Huge cost of the Iran war is biting America

Editor's note: He Weiwen is a senior fellow at the Center for China and Globalization, CCG. The article reflects the author's opinions and not necessarily the views of CGTN.

The Pentagon sent the US Congress an emergency application for additional defense appropriation of up to $200 billion on March 20, for the war in the Middle East. It was an astonishing act as the additional sum is even larger than the annual defense budget of Germany and the UK combined. It was also on the basis of the unprecedentedly high defence budget of over $900 billion for FY 2026. 

The direct and pressing reason is the tremendous cost of its Operation Epic Fury against Iran. 

According to the Pentagon's report to Congress, the US spent $11.3 billion during the first 6 days of the war, and $1 billion per day, or $11,500 per second since then. Thus, over $30 billion was spent by April 8, when a two-week truce was hit. Considering the fact that the Pentagon is continuously deploying military muscle to the Middle East, there is a high risk of a war again, despite all the peace talks and progress so far.

The $200 billion additional defense application should be firmly condemned. 

The war launched by the US and Israel is on the sovereign state of Iran, which had not invaded the US at all. The US war against Iran is in total violation of the UN Charter and the relevant international laws and is thus absolutely illegal. The war has caused tremendous losses and inflicted tragedies on the state and people of Iran. Over 3,000 Iranians are estimated to have been killed. Millions have been impacted, displaced or lost their homes, while hundreds of hospitals, schools and universities have allegedly been damaged. 

Protests have broken out across America and in other parts of the world. A majority of the American people are against the war, according to media reports.

Washington has been a cash-guzzler for wars over the past decades. According to a research report titled "The Cost of Wars" by Brown University, the US spent over $8 trillion on wars during fiscal years 2001-2022. As with the past, the current war policy has also caused significant cost on America itself.

The cost of war is quickly eating into the federal government fiscal pool, making the fiscal deficit situation go from bad to worse. The US federal budget already suffered a deficit of $1.865 trillion in FY 2025, or 6.2% of GDP, and has been estimated to suffer a $1.9 trillion deficit in FY 2026. As the US Supreme Court has ruled Trump's IEEPA tariffs illegal, Washington has to return the relevant tariff income of $166 billion. Hence, the ultimate federal budget deficit will likely exceed $2 trillion for FY 2026. Now, with additional military expenditures, the deficit will be even larger.

The situation has left the Treasury no choice but to issue more treasury bills as national debt. By March 17, the US national debt exceeded $39 trillion, and it is still increasing. It has been estimated that by 2036, total US national debt will exceed $60 trillion, with annual national debt service cost at $2 trillion, and the budget deficit at $3.1 trillion, or 6.7% of GDP.

Former US Treasury Secretary Henry Paulson, who led America out of the 2008-2009 global financial crisis, issued a serious warning recently that US policymakers must prepare an emergency plan to prevent a national debt crisis. If the crisis does happen, it would have serious consequences across the whole economy, he warned.

Worries over US treasury bills have been mounting among global investors. The persistent US federal fiscal deficit, unprecedented national debt, and inflation prospects have led to pressure on US treasury yields recently. As US treasuries are seen as the keystone of the global financial system, the pressure could spill over into stocks, bonds, and monetary markets as well.

To make the situation even worse, a major part of the federal budget expenditure is the payment of the national debt service. The debt burden hinges on the Fed rate. In FY 2024, the Fed rate was over 4% and the national debt service was $1.14 trillion. 

The Fed rate decision depends on two key indicators: CPI at 2% and a stable unemployment rate. The war of aggression against Iran has pushed up US inflation. It triggered the choking of the Strait of Hormuz, disturbing 20% of world oil and natural gas shipping, causing a global oil supply shock and sending oil prices soaring. The latter, in turn, caused a rise in prices at gas stations in America, aggravating the inflation. The latest US Labor Statistics showed March CPI at 3.3%, against 2.4% in February. The inflation risk, in turn, has led the Fed to pause rate cuts.

Thus, American families are also victims in this war. The rising gas prices and other living costs have cut into their living cost. The Michigan University consumer confidence fell to 47.6, compared to 53.3 a month ago.

The current war against Iran is disastrous. It is disastrous not only to Iran, to the global energy supply chain and the world economy, but also to America itself. The only correct option is not the grant of additional money by Congress, but a political agreement to end the war and resume peace in the Middle East and in global energy flows. Washington should cast away any unrealistic illusions of winning through war and come to the negotiation table, not for a temporary truce, but for a lasting peace.