J.P. Morgan Warns the U.S. is ‘Going Broke Slowly’ as Debt Nears $38 Trillion and Fiscal Risks Mount

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Fortune reports that J.P. Morgan Asset Management’s Chief Global Strategist, David Kelly, has issued a stark caution about the growing U.S. debt burden, warning that while America is “going broke,” the process is happening slowly enough to delay market alarm — at least for now.

With national debt exceeding $37.8 trillion and annual interest payments topping $1.2 trillion, Kelly emphasized that the nation’s debt-to-GDP ratio has reached 99.9%, a level likely to surpass 102% within a year if spending outpaces economic growth. “Global bond markets are well aware of the trajectory of U.S. debt,” Kelly noted, adding that the ability of the government to borrow for 30 years at just 4.6% interest underscores both investor confidence and complacency.

Despite efforts by the White House to rein in fiscal deficits, concerns persist. President Trump’s tariff policy—a key part of his plan to balance the budget—has generated notable short-term revenue, including $31 billion in August, helping reduce the projected 2025 deficit to 6% of GDP, down slightly from 6.3% last year. However, analysts and the Congressional Budget Office (CBO) warn that this relief may be temporary.

Kelly observed that the U.S. remains caught between optimistic projections and structural debt realities. He pointed to estimates suggesting that if nominal GDP grows by 4.5% annually (split between 2% real growth and 2.5% inflation), any deficit higher than 4.5% would continue to push debt ratios upward. “Starting from these levels,” he said, “the debt-to-GDP ratio climbs from 99.9% on September 30, 2025, to 102.2% just 12 months later.”

The White House argues that its tariff regime could ultimately offset new spending under the One Big Beautiful Bill Act, which the CBO projects will add $3.4 trillion to the debt over the next decade. Officials claim that the tariffs will help reduce overall deficits by $4 trillion by 2035. Yet Kelly and other analysts highlight the risk of legal challenges that could force tariff refunds or policy revisions if the U.S. Supreme Court strikes down portions of the current trade measures.

Adding to the uncertainty, economic headwinds — from geopolitical tensions to slower domestic growth — threaten to accelerate fiscal pressures. “Because of all of this,” Kelly noted, “a deficit equal to 6.7% of GDP should probably be regarded as a low-ball estimate of this year’s red ink.”

For investors, the takeaway is clear. Kelly advises diversification beyond U.S. assets, warning that political choices, rising interest costs, and weaker growth could quickly turn a slow deterioration into a rapid fiscal downturn. “There is a danger that political choices lead to a faster deterioration in the federal finances, leading to higher long-term interest rates and a weaker dollar,” he wrote.

As the world’s largest economy grapples with record debt levels and uncertain policy outcomes, the warning from one of Wall Street’s leading strategists serves as a reminder that fiscal imbalances, though gradual, can eventually demand abrupt correction.

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Source: Fortune