There’s something different about Trump’s $1 trillion war on Iran and its strain on the national debt, Harvard Kennedy scholar says

In other words, to maintain peace, don’t finance wars with debt.

Almost a quarter-millennium later, public finance expert Linda Bilmes warns that the US made this exact mistake in how it raised capital for the Iran war, piling the nation’s already hefty $39 trillion debt.

According to Bilmes, a professor of policy at the Harvard Kennedy School, the cost of the ongoing war likely to exceed $1 trillionwhich flooded early estimates of US war spending, with the Pentagon reportedly claiming the first week of war spending about $11.3 billion alone. The American Enterprise Institute estimates the cost of war exceeded $35 billion on April 1—or about $1 billion a day. Bilmes says the daily cost is double the estimates, because the government does not take into account the long-term effects of the war, such as long-term veteran disability benefits and damage to basic infrastructure that may take years to rebuild.

More importantly, Bilmes said, the US is now more dependent on debt to finance the war than we were before. During the wars in Iraq and Afghanistan in the early 2000s, the debt held by the public sat at close to $4 trillion, and we paid about 7% of the total federal budget in interest, Bilmes said. Today, $31 trillion in debt is held by the public, with 15% of the national budget spent on interest payments.

“The result is that interest costs alone will add billions of dollars to the total cost of this war,” Bilmes said in a recent interviews with the Harvard Kennedy School. “And unlike the costs of the first, these are costs that we clearly pass on to the next generation.”

Bilmes said luck that the US has not always placed a large burden on the national debt during wartime, even though every previous conflict has relied on borrowing money. These 21st century wartime financing strategies pursued by the Trump administration, he said, are bad news for the rising US debt.

US history of financing wars

A teenage United States tried to follow Kant’s principles of peace when it entered the War of 1812, performing multiple dutiesincluding direct taxes on land, as well as taxes on everything from sugar, auction sales, carriages, liquor distilleries, and retail alcohol licenses. This was perhaps more out of necessity than choice: The Bank of the United States’ charter expired in 1811, meaning there was no centralized entity able to manage loans and bonds.

Heavy wartime taxation laid the foundation for how the US raised capital in times of war, from the Civil War to Vietnam, although the financing package still came from borrowed money.

During World War I, for example, President Woodrow Wilson supported a “recruitment of wealth,” telling Americans that just as the US drafted young men to fight in the war, it would also draft the wealth of America’s richest. By 1918, progressive income tax rates touched 77%. In the chaos of the Korean War, President Harry Truman gave more than 200 speeches emphasizing his “pay-as-you-go policy” to use tax revenue to pay for military expenditures rather than the debt.

But this ideology changed at the beginning of the 21st century, when President George W. Bush implemented tax cuts in 2001 and 2003 at the same time as he launched the attacks on Iraq and Afghanistan, became the first time a US war is financed only by borrowing instead of taxes or budget increases. Bilmes, along with economist Joseph Stiglitz, published a study in 2006 found the true cost of the war in Iraq and Afghanistan topped $2 trillion, about four times greater than the Congressional Budget Office’s projected $500 billion in direct spending. In 2013, Bilmes revised his estimates—and concluded the cost was actually closer to $4 trillion to $6 trillion.

The effect of broken traditions

President Donald Trump is continuing this pattern with Iran today. The administration A Big Beautiful Bill Act extended Trump’s 2017 tax cuts, lowering rates for individuals and businesses. The cuts amount to $4.5 trillion in tax cuts over the next 10 years, according to the act.

Meanwhile, the White House is seeking up to $100 billion in additional funding for the conflict from Congress, the Washington Post reportedand Trump’s fiscal 2027 budget request calls for $1.5 trillion in defense spending, a 44% increase from the year before and also includes a 10% reduction in non-defense spending. The proposed budget would mark the first time that defense spending exceeds all other discretionary spending. About a quarter of the US budget from borrowed money.

“That’s money that goes on forever,” he said. “This means that every year the base you start from the budget is higher.”

Bilmes argues that there is nothing inherently wrong with borrowing money. However, he is concerned that the administration’s focus on military spending will come at the expense of investments in economic development, tipping the debt-to-GDP ratio and leading to drag on economic growth. The White House did not immediately respond luckThis is a request for comment.

“When you borrow for things that are productive investments, like infrastructure or education, you hope to get back more than what you borrowed,” he said. “But in this case, we borrowed (at) a high rate, mostly for things that will be finished in sand.”