In the corridors of Wall Street, where economic forecasts often shape billion-dollar decisions, a sobering warning has emerged from one of finance’s most respected voices. David Kelly, chief global strategist at J.P. Morgan Asset Management, has sounded the alarm on America’s escalating federal debt, describing the nation as “going broke slowly” in a recent analysis that underscores the perils of unchecked borrowing amid political promises of fiscal salvation.

Kelly’s assessment, detailed in a Fortune report published today, paints a picture of a debt spiral that even aggressive policy measures may fail to arrest. With the U.S. national debt surpassing $35 trillion and interest payments alone rivaling defense spending, Kelly argues that the slow pace of this fiscal deterioration is lulling markets into complacency, much like a frog in gradually heating water.

The Illusion of Tariff-Fueled Relief

Proponents of tariffs, including those championed by President Trump, have touted them as a revenue bonanza capable of offsetting deficits. Yet Kelly dismisses this notion, noting that even if tariffs generate substantial income, they would barely dent the debt’s growth trajectory. As reported in Biztoc, he highlights how tariff revenues are shaky at best, vulnerable to trade retaliations and economic slowdowns that could exacerbate the very deficits they aim to cure.

This skepticism aligns with broader Wall Street concerns. Economists at Goldman Sachs and J.P. Morgan have previously flagged recession risks tied to tariffs, with a CBS News analysis earlier this year estimating a heightened probability of economic contraction in 2025 due to these trade barriers. Kelly extends this logic, warning that tariffs might inflate consumer prices without providing the fiscal windfall needed to stabilize debt levels.

Spending Cuts and the Musk Factor

Enter Elon Musk, whose proposed spending cuts have captured headlines as a potential counterbalance to debt woes. Musk’s vision, involving drastic reductions in federal outlays, is positioned as a bold fix, but Kelly remains unmoved. In the Fortune piece, he contends that such cuts, while politically appealing, face immense hurdles in implementation and could trigger social and economic backlash, further straining growth.

Historical precedents bolster this view. Past attempts at austerity, as chronicled in various economic studies, often lead to short-term pain without long-term gain, especially in a high-debt environment. Kelly’s team at J.P. Morgan has modeled scenarios where even optimistic cuts fall short, echoing sentiments in a Business Insider interview where he flagged tariffs’ potential to spark global slowdowns and stagflation.

Market Complacency Amid Rising Risks

Why, then, aren’t markets in panic mode? Kelly attributes this to the gradual nature of the debt buildup, allowing investors to adapt incrementally. Bond yields remain relatively tame, and equity markets continue their climb, but underlying vulnerabilities persist. A Bloomberg report from April echoed this, with J.P. Morgan economists predicting tariffs could tip the U.S. into recession, amplifying debt servicing costs.

For industry insiders, the implications are profound: portfolio strategies must now factor in higher inflation risks and potential credit downgrades. Kelly urges a reevaluation of long-term holdings, suggesting diversification into assets less exposed to U.S. fiscal volatility.

Pathways to Fiscal Sustainability

Looking ahead, Kelly advocates for a balanced approach beyond tariffs and cuts—perhaps through tax reforms or entitlement adjustments—but warns of political gridlock. As detailed in another Fortune analysis from August, experts like those at Wharton and the American Enterprise Institute concur that tariffs alone won’t meaningfully reduce debt, emphasizing the need for comprehensive policy shifts.

Ultimately, Kelly’s message is a call to action for policymakers and investors alike: America’s slow fiscal decline demands urgent, multifaceted solutions before the boil becomes unbearable. In an era of economic uncertainty, ignoring these warnings could prove costly for generations.