors did not seek safety in long-term Treasurys. Instead, they sold them.

Ben-Achour: Has this change in perception stuck around? Are investors paying attention still to these kinds of bond market dynamics?

Farrell: I think the conversation is changing. The traditional complacency about the debt and the deficit that you saw in the markets, it may be eroding at the margins. The policy plans put forward by President-elect Donald Trump are expected to significantly increase both the debt and the deficit. I mean, we’ll see what happens. I think we’re at that point where there’s some yellow warning lights flashing. Perhaps the federal government is close to using up its fiscal capacity, and that would largely be driven by these bitter partisan divides that limit the capacity for a fiscal compromise. And in that case, U.S. Treasurys are a riskier security than global investors rightly once believed. So caution, rather than complacency, may well be the bond market byword of the moment.