The Cost of War

The United States has begun a conflict with Iran that two thirds of the American public does not understand. One question we can try to answer: how much is this conflict costing us? The surprising story of how the government learned to hide the costs of war, and how someone learned to get to the bottom of those costs anyway. Check out Professor Bilmes’ work. https://www.hks.harvard.edu/faculty-research/policy-topics/international-relations-security/why-war-iran-so-expensive Additional listening: our episode on ballooning national debt and why it's a big deal https://www.searchengine.show/why-the-national-debt-might-finally-matter/ Support the show! https://searchengine.supercast.com/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00PJ Vogt?

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• 0:44PJ Vogt?

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• 0:58PJ Vogt?

  Quick note before we start the show, we are doing an AMA. That's an Ask Me, I'm the proverbial me in this, Ask Me Anything on the Search Engine subreddit. This is going to be Friday, April 24th at noon Eastern. Don't feel like you have to ask me anything. It's more like we've done a bunch of recent episodes that people have emailed a lot of questions about. There was our big series on driverless cars. There was our episode about GLP1s. There was our episode about Anthropic, the company behind Claude. And these are just things that generated a lot of questions from people. And we wanted to say, if there's something that we've published recently that you wanted to know more about, or if you wanted to know why we did something, or how we did something,

• 1:41PJ Vogt?

  or even if you just have general questions about how the show works, we're doing an Ask Me Anything. I guess, yeah, anything, anything you want. Again, April 24th, Friday. This will be in the Search Engine Podcast subreddit at noon Eastern time.

• 2:23PJ Vogt?

  Welcome to Search Engine. I'm PJ Vogt. No question too big, no question too small. I think almost any other time in American history, this would be a very naive thing for me to admit out loud. But genuinely, if you were to ask me, PJ, explain why the United States is currently at war with Iran? I would have to answer, I don't know.

• 2:50PJ Vogt?

  I do read the newspapers. So I know Trump said he wanted to hit Iran's nuclear program. I know Netanyahu was pushing for strikes. I also know that after quickly deposing Maduro in Venezuela, Trump seemed to walk away with the belief that regime change was just something you could do conveniently from home. Door dash, but with armed drones. But like, what is the case for the Iran strikes other than they're emotionally satisfying for the president? What is the argument for why this is in the national interest? I genuinely don't know. I'm not alone. Two thirds of Americans polled by CBS YouGov said they don't understand the reason for our current war. They don't get it.

• 3:33PJ Vogt?

  Like, it's a too challenging David Lynch movie. The most disturbing possibility might be that there just is no underlying reason, that this is confusing because it actually doesn't make sense. But if the benefits of the war don't add up, the one thing we should still be able to understand are the costs.

• 3:54PJ Vogt?

  Obviously, war has an incalculable moral cost. The deaths of civilians, the deaths of soldiers, the cost to America's moral standing in the world. But that's not the part I wanted to understand this week. I wanted to understand something much more literal. The price tag. So this week, Search Engine called someone who actually tries to put prices on American conflicts.

• 4:19PJ Vogt?

  So first off, can you just say your name and what you do?

• 4:23Speaker 01

  My name is Linda Bilms, and I am the Daniel Patrick Moynihan Senior Lecturer Chair in Public Policy and Public Finance at the Harvard Kennedy School.

• 4:32PJ Vogt?

  And when you're at Thanksgiving and people ask you what you think about all day, like, what do you say?

• 4:39Speaker 01

  Well, I spend my time thinking about how society allocates resources. I think about the roads in Pittsburgh. I think about the composting in Somerville, and I also think about how we spend money on wars. I've been obsessed with the cost of war since the US invasion of Iraq in 2003. And as I've studied this for years and years and years, I mean, I've seen this real disconnect between the fact that we're talking about billions and even trillions of dollars on costs of war, when we're talking about $6 for after-school basketball in a local community.

• 5:22Speaker 01

  I mean, it is this enormous disparity, and I think that partly because of the fact that the words millions, billions, and trillions rhymes in English. We don't even really fully grasp the scale of the spending on wars. And trillions are order of magnitude bigger than billions. I always tell my students, like, a billion seconds ago is like, you know, in the 90s when The Lion King came out, and trillions is woolly mammoth era, you know, about a long time ago.

• 5:55PJ Vogt?

  So Professor Bilms is saying, part of the issue here is that we're just bad at imagining a trillion. But there's another part, which is that war spending is also confusing, because it's been intentionally designed to be. The government spends war money less honestly than it spends most of its budget. When the government goes to war, it starts to behave more like a shady moving company, quoting you one price to get the job, then changing that price once it's holding your precious flatscreen over the sidewalk. How did the government learn the pricing maneuvers of Brooklyn movers? That's a story that starts before this war in Iran. For Professor Bilms, it starts with Iraq. In the early aughts, the cost of that war was a topic that came up in her classroom.

• 6:37Speaker 01

  My students in my introductory public finance class started asking me, how much is this costing? And I said, that's a good question. And when I started looking into how much it was costing, I realized that the government was not really adding it up. And to the extent they were, they were drastically underestimating the costs. And they were underestimating the costs partly because of the way that we were budgeting for the wars, which didn't lead to a large paper trail of explanations of spending, and partly because of the way we think about spending for wars and all the costs that we don't include.

• 7:15PJ Vogt?

  But why could you tell even then that the way that they were accounting for this was imprecise or strategic or whatever, choose your word, but like, why was it obvious even back then that the price tag that the American public was seeing was really, really not the price tag?

• 7:32Speaker 01

  Well, I mean, the Bush administration was saying at the very beginning of the US invasion of Iraq, that it was going to cost not very much, it was going to cost a few billion dollars, maybe 50 billion dollars.

• 7:45Speaker 02

  It depends on the assumptions. It depends on how long the war lasts. It depends on whether weapons of mass destruction are used. What we have done is we have taken estimates looking at different variables and said, if this were the case on this variable and then on this variable, but there's so many variables that the numbers of possible point answers create a range that simply isn't useful.

• 8:06Speaker 03

  I'm not going to get into any speculation about numbers.

• 8:08Speaker 02

  So the money's going to come from Iraqi oil revenue, as everyone has said. They think it's going to be something like 2 billion dollars this year. They think it might be something like 15, 12 next year.

• 8:19Speaker 01

  And Larry Lindsey, who was the Republican economic advisor at the time, started saying, you know, this could cost hundreds of billions of dollars. This could cost like 1% of GDP. And he was fired for even having that thought and expressing it. So there was a very deliberate effort to not discuss the cost of the war because that was going to interfere with the rush into war. And then one of the major issues that... I saw at the beginning of the Iraq war was that we were paying for the war through emergency appropriations.

• 8:53Speaker 04

  Good evening, everyone. Tonight, we begin with the cost of war. Tonight, it looks very much like President Bush is going to ask the Congress for an additional 65 to 75 billion dollars to pay for the U.S. commitment in Iraq over the next year.

• 9:08Speaker 05

  The administration's request for 87 billion dollars is the clearest sign yet the U.S. war in Iraq is far from over. President Bush today signed a bill authorizing additional funding for this nation's dual wars, Iraq and Afghanistan. 162 billion dollars enough to fund operations into next year.

• 9:27Speaker 01

  Now, emergency appropriations are there for a reason. So, for example, if there's a hurricane or an earthquake, the objective is to get money out to people who need it very quickly. But 10 years into the Iraq war, we were still paying for trillions of dollars of spending as an emergency, even though we had 400 bases in Iraq that we had built and we had hundreds of thousands of troops who were there. So, we were still pretending that this was like some very, very short-term emergency thing where we didn't really need to worry about the details. And that meant that we were significantly underestimating the costs.

• 10:04PJ Vogt?

  Okay, so those were kind of the clues that whatever was being said here, it probably wasn't true?

• 10:09Speaker 01

  Yeah, and it was very convenient for the administration and for Congress to fund these wars through emergency spending because that way they didn't have to put it into the budget for the following year. So, they could every single year minimize the projection of what the deficit would be. So, they could say, oh, the deficit is going down, the deficit is going down because they weren't accounting for the fact that we were going to be spending another 150 billion dollars or whatever in emergency spending on the war, even though there was no way we could not be spending that. But it made it look as if the deficit would be lower. And it also made it seem as if the end of the war could be right around the corner.

• 10:51Speaker 01

  And for quite a few years, early into the Iraq war, if you look at the statements of senior officials, they were continually saying that the war was about to end, they were about to turn a corner, we had, the worst was behind us and so on. And that kind of made it seem as if that could be real because we weren't budgeting for it for the following year.

• 11:11PJ Vogt?

  And so, okay, so this is like your origin story as a person who pays deep attention to this starts there.

• 11:17Speaker 01

  That's right.

• 11:18PJ Vogt?

  Once you start deciding like, okay, they're not going to give real numbers for reasons of political expediency. How do you just start yourself auditing? Like, I imagine that's very hard.

• 11:30Speaker 01

  Well, I mean, it was difficult to try and get up to speed on understanding how the accounting is done within the Pentagon. I mean, you have a obviously very large, complex organization which has a record of poor accounting. It has flunked its audit every year since accounting was required for federal agencies and is the only federal agency that has done so.

• 11:59PJ Vogt?

  I didn't know that.

• 12:01Speaker 01

  Yeah, well, I mean, flunked its accounting in a sense. Up until about five years ago, it wasn't even able to submit its accounts for accounting. It was so bad.

• 12:13PJ Vogt?

  Is that like because they're top secret or is it just they're bad at their bugs?

• 12:17Speaker 01

  No, no, no. I mean, it's just that they have not been able to account for their assets. I mean, they cannot account for at least 50% of their assets around the world. The GAO, the Nonpartisan Government Accountability Office, ranks the lack of financial accountability at the Pentagon among its top risks of government every single year for years and years and years. And many people have tried to work on this, but they have made only modest progress.

• 12:48Speaker 06

  The topic today is an adversary that poses a serious threat to the security of the United States of America.

• 12:56Speaker 01

  And in fact, the day before 9/11, Donald Rumsfeld, the then Defense Secretary, gave a speech about how the Pentagon needed to get a grip on its accounting failures and how important it was to account for where taxpayer money went.

• 13:09Speaker 06

  Our financial systems are decades old. According to some estimates, we cannot track $2.3 trillion in transactions.

• 13:18Speaker 01

  Then, of course, 9/11 happened and here we are 25 years later and we still don't have. Any kind of accountability for where taxpayer money is spent in the Department of Defense, or now Department of War. I mean, I teach cost accounting. I happen to believe that accounting for assets matters. And if the Pentagon were a private sector organization, there would be extreme penalties for failing to be able to account for spending and where the spending goes. And this is separate from the relatively small portion of the defense budget, which is so-called secret.

• 13:59PJ Vogt?

  So it's not, because the explanation my brain would supply is, well, the Pentagon is a bunch of spies, and the spies aren't going to tell you where the spies are spending money because it's top secret. You're saying, no, no, no, no, no. Forget about that. It's a small proportion of the money they spend. This is just, like, we do not know, they do not account for American taxpayer money that they are spending on things that are not secret, things like conflicts.

• 14:21Speaker 01

  I think it's because it's a very far-flung complex organization. The Army, the Navy, the Air Force have different mechanisms. They have different units that account for things in different ways, and they have not been able to reconcile them.

• 14:34PJ Vogt?

  Hmm.

• 14:35Speaker 01

  So there are certainly portions of the Pentagon that can account for their assets, but there are others that can't, and they can't reconcile how they do it.

• 14:40PJ Vogt?

  And so in that environment, in which war is expensive but hard to measure, like, one of the reasons you would want war to be more transparently measured is because, in theory, the American public, in theory, Congress, should be able to make decisions about whether we want to go to war, and the cost of war is part of it. In this context, how price-sensitive are US presidents to wars? Like, how much does their estimation of the possible price tag influence their calculation to go in or not go in?

• 15:09Speaker 01

  Well, I think it's important to look at the historical context of this, because in US history, we always paid for wars through a combination of tax increases and non-war budget cuts. So from the War of 1812, through the Civil War, through the Spanish-American War, World War I, World War II, the Korean War, the Vietnam War, this issue of how we were going to pay for the war. Was a very big issue for presidents and congresses in which they spent a lot of time thinking about how they could raise the money for the wars and whether it was worth it. And certainly if you go to the archives, for example, the Johnson archives, you see

• 15:50Speaker 01

  him talking at length with all of his advisors about how he could retain support for his domestic programs at the same time that he was paying for expletive deleted this effing war.

• 16:03PJ Vogt?

  Huh. So the money used to have to come from somewhere.

• 16:06Speaker 01

  Right. It used to have to come from somewhere and taxes were raised a lot. And President Wilson in World War I raised corporate taxes from 1% to 12%.

• 16:15PJ Vogt?

  Wow.

• 16:16Speaker 01

  President Truman raised top marginal tax rates to 92%. President Johnson imposed a tax surcharge to 75% top rates. So they really raised taxes to try and offset the cost of these wars. Now, one of the consequences of that is that Congress had to get involved because Congress has to approve tax increases. So this forced the fiscal committees in Congress, that's the House Ways and Means Committee and the Senate Finance Committee, to approve these taxes. So they had to hold a lot of hearings about this. And when you look back at the hearings in all these previous wars, Congress spent a lot more time grappling with how are we going to pay for these wars. I mean, a significant percentage of their hearings were spent figuring this out.

• 17:01Speaker 01

  And after 9/11, something changed. So we cut taxes, actually twice, in 2001 and 2003, as we went to war in Afghanistan and Iraq. We then cut taxes again during President Trump's first term in 2017, and then, of course, again last year. So the taxes have gone down at the same time that we had 20 years of increasing war expenses.

• 17:27PJ Vogt?

  And now we just add it to the deficit?

• 17:29Speaker 01

  Right. I mean, so everything that we are spending now in Iran is just adding to our national debt.

• 17:35PJ Vogt?

  So, but why? Like, why? I understand that 9/11 felt uniquely urgent. You know, it was an attack on American soil. It was a surprise attack on American soil. But what about that event justified the kind of like Klarna model or whatever, where rather than raising the money to fund the thing, you just borrow the money against the future to fund the thing?

• 17:55Speaker 01

  Well, this is a really, really important question that you're asking about why is it that we completely shifted the way we pay for wars? And I think there are three main reasons. I mean, first of all, is the general dysfunction of the congressional budget process. As everybody knows, having just lived through another year of shutdowns and almost shutdowns, the budgetary process has broken down to a large extent in a bipartisan way. So from the military perspective, they kind of felt, well, they need to get this emergency money because they couldn't rely on Congress to appropriate funds. Secondly, you had the situation through the 2000s and through most of the 20 years

• 18:39Speaker 01

  that we were in Afghanistan of historically very low interest rates. So we could borrow at a very, very low rate. It's as if we had a credit card with an expanding limit at lower and lower and lower rates. So we could borrow at almost zero after the 2008 financial crisis. So this made it really, really convenient to keep borrowing the money.

• 19:00PJ Vogt?

  So it wasn't Klarna? Because for a long time, the interest rates were really low.

• 19:04Speaker 01

  Well, they were really low, and so people didn't feel the effect of this rising debt.

• 19:09PJ Vogt?

  Yeah.

• 19:09Speaker 01

  So when we went into Iraq in 2003, at that time, the national debt held by the public was less than $4 trillion. And now that number is $31 trillion. And we borrowed a lot of money at low rates that we are now paying back at much, much higher rates. So we paid at that time about 6%, 7% of our total budget on interest, and now we're paying 15% of the budget on interest. That's not all because of the wars, but it's a lot of it is because of the combination of tax cuts at the same time that we were increasing spending. But that kind of set the tone of

• 19:55Speaker 01

  Being able to pay for these wars through debt, in addition to the low interest rates and in addition to the budgetary dysfunction, there were a number of reasons internally within the Defense Department that made it very advantageous for them to have money that was provided in this way. First of all, the money went into a more flexible account, so they got more discretion over how to spend it. This was happening at the same time that the department and the country was increasing its reliance on contractors. So we had far, far, far more contractors involved in the Iraq and Afghanistan wars than we had in any previous wars. It was much easier to pay the contractors

• 20:39Speaker 01

  and so forth with this funding. It also meant that it was more protected from the budgetary dysfunction. So if there was a shutdown or an almost shutdown or, you know, some other budgetary crisis, it could continue to pay contractors, who often don't get paid during government funding lapses.

• 20:58PJ Vogt?

  What ended up being the total bill of Iraq and Afghanistan?

• 21:02Speaker 01

  Well, Joe Stiglitz, my co-author on the $3 trillion war, and I, we had estimated it in 2008 that the absolute minimum that the Iraq war could cost was $3 trillion. And this was on the basis of what Joe called excessively conservative. Now, we had estimated at that time that the war would be done by 2015. So if you look at what actually happened and based on our methodology, it cost between $5 and $6 trillion, the Iraq and Afghanistan wars together. Now, my colleagues at the Brown University Cost of War

• 21:45Speaker 01

  organization estimated it $8 trillion. So it's somewhere in that range.

• 21:50PJ Vogt?

  Expensive.

• 21:51Speaker 01

  It's expensive.

• 21:56PJ Vogt?

  That absolute highest estimate you heard, eight trillion, the top estimate from the Brown University Cost of War project, that's for every part of Operation Enduring Freedom. It includes everything that sprung from 9/11. Iraq, Afghanistan, the spillover military operations that took place at the time in Pakistan and Syria. But that war, which every major US politician now admits was a massive error, cost us a price that would have paid for a full century of free education at all public American universities. I'm not a devout Quaker. I don't think our country should never go to war. But one thing Iraq teaches us is that of all the stupid mistakes a country can make,

• 22:38PJ Vogt?

  stupid wars are the most expensive one. So what then of our current conflict? How are we pricing that one? After the break, and in celebration of American Tax Week, as the government audits us, we, Search Engine, will audit the government. That's after these ads.

• 23:13PJ Vogt?

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• 24:26PJ Vogt?

  Welcome back to the show.

• 24:30PJ Vogt?

  For the rest of this episode, Professor Bilms is going to help us track the numbers that the government has gotten pretty good at obscuring: the running cost of war, specifically the Iran war. We'll try to understand how money is being spent via the milestones of the conflict so far. I should note, something you've probably noticed, is that the passage of time doesn't work correctly anymore. By which I mean, you'll probably be surprised to learn that this conflict with Iran has been running for under seven weeks so far, not the many, many months it feels like. But the war does start to come into a kind of focus if you try to understand it through money spent, rather than through apocalyptic Truth Social posts. So, Saturday, February 28th, the beginning.

• 25:15Speaker 07

  Good evening, and here we are. Weeks of failed diplomacy have exploded into full-blown war with Iran tonight. Iran's supreme leader, the Ayatollah Khomeini, has been killed during the joint US-Israel attack on Iran.

• 25:27Speaker 08

  We saw several sites hit in what Donald Trump has described on social media as "major combat operations."

• 25:34PJ Vogt?

  February 28th, the United States and Israel launched strikes across Iran. Can you just give me a sense of like, how the US would have priced those strikes internally? Like, is there a budget? Do they agree on a budget ahead of time? Is it like, there's no budget, but they have an idea of a financial cutoff point? Like, what is the internal conversation?

• 25:50Speaker 01

  Oh, I don't think there's any internal conversation upfront about how much is the spending limit.

• 25:57PJ Vogt?

  Really?

• 25:57Speaker 01

  I think the internal conversation is about which weapons, from a tactical perspective, are best to hit which targets. And from that perspective, the performance of most of the US weapons systems and the military has gone very well. I think that the costs, however, are enormous. And the costs that have been released so far are just the tip of the iceberg.

• 26:24PJ Vogt?

  Well, and so, talk to me about some of those costs. Like, how do you think through the component parts that we are spending on?

• 26:30Speaker 01

  Okay, so, on my model, I model short-term operating costs, medium-term costs, and long-term costs in three different buckets.

• 26:40PJ Vogt?

  Okay.

• 26:40Speaker 01

  So, let's start with the upfront operating costs.

• 26:47Speaker 09

  We're getting a better picture about just how much Operation Epic Fury has cost the US so far.

• 26:52Speaker 10

  $11.3 billion. That's the cost for the first six days of this war in Iran.

• 26:59Speaker 11

  That figure would amount to about $1.3 million a minute.

• 27:03Speaker 01

  The Pentagon had released the number that they had spent $11.3 billion in the first week, but that number is an underestimate. Because that is based on the historic cost of inventory. But the replacement costs are higher. So for example, the Tomahawks that we're firing now cost about $2 million, but replacing them costs $3.5 million. The Patriot missiles that are in the inventory are valued at $1 to $2 million, but the newer interceptors cost $4 million, and so on. So the $11.3 billion is much closer to $15 or $16 billion. And everyone who has looked at this number seriously has a much bigger number.

• 27:47PJ Vogt?

  Okay, so your point is, the same way, if I crash my car and have to buy a new car, it's not going to be the price that I bought that car for years ago.

• 27:56Speaker 01

  Right.

• 27:56PJ Vogt?

  But they're pricing it as if so. They're saying, this is how much we spent based off old things that we had in our stockpile. The real price already in the week one is higher because the replacement cost is higher.

• 28:06Speaker 01

  Right, and in addition to underestimating it for that reason, the reported costs also don't include the full repair and maintenance costs, or the full costs of keeping the carrier strike groups at sea, or the full costs of the fact that the troops have been deployed on the carrier strike groups long beyond their tours of duty, and that kind of thing.

• 28:30PJ Vogt?

  So, okay, and so, just like when you're pricing week one of the war, $11.3 billion, if it were a pie chart, I'm guessing like most things in life, the biggest slice is labor, but I don't know. Is it weapons or is it soldiers?

• 28:44Speaker 01

  Well, I mean, a carrier strike group, which are, as the president calls them, flotillas. I mean, this is a huge range of ships and aircraft and submarines and supply ships and all kinds of things. Keeping them there, I mean, that costs 10... Million dollars a day when you're not at war and costs more than that during war. So you have that as well as the cost of combat pay and so forth. Fifty thousand people who are involved before we sent in Marines and so forth. And then this, you know, very, very significant cost of all the munitions that have been used up. I mean, for example, on Friday, an Iranian drone severely damaged a Boeing E3 airborne

• 29:26Speaker 01

  surveillance system, and that alone costs seven hundred million dollars. Oh, my God. So, so, you know, there's these huge, you know, we've lost several planes through friendly fire and then keeping all the aircraft and the depreciation and so on for all the aircraft that are involved. And then all the munitions, the munitions are the things that get fired and then you have the the things that fire them. So all of that together is the largest component.

• 29:53PJ Vogt?

  So Professor Bilms says the biggest part of the upfront operating cost of war is the war machine itself, not the troops, the cost for the weapons, the missiles, the cost to run a battleship. But of course, humans are expensive too. And when you're paying for war, human troops cost money, not just in the short term, through their immediate pay, but in many long-term ways as well.

• 30:15Speaker 01

  Something that is not considered upfront, but which becomes a cost of war, is the fact that we have in the first two weeks, fifty thousand US troops who are exposed to toxins and contaminants, which will make them eligible for, in many cases, lifetime disability benefits and medical care and so forth. And that's a very, very significant cost. So just to put this in perspective, right now, in the government financial statements, we owe seven point three trillion dollars Wow. in just disability benefits, not even counting medical care, to living veterans. They're basically veterans of the First Gulf War, Iraq, Afghanistan, and some from Vietnam.

• 30:59Speaker 01

  So it's a huge number. And in the First Gulf War, which was a six-week war,

• 31:07Speaker 01

  Thirty-seven percent of those troops have claimed and have been approved to receive lifetime disability benefits. In large cases, for inhalation of toxins and things like that. I mean, it was a ground war, but a lot of the inhalants were similar to the things that some of the troops who are stationed in the theater now are inhaling. And so if we assume that, say, a third of those 50,000 who were there and who are inhaling this stuff now for weeks on end will develop some kind of respiratory problems, some of them more severely, we've had several hundred who have been wounded more severely.

• 31:47Speaker 01

  I mean, that that leads to this long tail of costs, which go on for the next 30, 40 years.

• 31:53PJ Vogt?

  Which they don't price into the war. Like, even though we do and should take care of veterans' long-term health concerns, when they're saying, "It's going to cost this much money," they're just deleting that from their budget.

• 32:04Speaker 01

  They're totally deleting that. We have no long-term mechanism for even really tracking those costs. So if you think about social security liabilities that the US has, there is a social security trust fund, and we know, like, what the shortfall is. But when it comes to veterans' liabilities, we have all these accrued liabilities, but we don't really even know the full scale. We know that the floor is 7.3 trillion, which is just the, like, benefits we've already promised but not yet paid.

• 32:37PJ Vogt?

  So to recap, the Pentagon had quoted an initial price for the war's first six days of $11.3 billion. The Pentagon, of course, only counting short-term costs, not medium or long term. Trump had promised this would be a quick conflict. He told reporters it would be a, quote, "four-to-five-week deal."

• 32:59PJ Vogt?

  The problem is war, famously, is unpredictable. Trump's estimate failed to capture some key ways Iran could retaliate. And in doing so, intentionally raised the cost of this war for America.

• 33:10Speaker 12

  Also breaking tonight, Iran launching retaliatory missile strikes across the Mideast at this hour, aiming at US military bases in the region and setting fire to one of Dubai's luxury hotels.

• 33:22Speaker 13

  For the first time in history, Iranian officials say the country has closed the Strait of Hormuz following joint strikes from the US and Israel.

• 33:29Speaker 14

  Now, this is an important waterway with about 20% of the world's oil consumption passing through this narrow curve.

• 33:37Speaker 13

  Iranian media reports that authorities have been ordered to set any ship trying to pass through on fire.

• 33:42PJ Vogt?

  Are there costs from the strait closing that end up on the actual balance sheet as you're tallying it?

• 33:48Speaker 01

  Well, there are significant costs of the war around rebuilding damaged infrastructure. If you think about the strait per se, it's really too early to estimate what the long-term economic costs will be of the impact on energy prices and insurance and shipping and food prices and all those things. But you can already see some costs. For example, the US, through the Treasury, has opened a reinsurance facility.

• 34:19Speaker 12

  In an effort to get oil tankers and other ships in the Persian Gulf moving, the Trump administration has announced it will provide $20 billion in reassurance to shippers in the area.

• 34:30Speaker 01

  The US has put $20 billion into buying up and backstopping the insurance companies in shrouds.

• 34:38Speaker 12

  President Trump says the US will provide government-backed insurance and naval escorts to help get those oil shipments moving again.

• 34:45Speaker 01

  So, I mean, there are all these costs. I mean, the US has got major military sites that have sustained damages, along with facilities like the US Embassy in Baghdad, which was the world's most expensive embassy. And that's four or five years of very significant costs to rebuild all those US facilities, not to mention the fact that there are also all these... Facilities in these countries, which belong to the countries.

• 35:11PJ Vogt?

  Yeah.

• 35:11Speaker 01

  And the US may be involved in helping to rebuild some of those, like the Rezlafen liquefied gas facility in Qatar, which is estimated to cost $26 billion to repair. So we see costs and there will be costs, but it's too early to estimate the full economic impact.

• 35:35PJ Vogt?

  Professor Bilms thinks of this crop of costs as medium term ones. The post-war repairs for all those US military installations and embassies, the cost to help fund similar repairs for our allies, cleanup for the mess we're still busy making. In the meantime, on March 18th, more news from the Trump administration. The Pentagon had requested $200 billion more dollars for the war from the White House. The next day, reporters had questions for Secretary of War Pete Hegseth.

• 36:03Speaker 15

  There was a report last night that the Pentagon asked the White House for $200 billion for Iran war supplemental. Can you confirm this? And can you explain why a package this large is necessary?

• 36:16Speaker 16

  Well, first of all, none of this would have been possible without Midnight Hammer, without that audacious mission with very clear goals that did obliterate their ability to enrich and the capabilities they have.

• 36:25PJ Vogt?

  On a dais with one American flag behind him, a second folded up as a pocket square in his breast pocket, Secretary Hegseth praises his team for last year's bombing operation in Iran, before turning to the specific subject at hand, the price of this year's war. Yes, now that you mention it, here's why the price will be rising.

• 36:44Speaker 16

  As well, as far as $200 billion, I think that number could move, obviously. It takes money to kill bad guys. So we're going back to Congress and our folks there to ensure that we're properly funded for what's been done, for what we may have to do in the future, ensure that our ammunition is, everything's refilled and not just refilled, but above and beyond. I mean, President Trump, as he said, rebuilt the military in his first term, didn't think he'd use it as dynamically in his second, but he had. So thank goodness he did that. And an investment like this is meant to say, hey, we'll replace anything that was spent. And now that we're reviving our defense industrial base and rebuilding the arsenal of freedom and cutting deals like our great deputy secretary is doing, long lead times on exquisite munitions,

• 37:30Speaker 16

  we're going to be refilled faster than anyone imagined.

• 37:34PJ Vogt?

  I asked Professor Bilms what she'd made of this press briefing on the lengthening national bill for all of our exquisite munitions.

• 37:41Speaker 01

  I think the 200 billion that they came up with was just a confirmation of what I've been saying, that the, these numbers like 11.3 billion that they were reporting the first few days was a significant underestimate. So I was not at all surprised that they asked for 200 billion. I think that what is even scarier is the fact that the president has asked for a 50% increase, even before all this happened, a 50% increase in the defense budget, which would take it from 1 trillion to 1.5 trillion.

• 38:17PJ Vogt?

  Oh my god.

• 38:18Speaker 01

  And Congress was kind of super lukewarm to this idea before this war. But I think that the president will be able to get a higher increase. He won't get 1.5, but maybe on top of the 200 billion dollars of emergency money for replacing inventory and everything, we'll get a higher long-term increase to the Defense Department. And once you get that increase in the base, that goes on and on.

• 38:50PJ Vogt?

  Right, they don't give the money back next year.

• 38:52Speaker 01

  Right.

• 38:53PJ Vogt?

  They didn't need it. The other thing I didn't understand about that announcement, in theory, the president goes to Congress to fund a war. He had chosen not to do that. Why at this point are they telling us the price tag of a thing when they are just spending money as they want to?

• 39:06Speaker 01

  Well, almost everybody who looks at this is concerned about the inventory levels. The US had a finite number of particularly these interceptors. These are the things that intercept incoming drones. And The Iranians produce very cheap drones for 20,000, maybe 30,000. And we use 2 million, 3 million dollar interceptors to down these drones. So this is highly asymmetric and really just kind of shows why the Iranians have been able

• 39:48Speaker 01

  to severely damage us, if not so much in terms of the human loss, but economically. We've taken a major hit because so much of our inventory has been used up on this. And there are many people within the military in particular who are concerned about the fact that this means our overall inventory of all of these weapons, many of which are defensive, intercepting weapons, are therefore depleted. So we already depleted about 20% of our high-altitude interceptor drones last summer in the 12-day operation Midnight Hammer with Iran. So now we further depleted them. So there was a huge rush to, we've got to spend the money, we've got to get these big

• 40:30Speaker 01

  contracts out so that we can replenish the inventory and more.

• 40:34PJ Vogt?

  And is that unusual to spend down our inventory in such a way? Like, is that a sort of specific Trump planning, or is that something that happens routinely?

• 40:42Speaker 01

  I think that we have seen now in Ukraine, Russia, and now again, that the nature of warfare has changed somewhat. So even at the beginning and midway through the Iraq and Afghanistan wars, we were not in the era yet of these sort of advanced hypersonic AI-driven weaponry that we are now. And we see now a war going on between largely unmanned weapons that are attacking targets, very complex, high-performing, precision-driven weaponry.

• 41:24Speaker 01

  In this case, we've seen with Iran that they can produce large, large numbers of relatively cheap Weapons and they can just send tons of them out. And we were not really prepared for that. We have expensive weapons that are really, really good at precision and are wildly expensive to produce. And we're sending them for every one of these very cheap weapons. I mean, like, we have a kind of a one-size-fits-all response. So we had this number of high-altitude interceptors. We've reduced by half our inventories. We need to replace it, and the new ones are going to be even better.

• 42:12PJ Vogt?

  I was speaking to Professor Bilms on April 9th. By that point, what had really changed about the war was this. President Trump, who's actually quite sensitive to what is popular with the public, could now tell that his war was not. He'd made a bet it would be quick and clean. It was neither. And worse, the dynamics that American presidents rely on to make wars appear cheap had slightly broken down here. The closing of the Strait of Hormuz had raised oil prices, and the gas pump is one price every American notices. Trump had started freaking out, first menacing Iran online with allusions to nuclear war.

• 42:48Speaker 17

  Donald Trump has issued his most apocalyptic threat yet. The President of the United States deciding to deal openly, if incoherently, in the language of genocide.

• 42:58Speaker 18

  He said, quote, "A whole civilization will die tonight, never to be brought back again. I don't want that to happen, but it probably will."

• 43:09PJ Vogt?

  After that, normally stalwart MAGA media stars started openly turning on Trump. Alex Jones, Nick Fuentes, even Tucker Carlson.

• 43:17Speaker 19

  Those people who are in direct contact with the president need to say, "No. I'll resign. I'll do whatever I can do legally to stop this because this is insane. And if given the order, I'm not carrying it out. Figure out the codes on the football yourself, because everything hangs in the balance right now. This is not hysteria. This is 100% real."

• 43:37PJ Vogt?

  It was a moment where living in America felt like living on the brink of something awful.

• 43:43PJ Vogt?

  And then, late on April 7th, a two-week ceasefire was announced. A ceasefire which felt, which feels immensely fragile.

• 43:50Speaker 09

  Iran and the US agreed to a two-week ceasefire, less than two hours before President Trump's deadline to strike the country's bridges and power plants.

• 43:59Speaker 07

  After 38 days of joint US-Israeli military operations against Iran, known as Operation Epic Fury, that agreement, announced this evening by President Trump.

• 44:08Speaker 20

  Although, the details of that agreement remain clouded in contradictory statements between the two sides. And, there is real uncertainty over whether that 14-day truce...

• 44:18PJ Vogt?

  Why, again, are we at war with Iran? I said at the beginning that this story was not about the moral cost of war. And it's not. Even though it's hard to miss how quickly that cost has risen. The more than 100 children who died when the US accidentally bombed their school. The 3.2 million Iranians displaced from their homes. The day that our president threatened an entire people with genocide over the internet. Those are the costs we all know matter. But Professor Bilms's work suggests that, if we want to avoid wars like this in the future, the more persuasive costs to track still might be the narrower one. Because traditionally, wars don't end for moral reasons. They end for pragmatic ones.

• 45:02Speaker 01

  Historically, wars ended when countries ran out of blood or treasure. And if we pay for every war on credit card, and never think about the treasure side, one of the most basic deterrents to perpetual war is missing.

• 45:23Speaker 01

  It's Kant's fourth principle for staying at peace: do not borrow. You know, if you borrow, that leads to war, and that leads to prolonging war. Because it makes the costs invisible. So, it's a longstanding concept. But in terms of what's happening today, if the costs are not felt, particularly in a situation where there is no draft, and where only a very tiny percentage of the population is directly fighting, then we have a situation where we don't fight and we don't pay. You know, so there's sort of no, there's no pain. Now, people feel the pain of this war in terms of gas prices.

• 46:07Speaker 01

  Not as much as they do in most of the rest of the world. But even that is a cost that the government has tried to suppress by lifting sanctions on Iranian oil and Russian oil. So, you know, that's the craziness of this situation.

• 46:25PJ Vogt?

  I mean, I take your point, which is just the more you you want a citizenry that to some degree sees the bill and pays a cost for war without that, as the cost becomes more invisible, the likelihood of conflict just goes up.

• 46:41Speaker 01

  Right, and I think that this is important and it's a bipartisan shift, which is bad. So, for example, when President Biden decided to support Ukraine, and he fought hard in Congress to get money for Ukraine, he also, at the same time, to make absolutely sure that the public wouldn't feel any impact at the gas pump, he released half of the Strategic Petroleum Reserve to make sure that we didn't feel anything. Now, if he had done what had been done in all previous wars, going back historically in the US, he might have said, this is so important, this is so critical to freedom, that we're asking everybody to pay two cents more per gallon to support Ukraine.

• 47:25Speaker 01

  But, I mean, that kind of thinking was anathema, right? I mean, and now you see, going even further, in the Trump administration, saying, you know, not only are we going to do this war, but we're going to vastly increase military budget, and we're going to cut taxes even more. I mean, there's no construct at all in which anyone is saying, this costs a lot of money, and we should therefore pay for it now. And when you go back, for example, to President Truman, or President Roosevelt, or President Wilson, or whatever, they had hundreds of speeches to the public, saying, this is so important, we have to pay for it now, we can't pass these costs on to our children. The worst thing we can do is bestow a legacy to our children of paying for this war. We're going to pay as we go.

• 48:10Speaker 01

  So we have the opposite situation now.

• 48:19PJ Vogt?

  Professor Linda Bilms, she's the author of the forthcoming book, The Ghost Budget. As of today, her minimum estimate for what the Iran war will end up costing us is $1 trillion. For $1 trillion, the US government could fund free school lunch for every K through 12 student in America for over 40 years. But if the government wanted to do something flashier, it could take $1 trillion and buy every single sports team in the NFL, NBA, MLB, and NHL. It would then have about $500 billion left over, which could be used to fund NASA for 20 years.

• 49:20PJ Vogt?

  This episode of Search Engine is brought to you in part by Odoo. Ever feel like you need one app for sales, another for inventory, another for accounting, and the list never ends? If your software stack feels more like a source of constant daily stress than actual success, it's time to modernize your workflow with Odoo. Odoo is truly the only business software you'll ever need because it consolidates your entire operation into a single seamless ecosystem. Think about the hours lost to copying data between platforms, managing mismatched logins, and troubleshooting broken integrations. Odoo eliminates all of that by linking your CRM, e-commerce, human resources, and financial tracking in real time. Not only does it make your daily routine massively more efficient, but it also replaces multiple expensive, single-use tools,

• 50:04PJ Vogt?

  saving you a small fortune every single month. It's flexible, user-friendly, and built to adapt as your company evolves. Thousands of businesses have already made the switch. Why not you? Try Odoo for free today at Odoo.com. That's O-D-O-O dot com.

• 50:30PJ Vogt?

  Search Engine is a presentation of Odyssey. It was created by me, PJ Vogt, and Trudy Pinamenei. Garrett Graham is our senior producer. Emily Multer is our associate producer. Theme, original composition and mixing by Armin Bazarian. Our production intern is Piper Dumont. This episode was fact-checked by Madeline LePlante-Doubie. Our executive producer is Leah Reese-Dennis. Thanks to the rest of the team at Odyssey. Rob Morandi, Craig Cox, Eric Donnelly, Colin Gainer, Moira Curran, Josephina Francis, Kirk Courtney, and Hillary Schaaf. If you have a business and would like to advertise on our show, please shoot us an email, [email protected], subject line "Advertising." If you're a listener and you'd like to support our show, get ad-free episodes, zero reruns, and bonus episodes, please consider signing up for incognito mode.

• 51:15PJ Vogt?

  You can find it at searchengine.show. Thank you for listening. We'll see you soon.

• 51:43Speaker 21

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• 52:25Speaker 21

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