By Lina Irawan 
Smetters’ assessment carries significant weight in Washington, D.C., where his model is a cornerstone for analyzing the intricate fiscal and macroeconomic effects of federal policy. His extensive "Beltway policy chops" include a pivotal stint as an economist at the Congressional Budget Office (CBO), the non-partisan agency providing economic data to Congress, and a tenure as deputy assistant secretary for economic policy at the U.S. Treasury. This background has positioned him as a trusted advisor to policymakers from both parties on major tax and spending legislation. Notably, Smetters has been instrumental in advising Congress on "dynamic scoring," a method of estimating the fiscal impact of policy changes that accounts for how those changes alter economic behavior, offering a more comprehensive view than traditional static scoring. He has famously described PWBM as a "sandbox" for legislators, a robust analytical environment where they can workshop and rigorously test economic policy ideas before they are formally introduced, ensuring a deeper understanding of their potential ramifications.
Delving into the direct budgetary outlays for Operation Epic Fury, Smetters provided Fortune with a range of estimates, with the smallest direct cost to taxpayers pegged at $40 billion, escalating to $95 billion for the most extensive direct military engagement. However, factoring in the inherent uncertainties and what PWBM assumes to be a greater "upside risk" in the evolving scenario, a $65 billion direct hit to taxpayers is considered the most probable cost. This substantial sum encompasses the immediate expenditures for military operations, including the deployment and utilization of sophisticated weaponry, as well as the crucial replacement of equipment, munitions, and other vital supplies consumed in the intensity of modern warfare. A critical caveat, Smetters emphasized, is the duration of the conflict: "If the war lasts more than two months, then this number goes up." This warning highlights the exponential nature of military spending, where protracted engagements inevitably lead to sharply escalating costs due to attrition, sustained logistical demands, and potential for deeper strategic objectives.
Beyond the direct costs of bombs, bullets, and boots, Smetters projected an additional, far-reaching economic loss to the United States alone, estimated at approximately $115 billion. This figure, however, is enveloped by a wide band of uncertainty, stretching from a more conservative $50 billion all the way to an alarming $210 billion. Echoing his earlier caution, Smetters reiterated, "[there’s] more uncertainty at the top end," underscoring that the upside risk—the potential for costs to exceed expectations—is significantly greater than the downside. This broader economic impact is multifaceted, accounting for the profound disruptions that a sustained conflict in the Middle East typically triggers across various sectors. These include volatile energy markets, significant disruptions to global trade routes and supply chains, and a general tightening of financial conditions as investor confidence wanes and uncertainty pervades. The intertwined nature of the global economy means that a major conflict can send ripple effects far beyond the immediate theater of operations, impacting everything from consumer prices at home to the stability of international financial systems.
Adding another layer to the financial complexity, these figures from PWBM do not even encompass the cost of the administration’s controversial International Emergency Economic Powers Act (IEEPA) tariff regime, which the model has separately pegged at a staggering $179 billion. This amount represents duties collected under an executive order that weaponized trade policy, leveraging emergency powers for what critics argue was not a genuine national emergency. The legality of these tariffs has been vigorously challenged, and if the Supreme Court rules against the administration, as many legal experts anticipate, this monumental sum will likely need to be refunded to American companies, and by extension, ultimately to American taxpayers who bore the brunt of these increased import costs. Such a repayment would not only add a massive liability to the federal balance sheet but also spark a contentious debate over who should fund such an unforeseen, retrospective expense.
Operation Epic Fury commenced on February 28, following President Trump’s authorization of the joint U.S.-Israeli military campaign. The stated objectives were precise and ambitious: targeting Iran’s ballistic missile infrastructure, naval forces, and clandestine nuclear program. The initial strikes were devastating, and within hours of the operation’s launch, Iranian state media confirmed the death of Iran’s Supreme Leader, Ayatollah Ali Khamenei, a development that sent shockwaves through the Middle East and beyond, signaling the profound and immediate impact of the military action.
President Trump framed the operation as an unavoidable and necessary response to what he characterized as Iran’s "imminent nuclear threat." In his address, he asserted that the U.S. had exhausted all diplomatic avenues, stating that Iran had "rejected every opportunity to renounce their nuclear ambitions." The White House, in its official statements, described the strikes as "precise" and "overwhelming," a calculated display of force designed to achieve specific military objectives while minimizing collateral damage. Trump, with characteristic resolve, vowed to "dismantle Iran’s missile capabilities" and unequivocally ensure that Iran would "never acquire a nuclear weapon," articulating a clear, if highly ambitious, strategic goal for the intervention.
However, the human and logistical costs quickly mounted. By day three of the campaign, the grim reality of conflict had manifested with the confirmed deaths of at least four American troops. Amidst the escalating tension, President Trump, speaking on Monday, offered an initial projection for the operation’s duration, suggesting it could last "four to five weeks." Yet, he prudently acknowledged the inherent unpredictability of warfare, conceding that it "could run longer" and notably declined to rule out the eventual deployment of ground forces. The prospect of a protracted conflict dramatically heightens the financial stakes, particularly as Smetters’ models explicitly assume that costs escalate sharply and non-linearly beyond the initial two-month mark. This rapid escalation is not merely due to sustained operations but also the attrition of forces, the need for deeper and more complex strikes, and the immense logistical tail required to support a large-scale military presence in a hostile environment. Furthermore, Fortune had previously reported on a critical vulnerability: while exact numbers remain classified, previous war games modeling a conflict with adversaries like China have indicated that U.S. supplies of certain high-precision munitions could be depleted in as little as a week. This raises serious questions about the industrial base’s capacity to replenish stocks quickly enough for a sustained, high-intensity campaign against Iran.
Even before the first bombs fell on Iranian targets, the Pentagon’s extensive pre-strike military buildup had already imposed a significant cost on American taxpayers. Elaine McCusker, a former senior Pentagon budget official now at the American Enterprise Institute, previously informed the Wall Street Journal that this mobilization alone had cost an estimated $630 million. The bulk of this substantial spending was driven by the strategic repositioning of more than a dozen naval vessels, including aircraft carriers and their escort fleets, along with over 100 advanced aircraft to the Middle East. While McCusker noted that these pre-conflict costs were likely to be absorbed within the Pentagon’s colossal existing $839 billion fiscal year 2026 budget, it nonetheless represents a substantial allocation of resources that could have been directed to other defense priorities or domestic needs, highlighting the immediate opportunity cost of preparing for war.
The war’s rapidly accumulating price tag is already attracting intense scrutiny on Capitol Hill, where lawmakers are grappling with a deeply divided public and burgeoning national debt. A Reuters/Ipsos poll conducted over the weekend painted a stark picture of public sentiment, revealing that only one in four Americans express support for the U.S. strikes on Iran. This low level of approval is particularly striking, extending even to Republicans, with only one in four members of the President’s own party believing Trump has been sufficiently restrained in his willingness to use military force. With a public weary of foreign entanglements and an increasingly vocal bloc of fiscal conservatives demanding accountability for federal spending and the soaring deficit, the economic estimates from the Penn Wharton Budget Model are poised to ignite and intensify a political debate over who will ultimately bear the profound and growing cost of a conflict with no clear end date in sight. This political pressure could significantly constrain the administration’s options and dictate the future trajectory of Operation Epic Fury.
Amidst the stark financial projections and political controversy, Smetters offered a crucial, albeit often overlooked, note of caution regarding how war costs are typically framed. "One problem I have with cost-of-war calculations is that they really do ignore the counterfactual," he stated, a remark that, while understated, carries profound implications. He elaborated on this critical point, suggesting that such analyses often fail to consider the alternative, potentially more catastrophic, scenarios that might have unfolded had military action not been taken. "If Iran really did get a nuclear weapon, then we might have spent a lot more on military and even repair of cities later on," Smetters explained. This perspective introduces a complex ethical and strategic dimension, reminding policymakers and the public that the costs of inaction—including nuclear proliferation, regional arms races, direct attacks, or even a future war on a much larger scale—could ultimately dwarf the substantial expenditures of the current conflict. It forces a contemplation of not just the immediate financial burden, but the long-term, existential risks that might have been averted, however costly the present course of action may be.