Via TBP

 

The war with Iran. When was the last time you saw a broadcast or read a newspaper that talked about significant American losses/costs?  For example the total destruction of the billion dollar long-range radar station in Jordan, or the fact that the 14 military bases America has in the ME are currently basically uninhabitable.  Let me guess …. virtually zero, right?  This war is likely to cost a trillion dollars.   Think about that this tax season. After all, YOU are paying for it.  Then again, you are getting back $3 – $4 thousand dollars, so life in ‘Murica is goooood.  Right? Make Wars Fun Again.

Why is the war in Iran so expensive?

On February 28, the United States and Israel launched attacks on Iran, killing supreme leader Ayatollah Ali Khamenei. By early April, the United States had more than 56,000 troops in the war zone (including some 50,000 on ships, military bases, and other installations, as well as 4,500 Marines and 2,000 troops from the 82nd Airborne), and the United States was considering deploying 10,000 additional ground troops.

 

We spoke with Professor Linda Bilmes, the Daniel Patrick Moynihan Senior Lecturer in Public Policy and a leading expert on public finance, about the financial cost of the war in Iran. The conversation has been lightly edited for length and clarity, and all information reflects the reality as of April 6, 2026.

How expensive is the war in Iran for American taxpayers?

Wars always cost more than expected. Throughout history, those who get into wars tend to be optimistic about the cost and about the length of time it will take. For example, Russia thought it could take control of Ukraine in a few weeks. President George W. Bush fired his economic advisor, Larry Lindsey, for predicting that the Iraq War might cost $200 billion (it ended up costing $5 trillion).

We see the same pattern with Iran. The Trump administration expected that this war would be over quickly and would be relatively inexpensive. According to the Pentagon, it cost $11.3 billion in the first three to five days—but that is an underestimate. According to my calculations, those first few days cost at least $16 billion. We are spending down munitions at an extraordinarily fast pace—to put it in perspective, we fired more Patriot missiles in the first four days of the Iran war than we have given to Ukraine over the past four years.

It is hard to measure the exact cost. But based on what we know now, it is costing about two billion dollars a day in short-term, upfront costs, which is the tip of the iceberg.

What are some short-term costs of the war in Iran?

Short-term costs include things like the munitions, which are the missiles, bombs, and interceptors we are firing; the cost of maintaining two or three carrier strike groups in the region with aircraft, submarines, destroyers, supply ships, etc.; and the cost of maintaining personnel, combat pay, extended deployment pay, as well as the cost of unexpected things like the fact that we lost three F-15 fighter jets to friendly fire from Kuwait. And now Iran has already shot down U.S. aircraft, including an F-15 fighter, an A-10 attack plane, and multiple drones. So we are losing high-cost assets.

How are short-term costs calculated?

But the short-term costs are even higher than they appear. The Pentagon reports costs based on the historical value of inventory, instead of the actual cost it takes to replace what we are using. And those replacement costs are far higher.

For example, the Tomahawk missiles being used are valued at around $2 million each in inventory, but replacing them today costs $3 to $3.5 million. Patriot missiles in the inventory were valued at $1 to $2 million, but newer versions cost $4 to $5 million each. The same is true for fuel and other supplies, where we are drawing down inventory purchased at lower prices and replacing it at much higher current prices.

We are not accounting for the full cost of repair and maintenance, or for what it costs to keep forces deployed months beyond their planned rotations.

Can you share examples of those additional costs?

Take the USS Gerald R. Ford, an exceedingly high-tech $13 billion aircraft carrier which just limped off after a massive fire in the laundry exposed 600 sailors to serious smoke inhalation. It was deployed six months longer than planned, with about 5,000 personnel on board, and the sewage system failed, so it cost $400,000 to flush the toilets with chemicals every day. The carrier now requires 14 months or more of repairs. None of those costs are reflected in the initial operational estimates.

These gaps are one reason why the reported $11.3 billion is closer to $16 billion, and they reflect a persistent gap between what the Pentagon reports in real time and what the war actually costs. You can see that gap clearly in the administration’s request for roughly $200 billion in emergency funding, much of it to cover repairs, maintenance, and replacement costs that were never included in the upfront costs that get announced.

What are the other costs?

There are always big, medium, and long-term costs that go on long after the last shot is fired. The medium-term costs, over the next four to five years, include things like repairing facilities and restocking inventory with much higher-tech weapons systems.

Starting with reconstruction of damaged facilities and inventory, at least 20 U.S. military installations in the region have been severely damaged, including bases, housing, missile systems, etc. These will take years to repair. At the same time, we will be rebuilding across the region, and probably helping our allies, including Kuwait, UAE, Bahrain, etc., to rebuild some of their facilities and infrastructure that Iran has destroyed.

Then there is the cost of the contracts we are signing with defense suppliers.

What are some examples of contracts with defense suppliers?

We have already signed billions of dollars of large, multi-year contracts with Lockheed Martin to increase interceptor production from about 600 per year to roughly 2,000, to produce 400 THAAD interceptors per year, up from 96; we signed a contract with Boeing to expand production of missile systems. This is not a marginal adjustment; it is a large-scale industrial expansion that will take years and cost hundreds of billions of dollars.

And it reflects a fundamental asymmetry in the economics of this war. Iran is producing roughly 10,000 Shahed drones per month at a cost of about $30,000 each. We are responding by firing interceptors that cost around $4 million apiece, and using up what we have both in offense and defense, for example protecting Israel from incoming attacks.

So in the medium term, we are rebuilding infrastructure, replenishing stockpiles, and expanding production capacity—all at once, and all at high cost.

But the long-term costs will dwarf all this.

What are the long-term costs?

First, veterans’ care. We now have roughly 55,000 U.S. troops deployed in this conflict who have been exposed to toxins, contaminants, and environmental hazards, such as burning fuel and chemical residues that we know can cause long-term harm. Under the PACT Act, veterans who develop or aggravate conditions, ranging from asthma and skin problems to cancer, are eligible for lifetime disability compensation and medical care for the rest of their lives.

For example, 37% of the veterans from the first Gulf War in 1991 receive lifetime disability benefits. So if even one-third of the 55,000 troops deployed today claim benefits, then we are committing ourselves to tens or hundreds of billions of dollars in disability and medical care costs for this cohort alone. And if we send more troops into Iran, the toll from serious injuries and disabilities will unfortunately grow. It is important to reckon with this cost.

Can you put the long-term costs in context?

Before this war started, we already owed $7.3 trillion dollars just in disability benefits alone (not including medical benefits, education, and other benefits) to veterans of previous wars who are alive now. I have written extensively about this debt and why we should be setting up a Veterans Trust Fund to pay for it instead of kicking the can down the road.

Second, there is the permanent increase in the defense budget. The president is proposing roughly a 50% increase in the defense budget. If enacted in full, that would push defense spending to levels about 20% higher than the peak reached during World War II. This raises the baseline. Even if Congress does not agree to approve the full increase, it is highly likely that at least $100 billion per year will be added to the base defense budget that would not have been approved in the absence of this war.

And once that increase is built into the base, it raises the baseline and compounds—so an additional $100 billion per year is $1 trillion over the next decade.

What does this mean for the national debt?

When the United States invaded Iraq in 2003, debt held by the public was under $4 trillion. Our total national debt today is now $31 trillion dollars, and a lot of that debt is due to the money we borrowed for Iraq and Afghanistan. But all the money that we borrowed over the last 20 years at low interest rates is now being repaid at the higher interest rates that we are all experiencing. Today, we spend about 15% of the total national budget just paying interest.

So that means we are borrowing to finance this war at higher rates, on top of a much larger debt base. The result is that the interest costs alone will add billions of dollars to the total cost of this war. And unlike the upfront costs, these are costs we are explicitly passing on to the next generation.

And we have not even discussed the long-term economic costs and the impact of rising oil prices, insurance, food, and other prices on the global economy.

How do you think about the “tradeoffs” involved in war spending?

I am certain we will spend one trillion dollars for the Iran war. Perhaps we have already racked up that amount. So what is the opportunity cost of that money? There are some who would say, “This money should be spent on schools, or roads, or other immediate concerns.” There are others, and I tend to be something of a fiscal hawk, who would say, “This money should be used to help pay for existing obligations. For example, dealing with the Social Security shortfall, dealing with the liabilities we have to veterans, reducing the deficit.”

If we think about how to spend money strictly in terms of national security, we know from recent history that national security includes not only the military, but also economic security and health security, as we saw with COVID. There are many dangers, but they are not all military threats.

SOURCE:  harvard.edu

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