One off expenses, like embracing institutions or building a bunch of useless coastal buildings, are certainly going to be a knock against the AI. But they should not cause perpetual debt. Maybe these things move up economic doomsday by a decade or three, I don't know. But I know I see massive debts in landlocked AIs who still have not gotten feudalism.
I would put a lot more money down on mercs and recruit/disband than on wrong buildings or too quickly embracing. Again after making those mistakes the AI should have $X income. If they kept their expenses below X for any reasonable amount of time they should get out of debt eventually. Instead I see AIs in debt and sinking deeper. It really looks like the AI does not know how to budget and the recruit/disband cycle seems a quite likely culprit.
Frankly I wonder if the AI is trying to disband to get under cap and recruit non-mercs to be able to get rid of the mercs. E.g. something in the code was written so the AI would not disband the old merc regiments until they had enough regular army, but now instead of replacing regiments 1 for 1, it gets stuck raising 1 of regulars, disbands the first regiment that it can for being over some limit, cannot disband the mercs without losing the whole company, and then repeats.
Frankly the whole merc system now is just a giant nerf to the AI. It is full of all the sorts of things where AIs have trouble: large break points, highly dynamic potentials, and inflexible use of resources. I mean it is nicer conceptually, but I am not convinced that the AI is remotely in a state where it can handle the new mercs.