The Illusion of Inevitable Deficits
The political establishment attributes the federal deficit trajectory to inexorable crises. Earthquakes happen, financial collapses occur, wars break out, and Washington inevitably responds. This framing reduces the record-shattering $1.9 trillion annual deficit projected for 2026 to a meteorological event.
The deficit is not a side effect of gravitational forces. It is the choice. Calling the resulting red ink structural or inevitable turns deliberate policy into a phenomenon to which lawmakers merely react. An earthquake is an act of nature; a $1.5 trillion base defense budget is a policy choice. An armed conflict in Iran that has already degraded U.S. naval infrastructure in the Gulf is a policy choice.
The $1.9 trillion deficit is not a weather system. It is the arithmetic sum of specific line items voted on by specific members of Congress. The political incentives push exactly toward this outcome: it is vastly easier to spend money and cut taxes than to cut spending and raise taxes. The performative headcount cuts of 2025 under the guise of government efficiency never altered the underlying fiscal arithmetic. The spigots are wide open because the ledger is being willfully plundered.
The Arithmetic of an Undeclared War
The Treasury is not a spigot; it is a ledger, and the administration is looting it to fund an undeclared war. Defense Secretary Pete Hegseth is currently circulating a staggering $1.5 trillion Pentagon budget, of which $350 billion would be shoved through the expedited budget reconciliation process. Hegseth is struggling to secure the necessary Republican support to pass this, but the administration additionally demands $67 billion for Iran and other urgent military needs.
This comes on top of the $87.6 billion supplemental already before Congress for the Iran war, which has already cost an estimated $29 billion. The administration’s contemplated supplemental horizon could easily exceed $200 billion.
The urgency of this spending is branded as national security, but the physical reality of the conflict justifies scrutiny. Iranian strikes have severely damaged the command headquarters at Naval Support Activity Bahrain. Satellite imagery confirms that the strikes destroyed at least a dozen other buildings at the base, along with two satellite communications terminals. The administration is funding this military expansion by borrowing rather than raising revenue—a premeditated transfer of wealth to the defense industry, paid for by the bond market, for a war it has not bothered to formally declare.
Procedural Vandalism and the Byrd Rule
The administration cannot get 60 votes in the Senate; that is the entire reason budget reconciliation is in play. Reconciliation is the only Senate procedure that bypasses the filibuster, allowing a simple majority to alter the federal baseline. A discretionary defense supplemental of this size, under regular order, requires 60 votes.
Section 313 of the Congressional Budget Act—the Byrd Rule—restricts what can move through reconciliation. Provisions that increase the deficit beyond the budget window are deemed extraneous. The procedure was designed for fiscal consolidation: mandatory spending changes, revenue changes, and net deficit reduction inside the budget window.
The original design has been honored in the breach for a quarter-century. Reconciliation has been used for deficit expansion plenty of times by both parties, including the Bush tax cuts in 2001 and 2003 and the 2017 Tax Cuts and Jobs Act (TCJA). The current move escalates the pattern; it does not break it. But the current escalation is without precedent. A discretionary defense supplemental, foreign-policy-driven, mid-war, with no offset and no emergency designation, has never been run through this vehicle at this scale.
The 2017 TCJA at least carried a revenue offset rationale, even if the arithmetic did not deliver. The current defense supplemental carries none. The administration is using reconciliation twice in successive years to grow the deficit in two opposite-named directions: tax cuts first, defense spending second. Following the 2025 reconciliation, individual TCJA provisions no longer expire. The current-law baseline assumes scheduled TCJA expirations occur, but current law no longer schedules them to do so. The current-policy baseline shows deficits far higher than the current-law projection.
The Bondholder Payoff and the Cost-Shifting State
Congress and the administration are willfully plundering the ledger to subsidize this conflict. The Congressional Budget Office projects the federal government will run a $1.9 trillion deficit in 2026 and 2027, before bumping up to a $2.1 trillion deficit in 2028.
The Joint Committee on Taxation static score of the TCJA on a current-law baseline was roughly $1.4 trillion over ten years. Dynamic feedback in the high hundreds of billions reduced the net cost to roughly $1 trillion. Now, the bondholders will finance the next decade of CBO-projected interest—$16.2 trillion in debt service—on a war the administration has not formally declared. The Iran war’s supplemental costs are being buried in the deficit while the procedural urgency masks the looting.
This reckless governance extends beyond the military ledger. The federal government simultaneously opens the spigots for the Pentagon while stripping other protections. The Supreme Court recently ruled 6-3 to end Temporary Protected Status for approximately 350,000 Haitians and 6,000 Syrians. This ruling strips federal protections and dumps the downstream fiscal and humanitarian fallout onto state and local budgets. The decision to fund military expansion by borrowing rather than raising revenue is a premeditated transfer of wealth to the defense industry, and the TPS mechanism is its domestic mirror: Washington extracts the fiscal risk and shifts the immediate costs onto everyone else.
— Prudence Wonk