A Stark Warning From Wall Street’s Biggest Bank
The United States is on a path of slow financial erosion, according to JPMorgan strategists, who warn that mounting national debt and unreliable tariff revenues are undermining long-term fiscal stability.
“America isn’t collapsing overnight,” one senior JPMorgan economist said. “It’s going broke slowly – one deficit, one interest payment, one political delay at a time.”
The warning comes as the U.S. national debt surpasses $35 trillion, an all-time high, and annual interest payments exceed $1.2 trillion – now larger than the entire defense budget.
Tariff Revenue: A Drop in the Ocean
Despite the White House’s renewed emphasis on tariffs as a source of income, JPMorgan analysts argue the math simply doesn’t add up.
Even under the most optimistic projections, the government’s tariff revenue – roughly $350 billion annually – covers only a fraction of the federal deficit, which is projected to reach $1.8 trillion this fiscal year.
“Tariffs make headlines, not balance sheets,” the report stated. “They are politically useful, but economically negligible when compared to the scale of federal borrowing.”
Much of the tariff revenue is offset by higher import costs, which ripple through to consumers and businesses. Economists warn this could stoke inflation, further complicating the Federal Reserve’s monetary policy.
Debt Growth Outpacing GDP
The U.S. debt-to-GDP ratio – once below 60% two decades ago – is now hovering near 130%, the highest level since World War II.
JPMorgan’s research shows debt is growing nearly twice as fast as the economy itself, driven by entitlement spending, interest costs, and political gridlock.
“The debt curve is no longer linear – it’s compounding,” said a strategist from the bank’s global markets division. “Once interest costs start feeding on themselves, you enter a self-perpetuating cycle that’s hard to escape without painful fiscal discipline.”
Interest Payments Now America’s Fastest-Growing Expense
The Treasury Department’s latest data show that interest payments on the debt have become the government’s single fastest-growing line item.
Rising yields on Treasury bonds – partly due to higher-for-longer Fed policy – mean Washington now spends more servicing debt than on Medicare, education, or infrastructure.
“Interest payments used to be a background cost,” said a JPMorgan macro strategist. “Now they’re the headline story. The U.S. is effectively borrowing money to pay interest on past borrowing – and that’s not sustainable.”
Political Theater Meets Economic Reality
Analysts warn that Washington’s political battles – particularly around tax cuts, spending caps, and new tariffs – have made coherent fiscal policy nearly impossible.
“Both parties are promising growth without sacrifice,” said the report. “That’s not how balance sheets work.”
While tariffs and industrial policy have been framed as tools to fund national renewal, JPMorgan’s research suggests they barely move the fiscal needle. The bulk of tariff proceeds are already absorbed by subsidies, defense spending, and debt service.
The Global Ramifications of U.S. Debt
JPMorgan’s warning also underscores a global dimension: as the world’s reserve currency issuer, America’s fiscal trajectory has ripple effects across global markets.
Foreign buyers, including Japan and China, have reduced their holdings of U.S. Treasuries, forcing domestic investors and institutions to absorb more debt issuance.
That trend could accelerate if bond yields rise further, driving up borrowing costs worldwide. “The U.S. still has the privilege of issuing debt in its own currency,” said a strategist, “but that privilege isn’t a blank check.”
A Slow-Burning Crisis, Not a Sudden Collapse
Despite the grim tone, JPMorgan’s message isn’t one of imminent catastrophe – it’s one of creeping decline.
“The phrase ‘going broke slowly’ captures it perfectly,” said one analyst. “This isn’t about default risk tomorrow. It’s about eroding resilience over decades.”
That erosion comes from crowding out private investment, reducing fiscal flexibility, and leaving the government with fewer options in the next crisis.
“The U.S. can still print dollars,” the report concluded, “but it can’t print trust.”
Investors Are Watching the Long Game
Markets have so far shrugged off debt concerns, focusing instead on inflation and interest rates. But JPMorgan warns that investor psychology can shift quickly.
“If investors start to doubt Washington’s fiscal discipline, even modest changes in sentiment could drive bond yields sharply higher,” the report said. “That’s when a slow bleed turns into a financial shock.”
For now, the world’s largest economy remains functional – but fragile. “You don’t go broke in a day,” the analyst said. “You do it by pretending tomorrow will always look like today.”
