How much is the Iran war costing us?

NPR. This is the indicator from Planet Money. I'm Ricky Mulvey. And I'm Darien Woods. Let me on the show, we've been discussing some of the broader economic costs of the US Israel War with Iran. And those expenses vary day by day. Yeah, finding out how much money war costs is a difficult task in the moment. The Center for Strategic and International Studies first estimated that the early days of Operation Epic Fury cost roughly $900 million per day. More recently, the New York Times reported that Pentagon officials estimated the cost to be more than twice that number, about $1.9 billion per day. And even these numbers don't tell the whole story. These estimates are the tip of the iceberg. Today on the show, we're looking at the costs of Operation Epic Fury, white post 9/11 wars, cost trillions of dollars more than early estimates suggested. And the underestimated expenses that American taxpayers will be paying now and far into the future. That's a laugh to the break. Others are expensive and it's difficult to find out just how much one costs in the middle of it. Mark Gantzian is a retired US marine colonel. He's also done budgeting for the Department of Defense and helped come up with that daily $900 million or so estimate. But that number is already significantly higher. The munitions mix appears to have been a little richer than we had first estimated and the damage to the bases is higher than we had estimated. He's talking about the types of bombs the US has been dropping and the US bases that have been hit in the Gulf. And he has an interesting thing. Those bombs don't actually count in the Department of Defense's current budget. After the US drops a bomb in Iran, the military says that's not a part of our regular budget and now we need to immediately pay to replace these bombs we just dropped. We'll need to go back to Congress to ask for more money regardless of how long the war goes. So one reason the war is already expensive is that many of the costs are not already budgeted for. But Mark says that while the costs of the first days in Iran were high, he expects the daily cost to go down now that the US has established air superiority. The military can drop cheaper bombs from airplanes versus launching long-range precision guided weapons. Still, Linda Billmeers is worried that the cost of war in Iran will not be controlled and she thinks that the long-term costs could be dramatic. Linda has studied how the US pays for post-9/11 wars as a public finance professor at the Harvard Kennedy School. This is very similar territory, not only to the Iraq and Afghanistan wars, but to wars dating back thousands of years, where those who initiate them tend to be optimistic about how long it will take and tend to significantly underestimate the wars. The Bush administration's initial public estimate for the Iraq war was about $50 billion. Neeter Crawford co-founded the Costs of War project at Brown University. Neeter estimated that the real number for Iraq and Syria was closer to $3 trillion. And she believes that we should consider long-term expenses of going to war. Most importantly, perhaps, the cost of veterans care. There are tens of thousands of US soldiers and Air Force officers and other service members and many Navy personnel involved in this war. Caring for veterans is expensive long after the conflict ends. Linda says we're paying billions of dollars a year to take care of veterans from the relatively short Gulf War, and these costs can go beyond health expenses. Their total obligation to veterans who have been hurt by war is in the trillions. The amount of accrued disability benefits, not counting health care, just disability benefits that we have already promised to veterans, is $7.3 trillion. This is the money we pay to veterans who were hurt through injury or illness during their service. And Neeter adds there's one other long-term cost she's concerned about. The cost of war on the environment. Let's say we look at 2024's military emissions for the Department of Defense. There were 47 million metric tons CO2 equivalent. Okay, larger than many countries, annually emissions. Neeter says these emissions are from moving large planes and ships around, fighter jets flying faster than the speed of sound. Plus this war has included strikes on oil facilities. Iran reportedly bombed a Saudi oil refinery, though the Iranian regime denies responsibility. The U.S. Israel joint strikes his hit oil facilities in Iran. Regardless, bombing oil facilities creates long-term environmental damage. One of the more significant economic costs are going to war is financing. Other than the revolutionary war, the United States has financed wars with a mix of debt, higher taxes, and budget cuts within the government. That changed after 9/11. Now America's wars are financed almost entirely through debt without higher taxes or budget cuts. All of the money that we're spending is being borrowed, so there is interest that we will have to repay. Mark Kanceyne says the cost is a concern, but not how the U.S. finances it. I think from an economics point of view, it's a war. Mark is talking about an economic theory called Riccati and equivalence, which says that spending through raising taxes or increasing deficits have similar effects on the economy. Linda disagrees and says the way we finance war matters. There have been many studies on this and show that people experience the cost of anything in a different way if they are asked to pay taxes than if they incur debt. She believes financing war through debt shifts the burden to future generations. And raising taxes to pay for war changes the buy-in that President's ask from the public. President Truman, for example, made 206 speeches on this topic, basically saying if this is important enough that we have to go to war, then it's important enough that we have to pay for it. So the costs of war aren't the only expenses of dropping bombs or fueling airplanes. They go on long after the war is over through health care, disability benefits, environmental costs, and interest payments. She also believes it sets the stage for increased military spending, which is already a significant chunk of federal spending. Earlier this year, President Trump asked Congress to approve a $1.5 trillion military spending budget, which is more than 50% higher than its current budget. Although Congress has kind of lukewarm to this idea, the backdrop of a live active war, and all of this discussion around using up of munitions and supporting our troops and so on is going to enable President Trump to secure a much larger amount of base increase to the Pentagon budget. And Linda worries this increased budget for defense spending will not go back down, even if the president doesn't get everything he asks for. Once that gets added into the Pentagon's annual budget, it stays there pretty much forever so that every year you have a higher base that you start from. Society economic figures can provide certainty in an uncertain time, but the chaos of war is precisely what makes those numbers so uncertain. The economic costs of war, like the physical damage, are not daily figures. They go on long after the conflict is over. Tomorrow we dig deeper into this issue with a look at drone warfare economics and how the US is learning a lesson from Iran. This episode was produced by Corey Bridges with Engineering by Robert Rodriguez, who's fact-checked by Sarah Huarez, Kaken Kettin edits the show and the indicators of production of NPR.