Harvard professor warns: US-Iran war may saddle taxpayers with a "heavy bill" of $1 trillion

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The financial cost of the US-Iran military conflict is far exceeding the official figures and will have a profound impact on US Treasury bonds.

Linda Bilmes, professor of public policy at Harvard Kennedy School, pointed out in her latest research that she is certain the total cost of this Iran war will exceed $1 trillion. This assessment is based on short-term operating expenses, long-term reconstruction and casualties compensation, as well as the escalating interest expense in a high debt environment.

The Middle East conflict broke out on February 28, and the Pentagon reported to Congress that the first 6 days of operational costs amounted to $11.3 billion. Although a fragile ceasefire agreement is still maintained, lasting peace negotiations have yet to be reached.

Official figures underestimate the actual cost

According to Bilmes’ estimate, the short-term direct costs during the 40 days of actual combat are around $2 billion per day, covering ammunition, troop deployments and military asset losses—including three F-15 fighter jets downed due to friendly fire.

She noted that the Pentagon reports costs based on historical inventory value, not current replacement costs, leading to a systematic underestimation of official numbers. She said: "This gap is one of the reasons why the reported $11.3 billion is actually closer to $16 billion, reflecting a longstanding divergence between the Pentagon’s real-time reporting and the true costs of war."

In addition, the longstanding contracts with Lockheed Martin and Boeing mean that the US replenishment cost for each interceptor missile is as high as $4 million, while Iran’s production cost for each drone launched is only about $30,000. The asymmetry of costs further intensifies fiscal pressure.

Long-term burdens: reconstruction, casualties, and defense expansion

In the long run, war costs will continue to accumulate due to multiple factors.

Bilmes pointed out that the US needs not only to rebuild its own damaged military facilities and equipment in the region, but also shoulder the reconstruction of allied Gulf countries’ infrastructure. Meanwhile, about 55,000 troops deployed in the region who were exposed to toxins and environmental hazards face the prospect of lifelong disability compensation, which will become a long-term financial burden for taxpayers.

At the defense budget level, the White House has asked Congress to raise the defense budget to $1.5 trillion, which would be the largest military spending expansion since WWII. This figure does not include an additional $200 billion special appropriation requested by the Pentagon for the Iran war. Bilmes believes that even if Congress does not approve the full increase, an annual base defense budget increase of at least $100 billion is nearly inevitable.

High debt combined with high interest rates, costs passed on to the next generation

Bilmes compares this war to the Iraq war. The total cost of the Iraq war was about $2 trillion, and at that time, US public debt held by the public was less than $4 trillion. Today, US public debt held by the public exceeds $31 trillion, a considerable portion of which stems from the debts left over from the Iraq and Afghanistan wars.

"Now we are financing this war in a context of higher interest rates and a larger debt base," she said. "Just the interest payments alone will add tens of billions more to the total cost of the war. Unlike direct frontline spending, these interest costs are a burden we are clearly passing on to the next generation."

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