Bloat is terrible in every type of RPG and leads to minmaxing (which reduces build variety since there's inevitably gonna be builds that are orders of magnitude better than all the others) and tedious endgame fights that rely either on luck or on exploits.
Bloat can infest everything that has to do with numbers. HP bloat is the most common, but stat bloat can also be an issue. Bloat can affect both the player characters and the enemies.
Examples of bad bloat:
- All post-Morrowind Bethesda games. High level enemies get such a huge boost to HP, and the player has high AP at that point too, that each hit only takes away a small amount of HP and fights become tedious grinds.
- Assassin's Creed Odyssey. HP gets bloaty at higher levels, and the combat is much more tedious than it was in the purely action-based non-RPG predecessors.
- Pathfinder: Kingmaker. Especially on higher difficulties, enemy stats are so ridiculously inflated towards the end that you have to autistically optimize your character builds or get fucked.
There are plenty more games that do this, but those few prominent examples should illustrate the issue.
Bloat, especially when it's taken to extreme levels, makes late-game gameplay tedious and reduces the amount of options a player has to handle any given situation. In vanilla Fallout 4, you're pretty much forced to invest points into the damage-enhancing perks because if you don't, the bloated enemies will be a chore to kill once you reach higher levels. In Kingmaker, you need to autistically optimize your AC and to-hit bonuses and squeeze out every single point you can get, otherwise endgame enemies will be impossible to even hit while hitting you with every swing. When numbers grow exponentially like that, you are forced into certain builds that give you a chance to deal with the ridiculously inflated numbers. Some character builds that the game theoretically offers - and whose abilities can be useful, even - become unviable simply because they can't keep up with the bloat.
With excessive number bloat, gameplay tactics are reduced to leveling up your character and picking the right skills to increase. It is detrimental to the gameplay of both action RPGs, where player twitch skill should play a role, and tactical RPGs, where player tactical thinking should play a role.
In an action RPG, excessive number bloat leads to you and an enemy whacking each other for five minutes, with each hit only reducing a small amount of HP. There are zero tactics involved, just keep whacking until the HP bar is down. Special abilities like knockdowns, staggers, etc are reduced in effectiveness because even if you manage to successfully inflict them, there's still going to be a lot of HP left to whittle down. Your own character also tends to have bloaty HP at that point, so any negative effects you suffer can usually be countered by gulping down a potion. Combat devolves to a situation where the character with more health potions wins. Boring and tedious.
In a tactical RPG, the same problems arise. Ideally, you want to get better positions, out-flank the enemy, use area effect spells/tools like a grease spell or throwing gas grenades to deny ground to an enemy, etc. But when HP is overly bloated, the effectiveness of such tactics is reduced, as it's still going to take 5 turns of whacking until the enemy's HP bar is depleted so dealing damage is more important than anything else.
Scaling character and monster power level purely by making all the numbers bigger is bad design. It tends to make high level combat less fun than low level combat, because it no longer feels lethal. Where on low and mid levels, one or two critical hits could get you close to death or take out an enemy, at high level a critical hit means you take off 8% instead of merely 4% of the enemy's HP bar. It turns into a boring grind. This is why people tend to prefer mid-level D&D to epic level D&D. Throne of Bhaal isn't as well-liked as Shadows of Amn because it's filled with tons of bloaty enemies that are tedious to fight (especially those giants).
In bloaty systems, level becomes the most important factor in determining success, so once you attain a high enough level, low level enemies will be a complete pushover who can't even harm you, while enemies just two levels above you can be impossible to defeat. Tactics take a backseat to simply grinding out more levels.
So what's the alternative? Why, less bloat of course! Fallout 1 does it well enough. HP gains per level aren't so high that you can shrug off a hundred hits at higher levels, and critical hits are potentially so powerful that they can one-shot even high level chars. Combat stays dangerous at high levels and there are many viable tactics and character builds. If you keep the scaling of stats and HP more reasonable, high level characters will still have an edge over low level characters but they don't get an insta-win button.
Also, you can make character development more horizontal instead of vertical. Rather than simply raising up numbers, levelups could give your chars new abilities instead or improve your character in other ways. Gothic is a good example for action RPGs: rather than just increasing damage, leveling up your weapon skills makes combos easier to chain and the controls more responsive. It actually feels like your character is getting better at fighting! Spellcasters in D&D get new spells on levelup, which often contain stuff that goes beyond merely doing more damage than earlier spells. There are many ways to make high level characters feel significantly more powerful than low level characters without having to inflate all the numbers to ridiculous levels.
Inflated number bloat needs to stop. It's not fun. It's just tedious.