Harvard professor warns: US-Iran war could burden taxpayers with a "hefty bill" of $1 trillion

The financial cost of the US-Iran military conflict is far exceeding 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 surpass $1 trillion. This assessment is based on short-term combat expenditures, long-term reconstruction and compensations for casualties, as well as the rising interest burden in a high-debt environment.

The Middle East conflict began on February 28, and the Pentagon reported to Congress that the first 6 days of combat cost $11.3 billion. Although a fragile ceasefire agreement remains in effect, negotiations for a lasting peace deal have so far failed.

Official Figures Underestimate Actual Costs

According to Bilmes’ estimates, the short-term direct cost during the 40 days of actual combat is about $2 billion per day, covering munitions, troop deployment, and military asset losses—including three F-15 fighter jets shot down due to friendly fire.

She noted that the Pentagon reports based on the historical value of stockpiles rather than current actual replacement cost, leading to a systemic underreporting of official figures. She stated: "These gaps are one of the reasons why the disclosed $11.3 billion is actually closer to $16 billion, reflecting a longstanding discrepancy between the Pentagon's real-time reporting and the true costs of war."

In addition, large multi-year contracts signed with Lockheed Martin and Boeing mean that the US pays as much as $4 million to replenish each interceptor missile, while each drone launched by Iran costs only about $30,000 to produce, further exacerbating fiscal pressure due to the cost asymmetry between the two sides.

Long-Term Burden: Reconstruction, Casualties, and Defense Expansion

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

Bilmes pointed out that the US will need to rebuild its damaged military facilities and equipment in the region, and also bear the reconstruction costs for Gulf state allies’ infrastructure. Meanwhile, approximately 55,000 soldiers deployed in the region who have been exposed to toxins and environmental hazards pose a potential long-term fiscal drag on taxpayers due to lifetime disability compensation.

On the defense budget front, the White House has already asked Congress to increase the defense budget to $1.5 trillion, which would mark the largest military expansion since World War II. This figure does not include the Pentagon's separate $200 billion special funding request for the Iran war. Bilmes believes that even if Congress does not approve the full increase, an annual baseline increment of at least $100 billion in the defense budget is almost inevitable.

High Debt Plus High Interest Rates: Costs Passed to Future Generations

Bilmes compared this war to the Iraq war. The total cost of the Iraq war was about $2 trillion, and back then, US public debt held by the public was less than $4 trillion. Today, US public debt held by the public has surpassed $31 trillion, a significant portion of which stems directly from the debt left over from the Iraq and Afghanistan wars.

"We are now financing this war against a backdrop of higher interest rates and a much larger debt base," she said. "Interest expenses alone will add tens of billions of dollars to the total cost of the war. Unlike front-line direct expenditures, these interest costs are a burden we are clearly passing on to the next generation."