It looks like the file ms-python.debugpy-2024.12.0-win32-x64\bundled\libs\debugpy_vendored\pydevd_pydevd_bundle\pydevd_plugin_utils.py uses the Literal feature, which is not supported in Python 3.7.
The documentation states: This extension is supported for all actively supported versions of the Python language (i.e., Python >= 3.7).