America’s Debt Time Bomb: J.P. Morgan Warns the U.S. Is ‘Going Broke Slowly’

America’s Debt Time Bomb: J.P. Morgan Warns the U.S. Is ‘Going Broke Slowly’

With the U.S. national debt now above $37.8 trillion and interest costs shattering records, J.P. Morgan’s David Kelly says America’s slow-motion debt crisis could turn fast — and few seem ready for it.

America’s balance sheet is bleeding quietly.
According to J.P. Morgan Asset Management chief global strategist David Kelly, the United States is “going broke slowly,” and the only reason markets aren’t panicking is that it hasn’t happened all at once.
But with federal interest payments now exceeding $1.2 trillion, debt-to-GDP nearing 100%, and tariff revenue projections on shaky ground, Kelly warns that time is running out before the “slow” part ends.

What Does “Going Broke Slowly” Really Mean?

The phrase describes a nation whose debt is growing faster than its economy, but not fast enough to cause an immediate financial panic.
In plain English: America can still borrow cheaply today — yet every year, the cost of that borrowing climbs faster than its income.
Eventually, even without a collapse or default, that arithmetic catches up.

Kelly explains that global bond markets are well aware of the U.S. trajectory, but they’re betting that growth and inflation will remain stable. “The danger,” he said, “is that we’re going broke slowly — until suddenly, we’re not.”

Tariffs, Deficits, and the Politics of Fiscal Hope

President Donald Trump’s 2025 tariff plan has been sold as a debt solution.
The White House projects import duties will generate around $31 billion per month, trimming future deficits by up to $4 trillion by 2035, according to the Congressional Budget Office (CBO).

But those numbers depend on trade stability and legal survival. Kelly cautioned that if the Supreme Court overturns Trump’s tariff authority, the administration could owe billions in refunds—blowing a hole in the already fragile fiscal math.
The result: temporary deficit relief, not structural repair.

A Government Spending Tug-of-War

Trump’s proposed Department of Government Efficiency (DOGE)—once led by Elon Musk—was meant to slash $2 trillion from federal costs.
Instead, after their much-publicized split, Musk’s reforms collapsed, and the “One Big Beautiful Bill Act” is now projected by the CBO to add $3.4 trillion in new liabilities over the next decade.

While the administration insists tariffs will offset those costs, economists see a deeper problem: America is spending faster than it grows, and politics is masking the math.

Why Tariff Revenue Won’t Fix the Debt Crisis

Can tariffs fix America’s debt problem?
In short: no.
Tariffs provide temporary income but are too volatile to replace long-term tax revenue. They also risk slowing consumer spending, which in turn drags on GDP — the very denominator keeping the debt-to-GDP ratio from exploding.

According to J.P. Morgan’s estimates, the U.S. must keep its annual deficit below 4.5% of GDP to stabilize debt levels.
Yet current forecasts show a deficit closer to 6–6.7%, meaning debt will rise even under “healthy” conditions.

The Psychology of a Slow Crisis

“The question I’m asked most often,” Kelly wrote, “is when the federal debt will blow up in our faces. My answer: we’re going broke—but we’re going broke slowly.”

That slow motion, he explains, is precisely why markets stay calm.
The U.S. government can still borrow for 30 years at just 4.6%, a rate that reflects global confidence in Treasuries.
But history shows confidence can vanish quickly — especially when political brinkmanship, global conflict, or fiscal gridlock hits at once.

Could America’s Debt Crisis Trigger the Next Global Shock?

This is the new risk Kelly wants investors to consider.
If U.S. debt growth accelerates, global markets could see a cascade effect:

• A weaker dollar

• Higher long-term yields

• Capital flight into alternative assets like gold and emerging-market bonds

Analysts at the Institute of International Finance warn that if Treasury yields spike above 5%, it could trigger liquidity stress in global bond markets — the same mechanism that nearly froze U.K. pension funds in 2022.

In Kelly’s view, it’s not just an American problem. “When the world’s largest economy borrows this much, everyone else eventually pays the interest,” he wrote.

Debt-to-GDP on the Edge

As of September 2025, publicly held U.S. debt reached $30.3 trillion, equal to 99.9% of GDP.
Even with modest 2% real growth and 2.5% inflation, the ratio will exceed 102% next year if current spending persists.
That projection assumes no recession, no wars, and no major emergency spending — a nearly perfect scenario that few economists consider realistic.

Investor Takeaway: Don’t Wait for the Panic

Kelly’s advice isn’t panic—it’s preparation.
He urges investors to diversify portfolios now, adding non-U.S. equities, commodities, and real assets before debt concerns push up yields or weaken the dollar.
“The risk,” he warned, “is that political choices speed up the deterioration. When that happens, markets won’t move gradually—they’ll move all at once.”

The Slow Burn of a Superpower’s Balance Sheet

For now, the U.S. continues to function like a wealthy household living off credit—paying the minimum due, confident it can refinance forever.
But as interest costs swallow more of the budget and fiscal policy drifts into political theater, Kelly’s warning rings sharper:

“We’re not going broke tomorrow. But the longer we wait to fix it, the harder the landing will be when ‘slowly’ becomes ‘suddenly.’”

Frequently Asked Questions About America’s Debt Crisis (2025 Update)

What is America’s national debt in 2025?
The U.S. national debt surpassed $37.8 trillion in October 2025, with $30 trillion held by the public and the rest owed to government trust funds, according to Treasury data.

Why does J.P. Morgan say the U.S. is ‘going broke slowly’?
J.P. Morgan’s David Kelly says the debt is rising faster than GDP, but not fast enough to cause a short-term crash. This slow erosion, he warns, could suddenly accelerate if growth weakens or borrowing costs spike.

Can tariffs fix America’s debt problem?
Tariffs raise short-term revenue but cannot offset long-term spending. They depend on global trade flows and are vulnerable to legal challenges, making them unreliable as a fiscal tool.

How high is America’s debt-to-GDP ratio?
The U.S. debt-to-GDP ratio sits near 100% in 2025 and is projected to exceed 102% by 2026, assuming current deficit levels continue.

Could the U.S. debt crisis trigger a global recession?
Yes. Rising Treasury yields or a sharp dollar drop could disrupt global credit markets, increasing borrowing costs worldwide and reducing investor confidence in U.S. assets.