Broadsheet

Let’s not tax houses to subsidize cars, OK?

A gas tax, and better yet, a comprehensive system of charging for parking everywhere in the city is a much smarter way to pay for roads than a monthly household fee.

A user fee ought to be based on use, and whether driving or standing still, cars are the most intensive, impactful and dangerous part of the transportation system, and they should pay for streets. A tax on houses or households isn’t fair to those who use the streets less intensely, and especially those who don’t own or drive cars.

An important set of users of Portland streets is non-residents: charging for parking or gas sales in the city puts a portion of the cost on them, rather than having Portland residents subsidize non-residents for driving in or through the city. A majority of workers in Multnomah County live outside the County, and thousands of vehicles on Portland streets are registered in other states–or not registered at all.

Portland, once again, doesn’t have enough money to pay to maintain its streets, make basic safety improvements, or do things that make biking, transit and walking easier and more commonplace.

The City Council is trying to come up with ideas to pay for roads, and led by Commissioner Olivia Clark, seem to have settled on the idea of a monthly household utility fee of $10 to $12 to pay for roads.

Given voter antipathy of road taxes and fees of any kind, it’s likely that “none of the above” would win in a landslide if voters were asked to decide on a multiple choice ballot.

This same issue came up more than a decade ago when Steve Novick was transportation commissioner; he pushed for a while for a household utility fee, but in the face of opposition, ultimately decided to propose a gas tax increase, which was–surprise–approved by the voters and then renewed in second election.

But now, the gas tax again is deemed to be a political non-starter, and so the Council is searching for a new gimmick to help pay for roads. There are some very good reasons they ought not to use the household fee.

One of the arguments for the household fee is a legal/political one: fees are subject to the same legal restrictions as taxes, and the City Council can set fees without voter approval (which it would need for say, a gas tax increase). But there’s a rub here: many say they want to set lower fees for say, low income households, but conditioning fees on income, rather than on actual use of service, makes them look and act a lot more like a tax than a fee.

There are some good reasons for charging fees for street use. But in our opinion, the Council have overlooked the most obvious fee. Currently, the city charges nothing for vehicle storage on city streets in ninety percent of the city. Sure, there are meters in downtown and a few other neighborhoods, but for the most part, Portland is truly a socialist paradise–if you are a car. You get to live rent free on the city streets. Rather than sticking households with an inescapable fee, whether they have a car or not, the city should charge those who use the streets, especially for storing their cars. Whether by annual, monthly, daily, or hourly permit, everyone should pay for parking.

Free riders? Non-residents who use Portland Streets should pay, too.

And the interesting thing is that, as the hub of a two-and-a-half million person region, Portland’s streets are widely used by residents from other cities. A key problem with the household fee is that it is paid only by Portland residents, not by those who drive here from elsewhere. That’s especially true at rush hours, with many workers commuting into the city from surrounding jurisdictions. It turns out that most of the people who work in Multnomah County live outside the County. (We’re using Multnomah County data, because helpfully, it’s been compiled from Census Bureau data by the Oregon Employment Department). This is 2022–after the Covid pandemic.

Of the more than 500,000 workers in Multnomah County, 53 percent of them live outside the county. Probably 80 percent of them (or more) drive to their jobs, which are overwhelmingly in Portland. If they live outside Multnomah County, they already pay nothing toward the county’s special vehicle registration fee, nor will they pay the monthly “utility” fee to the City of Portland, and yet they’ll be straining the capacity of city streets, chiefly by driving at peak hours.

And another thing: It’s probably a good guess that somewhere between 5 and 10 percent of the cars on Portland streets are registered not just outside the city of Portland, but outside the State of Oregon. Just as an example, we took a quick tour around Portland’s eastside a couple of days ago, and found cars from 22 states and the District of Columbia. Every one of these was parked on a city street, none of them paid for parking.

Washington – California – Idaho – Nevada – Montana – Colorado — Utah – Iowa – Minnesota – Wisconsin
– Nebraska – Arkansas – Oklahoma – Texas – Louisiana – Alabama – Mississippi – Tennessee – Georgia
– North Carolina – District of Columbia – Ohio – New York

They may be visiting, or living here and delaying registering their vehicles here, but in any case, aren’t paying vehicle registration fees, like Multnomah County’s $61 annual registration fee for bridge replacement.

But out-of-staters aren’t the only free riders on Portland streets. Many cars simply haven’t bothered to renew their registrations. There are plenty of permanently parked vehicles on Portland City Streets. We may not have social housing for people, but at least we have free housing for garage-less cars on the city streets. Like dun-colored non-descript and utterly unmoving GM sedan or this 7-series BMW, apparently parked for months without moving judging from the debris underneath the car, and tags that expired in 2021–four and a half years ago.

And finally there are those who don’t even bother to display license plates, Oregon, or others, such as this late model Toyota Camry, or this aging Volvo Wagon with no plates front or rear, and no visible temporary stickers.

While the unhoused must pay rent to stay anywhere, the un-garaged can take up space of city streets almost indefinitely for free.

Let’s have the users pay.

If we’re really going to charge a fee for city streets, it ought to be levied on those who actually use the city streets, and the most impactful users–in terms of space, costs, pavement damage, safety and pollution–are cars. Carless households, about a sixth of the city’s population–make far fewer demands on Portland’s streets. Clark’s proposed household fee levies taxes on city residents who don’t own cars to effectively subsidize those who live outside the city (or register vehicles outside the city). There’s nothing equitable about charging city residents to continue to allow non-residents to use city streets for free, whether they’re traveling through town or parking their vehicles.

Fees are prices, and prices send important signals to consumers about how their decisions affect the city and others. A household fee is really a tax–it’s inescapable, and inequitable; it bears no relation to how much you use the streets. It would be far fairer to insist that everyone who uses city streets to store their vehicles should pay for the privilege, and contribute to the cost of upkeep of the city’s streets. The city could sell annual passes to residents, and use its existing “Parking Kitty” app to let people buy daily, weekly or monthly parking.

Seven Rules for Paying for Streets

How, how much, and who pays for streets is a key issue for every city. From an urbanist and public finance perspective, and as a guide to thinking about which—if any—of these approaches Portland should adopt, here are my seven suggested rules for paying for streets:

1. Don’t tax houses to subsidize cars. Despite mythology to the contrary, cars don’t come close to paying for the cost of the transportation system. The Tax Foundation estimates that only 30% of the cost of roads is covered by user fees like the gas tax. Not only do cars get a free ride when it comes to covering the cost of public services—unlike homes, they’re exempt from the property tax—but we tax houses and businesses to pay for car-related costs. Here are three quick examples: While half of storm runoff is from streets, driveways and parking lots, cars aren’t charged anything for stormwater—but houses are. A big share of the fire department’s calls involve responding to car crashes—and cars pay nothing toward fire department costs. Similarly, the police department spends a significant amount of its energy enforcing traffic laws—this cost is borne largely by property taxes—which houses pay, but cars don’t. If we need more money for streets, it ought to be charged on cars.

Adding a further charge on houses to subsidize car travel only worsens a situation in which those who don’t own cars subsidize those who do. One in seven Portland households doesn’t own a car, and because they generally have lower incomes than car owners, fees tied to housing redistribute income from the poor to the rich.

2. End socialism for private car storage in the public right of way. Except for downtown and a few close-in neighborhoods, we allow cars to convert public property to private use for unlimited free car storage. Not asking those who use this public resource to contribute to the cost of its construction and upkeep makes no sense and ultimately subsidizes car ownership and driving. This subsidy makes traffic worse and unfortunately—but understandably—makes it harder and more expensive to build more housing in the city’s walkable, accessible neighborhoods. If, as parking expert Don Shoup has suggested, we asked those who use the streets for overnight car storage to pay for the privilege, we’d go a long way in reducing the city’s transportation budget shortfall—plus, we’d make the city more livable. We should learn from the city’s success in reforming handicapped parking that getting the prices right makes the whole system work better.

3. Reward behavior that makes the transportation system work better for everyone. Paying for the transportation system isn’t just about raising revenue—it should be about providing strong incentives for people to live, work and travel in ways that make the transportation system work better and make the city more livable. Those who bike, walk, use transit, and who don’t own cars (or own fewer cars) actually make the street system work better for the people who do own and use cars. We ought to structure our user fee system to encourage these car-free modes of transportation, and provide a financial reward to those who drive less. The problem with a flat-household fee or an income tax is it provides no incentive for people to change their behavior in a way that creates benefits for everyone.

4. Prioritize maintenance. There’s a very strong argument that we shouldn’t let streets deteriorate to the point where they require costly replacement. Filling potholes and periodically re-surfacing existing streets to protect the huge investment we’ve already made should always be the top priority. Sadly, this kind of routine maintenance takes a back seat to politically sexier proposals to expand capacity. We need an ironclad “fix it first” philosophy. Also, we need to guard against “scope creep” in maintenance. There’s a tendency, once a “repair” project gets moving, to opt for the most expensive solution (see bridges: Sellwood, Columbia River Crossing). That’s great if your project gets funded, but a few gold-plated replacements drain money that could produce much more benefit if spread widely. We need to insist on lean, cost-effective maintenance.

5. Don’t play “bait and switch” by bonding revenue to pay for shiny, big projects. There’s an unfortunate and growing tendency for those in the transportation world to play bait-and-switch with maintenance needs. They’ll tell us about the big maintenance backlog to justify tax and fee increases. Then they bond two or three decades worth of future revenue to pay for a shiny new project; the Sellwood Bridge and the local share of the Portland-Milwaukie light rail have been funded largely by tying up the increase in state gas tax revenue, vehicle registration fees, and flexible federal funds for the next two decades. The state, which routinely financed construction on a pay-as-you-go basis, has also maxed out its credit card: in 2002 ODOT spent less than 2 percent of its state revenue on debt service; today, it spends 25 percent. Now it is pleading poverty on highway maintenance. Politically, this makes a huge amount of sense. You get to build the projects today, and pass the costs into the future. Unfortunately, in practice it leads to a few gold-plated projects now, while jeopardizing the financial viability of the transportation system in the long run.

6. Promote fairness through the “user pays” principle. We all want the system to be “fair.” In the case of general taxes, we often put a priority on progressivity—that taxes ought to be geared toward ability to pay. But for something like transportation (as with water rates, sewer rates, or parking meter charges), fairness is best achieved by tying the cost to the amount of use, or what economists call the “benefit principle.” Charges tied to use are fair for two important reasons: higher income people tend to use (in this case, drive) more than others, and therefore will end up paying more. Also, charges tied to use enable people to lower the amount they pay by changing their behavior.

7. Don’t write off the gas tax yet. There’s a widely repeated shibboleth that more fuel-efficient vehicles have made the gas tax obsolete. Despite its shortcomings as a revenue source—chiefly that it bears no relationship to the time of day or roadway that drivers use—there’s nothing wrong with the gas tax as a way to finance street maintenance that a higher tax rate wouldn’t solve. While other methods like a vehicle-miles-traveled fee make a lot of sense, the reason they’re popular with the transportation crowd is because they would be set high enough to raise more money. And there’s the rub: people are opposed to the gas tax not because of what is taxed, but because of how much they have to pay. As an incremental solution to our maintenance funding shortfall, there’s a lot to like about a higher gas tax: it requires no new administrative structure, it’s crudely proportionate to use, and it provides some incentives for better use of streets. So when very serious people gravely intone that the gas tax is “obsolete” or “politically impossible”—you should know what they’re really saying is that people simply don’t want to pay more for streets.

Transportation and urban livability are closely intertwined. Over the past few decades it has become apparent that building our cities to cater to the needs of car traffic have produced lower levels of livability. There are good reasons to believe that throwing more money at the existing system of building and operating streets will do little to make city life better. How we choose to pay for our street system can play an important role in shaping the future of our city. As Portlanders weigh the different proposals for a street fee, they should keep that thought at the top of their minds.

This post is a set of my observations on the current war in Iran and my thoughts on the broader strategic implications. I am not, of course, an expert on the region nor do I have access to any special information, so I am going to treat that all with a high degree of uncertainty. But I am a scholar of military history with a fair bit of training and experience in thinking about strategic problems, ancient and modern; it is this ‘guy that analyzes strategy’ focus that I want to bring to this.

I am doing this post outside of the normal Friday order because it is an unusual topic and I want to keep making it clear that even as world events continue to happen – as they must – I do not want this blog to turn into a politics newsletter. I simply haven’t had the time to polish and condense these thoughts for other publication – the hard work of much writing is turning 3,500 words (or 7,500, as it turns out) of thoughts into 1,500 words of a think piece – but I need to get them out of my head and on to the page before it burns out of the back of my head. That said, this post is going to be unavoidably ‘political,’ because as a citizen of the United States, commenting on the war means making a statement about the President who unilaterally and illegally launched it without much public debate and without consulting Congress.

And this war is dumb as hell.

I am going to spend the next however many words working through what I think are the strategic implications of where we are, but that is my broad thesis: for the United States this war was an unwise gamble on extremely long odds; the gamble (that the regime would collapse swiftly) has already failed and as a result locked in essentially nothing but negative outcomes. Even with the regime were to collapse in the coming weeks or suddenly sue for peace, every likely outcome leaves the United States in a meaningfully worse strategic position than when it started.

Now, before we go forward, I want to clarify a few things. First, none of this is a defense of the Iranian regime, which is odious. That said, there are many odious regimes in the world and we do not go to war with all of them. Second, this is a post fundamentally about American strategy or the lack thereof and thus not a post about Israeli strategy. For what it is worth, my view is that Benjamin Netanyahu has is playing an extremely short game because it benefits him politically and personally to do so and there is a significant (but by no means certain) chance that Israel will come to regret the decision to encourage this war. I’ll touch on some of that, but it isn’t my focus. Likewise, this is not a post about the strategy of the Gulf states, who – as is often the sad fate of small states – find their fate largely in the hands of larger powers. Finally, we should keep in mind that this isn’t an academic exercise: many, many people will suffer because of these decisions, both as victims of the violence in the region but also as a consequent of the economic ripples.

But that’s enough introduction. What I want to discuss here is first the extremely unwise gamble that the administration took and then the trap that it now finds itself in, from which there is no comfortable escape.

The Situation

We need to start by establishing some basic facts about Iran, as a country.

First, Iran is a large country. It has a population just over 90 million (somewhat more than Germany, about the same as Turkey), and a land area over more than 600,000 square miles (more than four times the size of Germany). Put another way Iran is more than twice as large as Texas, with roughly three times the population.

More relevantly for us, Iran is 3.5 times larger than Iraq and roughly twice the population. That’s a handy comparison because we know what it took to invade and then hold Iraq: coalition forces peaked at half a million deployed personnel during the invasion. Iran is bigger in every way and so would demand a larger army and thus an absolutely enormous investment of troops, money and fundamentally lives in order to subdue.

Via Wikipedia, a map of Iran. This is a **very big country**. It also has a lot of very challenging terrain: lots of very arid areas, lots of high mountains and plateaus. It is a hard country to invade and a harder country to occupy.

In practice, given that Iran did not and never has posed an existential threat to the United States (Iran aspires to be the kind of nuclear threat North Korea is and can only vaguely dream of being the kind of conventional threat that Russia is), that meant that a ground invasion of Iran was functionally impossible. While the United States had the raw resources to do it, the political will simply wasn’t there and was unlikely to ever be there.

Equally important, Iran was not a major strategic priority. This is something that in a lot of American policy discourse – especially but not exclusively on the right – gets lost because Iran is an ‘enemy’ (and to be clear, the Iranian regime is an enemy; they attack American interests and Americans regularly) and everyone likes to posture against the enemy. But the Middle East is a region composed primarily of poor, strategically unimportant countries. Please understand me: the people in these countries are not unimportant, but as a matter of national strategy, some places are more important than others. Chad is not an area of vital security interest to the United States, whereas Taiwan (which makes our semiconductors) is and we all know it.

Neither is the Middle East. The entire region has exactly two strategic concerns of note: the Suez Canal (and connected Red Sea shipping system) and the oil production in the Persian Gulf and the shipping system used to export it. So long as these two arteries remained open the region does not matter very much to the United States. None of the region’s powers are more than regional powers (and mostly unimpressive ones at that), none of them can project power out of the region and none of them are the sort of dynamic, growing economies likely to do so in the future. The rich oil monarchies are too small in terms of population and the populous countries too poor.

In short then, Iran is very big and not very important, which means it would both be very expensive to do anything truly permanent about the Iranian regime and at the same time it would be impossible to sell that expense to the American people as being required or justified or necessary. So successive American presidents responded accordingly: they tried to keep a ‘lid’ on Iran at the lowest possible cost. The eventual triumph of this approach was the flawed but useful JCPOA (the ‘Iran deal’) in which Iran in exchange for sanctions relief swore off the pursuit of nuclear weapons (with inspections to verify), nuclear proliferation representing the main serious threat Iran could pose. So long as Iran remained non-nuclear, it could be contained and the threat to American interests, while not zero, could be kept minimal.

That deal was not perfect, I must stress: it essentially gave Iran carte blanche to reinforce its network of proxies across the region, which was robustly bad for Israel and mildly bad for the United States, but since the alternative was – as we’ll see – global economic disruption and the prospect of a large-scale war which would always be far more expensive than the alternatives, it was perhaps the best deal that could have been had. For what it is worth, my own view is that the Obama administration ‘overpaid’ for the concessions of the Iran deal, but the payment having been made, they were worth keeping. Trump scrapped them in 2017 in exchange for exactly nothing, which put us on the course for this outcome (as more than a few people pointed out at the time).

But that was the situation: Iran was big and hostile, but relatively unimportant. The United States is much stronger than Iran, but relatively uninterested in the region apart from the uninterrupted flow of natural gas, oil and other products from the Gulf (note: the one thing this war compromised – the war with Iran has cut off the only thing in this region of strategic importance, compromised the only thing that mattered at the outset), whereas Iran was wholly interested in the region because it lives there. The whole thing was the kind of uncomfortable frontier arrangement powerful states have always had to make because they have many security concerns, whereas regional powers have fewer, more intense focuses.

Which leads us to

The Gamble

The current war is best understood as the product of a fairly extreme gamble, although it is unclear to me if the current administration understood they were throwing the dice in June of 2025 rather than this year. As we’re going to see, this was not a super-well-planned-out affair.

The gamble was this: that the Iranian regime was weak enough that a solid blow, delivered primarily from the air, picking off key leaders, could cause it to collapse. For the United States, the hope seems to have been that a transition could then be managed to leaders perhaps associated with the regime but who would be significantly more pliant, along the lines of the regime change operation performed in Venezuela that put Delcy Rodriguez in power. By contrast, Israel seems to have been content to simply collapse the Iranian regime and replace it with nothing. That outcome would be – as we’ll see – robustly bad for a huge range of regional and global actors, including the United States, and it is not at all clear to me that the current administration understood how deeply their interests and Israel’s diverged here.

In any case, this gamble was never very likely to pay off for reasons we have actually already discussed. The Islamic Republic of Iran is not a personalist regime where the death of a single leader or even a group of leaders is likely to cause collapse: it is an institutional regime where the core centers of power (like the Islamic Revolutionary Guards Corps or IRGC) are ‘bought in’ from the bottom to the top because the regime allows them access to disproportionate resources and power. Consequently if you blow up the leader, they will simply pick another one – in this case they picked the previous leader’s son, so the net effect of the regime change effort was to replace Supreme Leader Khamenei with Supreme Leader Khamenei…Jr.

But power in the Iranian regime isn’t wielded by the Supreme Leader alone either: the guardian council has power, the council of experts that select the Supreme Leader have power, the IRGC has power, the regular military has some power (but less than the IRGC), the elected government has some power (but less than the IRGC or the guardian council) and on and on. These sorts of governments can collapse, but not often. It certainly did not help that the United States had stood idle while the regime slaughtered tens of thousands of its opponents, before making the attempt, but I honestly do not think the attempt would have worked before.

The gamble here was that because the regime would simply collapse on cue, the United States could remove Iran’s regional threat without having to commit to a major military operation that might span weeks, disrupt global energy supplies, expand over the region, cost $200 billion dollars and potentially require ground operations. Because everyone knew that result was worse than the status quo and it would thus be really foolish to do that.

As you can tell, I think this was a bad gamble: it was very unlikely to succeed but instead always very likely to result in a significantly worse strategic situation for the United States, but only after it killed thousands of people unnecessarily. If you do a war where thousands of people die and billions of dollars are spent only to end up back where you started that is losing; if you end up worse than where you started, well, that is worse.

The problem is that once the gamble was made, once the dice were cast, the Trump administration would be effectively giving up control over much of what followed.

And if administration statements are to be believed, that decision was made, without knowing it, in June of last year. Administration officials, most notably Marco Rubio, have claimed that the decision was made to attempt this regime change gamble in part because they were aware that Israel was about to launch a series of decapitation strikes and they assessed – correctly, I suspect – that the ‘blowback’ would hit American assets (and energy production) in the region even if the United States did nothing. Essentially, Iran would assume that the United States was ‘in’ on the attack.

That is notable because Iran did not assume that immediately during the Twelve-Day War in 2025. Indeed, Iran did not treat the United States as a real co-belligerent even as American aircraft were actively intercepting Iranian missiles aimed at Israel. And then the United States executed a ‘bolt from the blue’ surprise attack on Iran’s nuclear facilities on June 22, 2025, catching Iran (which had been attempting to negotiate with the United States) by surprise.

The problem with that strike is that attacking in that way, at that time, meant that Iran would have to read any future attacks by Israel as likely also involving attacks by the United States. Remember, the fellow getting bombed does not get to carefully inspect the flag painted on the bomber: stuff blows up and to some degree the party being attacked has to rapidly guess who is attacking them. We’ve seen this play out repeatedly over the last several weeks where things explode in Iran and there is initially confusion over if the United States or Israel bombed them. But in the confusion of an initial air attack, Iran’s own retaliatory capability could not sit idle, waiting to be destroyed by overwhelming US airpower: it is a ‘wasting’ use-it-or-lose-it asset.

So Iran would now have to assume that an Israeli air attack was also likely an American air attack. It was hardly an insane assumption – evidently according to the Secretary of State, American intelligence made the exact same assessment.

But the result was that by bombing the Iranian nuclear facilities in June of 2025, the Trump administration created a situation where merely by launching a renewed air campaign on Iran, Israel could force the United States into a war with Iran at any time.

It should go without saying that creating the conditions where the sometimes unpredictable junior partner in a security relationship can unilaterally bring the senior partner into a major conflict is an enormous strategic error, precisely because it means you end up in a war when it is in the junior partner’s interests to do so even if it is not in the senior partner’s interests to do so.

Which is the case here. Because…

The Trap

Once started, a major regional war with Iran was always likely to be something of a ‘trap,’ – not in the sense of an ambush laid by Iran – but in the sense of a situation that, once entered, cannot be easily left or reversed.

The trap, of course, is the Strait of Hormuz and the broader Persian Gulf. The issue is that an enormous proportion of the world’s shipping, particularly energy (oil, liquid natural gas) and fertilizer components (urea) passes through this body of water. The Gulf is narrow along its whole length, extremely narrow in the Strait and bordered by Iran on its northern shore along its entire length. Iran can thus threaten the whole thing and can do so with cheap, easy to conceal, easy to manufacture systems.

And the scale here is significant. 25% of the world’s oil (refined and crude), 20% of its liquid natural gas and around 20% of the world’s fertilizer passes through the Strait of Hormuz which links the Persian Gulf to the Indian Ocean. Any of those figures would be enough for a major disruption to trigger huge economic ripples. And even worse there are only very limited, very insufficient alternative transport options. Some Saudi oil (about half) can move via pipeline to the Red Sea and some Emirati oil can move via pipeline to Fujairah outside of the Strait, but well over half of the oil and effectively all of the natural gas and fertilizer ingredients are trapped if ships cannot navigate the strait safely.

And here we come back to what Clausewitz calls the political object (drink!). Even something like a 50% reduction in shipping in the Gulf, were it to persist long term, would create strong global economic headwinds which would in turn arrive in the United States in the form of high energy prices and a general ‘supply shock’ that has, historically at least, not been politically survivable for the party in power.

And so that is the trap. While the United States can exchange tit-for-tat strikes with Iran without triggering an escalation spiral, once you try to collapse the regime, the members of the regime (who are making the decisions, not, alas, the Iranian people) have no reason to back down and indeed must try to reestablish deterrence. These are men who are almost certainly dead or poor-in-exile if the regime collapses. Moreover the entire raison d’être of this regime is resistance to Israel and the United States: passively accepting a massive decapitation attack and not responding would fatally undermine the regime’s legitimacy with its own supporters, leading right back to the ‘dead-or-poor-and-exiled’ problem.

Iran would have to respond and thus would have to try to find a way to inflict ‘pain’ on the United States to force the United States to back off. But whereas Israel is in reach of some Iranian weapons, the United States is not. Iran would thus need a ‘lever’ closer to home which could inflict costs on the United States. For – and I must stress this – for forty years everyone has known this was the strait. This is not a new discovery, we did this before in the 1980s. “If the regime is threatened, Iran will try to close the strait to exert pressure” is perhaps one of the most established strategic considerations in the region. We all knew this.

But the trap here is two sided: once the strait was effectively closed, the United States could not back off out of the war without suffering its own costs. Doing so, for one, would be an admission of defeat, politically damaging at home. Strategically, it would affirm Iran’s control over the strait, which would be a significantly worse outcome than not having done the war in the first place. And simply backing off might not fully return shipping flows: why should Iran care if the Gulf states can export their oil? An Iran that fully controls the strait, that had demonstrated it could exclude the United States might intentionally throttle everyone else’s oil – even just a bit – to get higher prices for its own or to exert leverage.

So once the strait was closed, the United States could not leave until it was reopened, or at least there was some prospect of doing so.

The result is a fairly classic escalation trap: once the conflict starts, it is extremely costly for either side to ever back down, which ensures that the conflict continues long past it being in the interests of either party. Every day this war goes on make both the United States and Iran weaker, poorer and less secure but it is very hard for either side to back down because there are huge costs connected to being the party that backs down. So both sides ‘escalate to de-escalate’ (this phrase is generally as foolish as it sounds), intensifying the conflict in an effort to hit hard enough to force the other guy to blink first. But since neither party can back down unilaterally and survive politically, there’s practically no amount of pain that can force them to do so.

Under these conditions, both sides might seek a purely military solution: remove the ability of your opponent to do harm in order to create the space to declare victory and deescalate. Such solutions are elusive. Iran simply has no real way of meaningfully diminishing American offensive power: they cannot strike the airfields, sink the carriers or reliably shoot down the planes (they have, as of this writing, managed to damage just one aircraft).

For the United States, a purely military solution is notionally possible: you could invade. But as noted, Iran is very, very big and has a large population, so a full-scale invasion would be an enormous undertaking, larger than any US military operation since the Second World War. Needless to say, the political will for this does not exist. But a ‘targeted’ ground operation against Iran’s ability to interdict the strait is also hard to concieve. Since Iran could launch underwater drones or one-way aerial attack drones from anywhere along the northern shore the United States would have to occupy many thousands of square miles to prevent this and of course then the ground troops doing that occupying would simply become the target for drones, mortars, artillery, IEDs and so on instead.

One can never know how well prepared an enemy is for something, but assuming the Iranians are even a little bit prepared for ground operations, any American force deployed on Iranian soil would end up eating Shahed and FPV drones – the sort we’ve seen in Ukraine – all day, every day.

Meanwhile escort operations in the strait itself are also deeply unpromising. For one, it would require many more ships, because the normal traffic through the strait is so large and because escorts would be required throughout the entire Gulf (unlike the Red Sea crisis, where the ‘zone’ of Houthi attacks was contained to only the southern part of the Red Sea). But the other problem is that Iran possesses modern anti-ship missiles (AShMs) in significant quantity and American escort ships (almost certainly Arleigh Burke-class destroyers) would be vulnerable escorting slow tankers in the constrained waters of the strait.

It isn’t even hard to imagine what the attack would look like: essentially a larger, more complex version of the attack that sunk the Moskva, to account for the Arleigh Burke’s better air defense. Iran would pick their moment (probably not the first transit) and try to distract the Burke, perhaps with a volley of cheap Shahed-type drones against a natural gas tanker, before attempting to ambush the Burke with a volley of AShMs, probably from the opposite direction. The aim would be to create just enough confusion that one AShM slipped through, which is all it might take to leave a $2.2bn destroyer with three hundred American service members on board disabled and vulnerable in the strait. Throw in speed-boats, underwater drones, naval mines, fishing boats pretending to be threats and so on to maximize confusion and the odds that one of perhaps half a dozen AShMs slips through.

And if I can reason this out, Iran – which has been planning for this exact thing for forty years certainly can. Which is why the navy is not eager to run escort.

But without escorts or an end to the conflict, shipping in the Gulf is not going to return to normal. Container ships are big and hard to sink but easy to damage. But while crude oil tankers are hard to set fire to, tankers carrying refined petroleum products are quite easy to set fire to, as we’ve seen, while tankers of liquid natural gas (LNG carriers) are essentially floating bombs.

The result is that right now it seems that the only ships moving through the strait are those Iran permits and they appear to have a checkpoint system, turning away ships they do not approve of. A military solution this problem is concievable, but extremely difficult to implement practically, requiring either a massive invasion of Iran’s coastline or an enormous sea escort operation. It seems more likely in both cases that the stoppage will continue until Iran decides it should stop. The good news on that front is that Iran benefits from the export of oil from the Gulf too, but the bad news is that while they are permitting some traffic, precisely because high energy prices are their only lever to make the United States and Israel stop killing them, they are unlikely to approve the transit of the kinds of numbers of ships which would allow energy markets to stabilize.

Just as a measure here, as I write this apparently over the last three days or so Iran has let some twenty ships through their checkpoint, charging fees apparently to do so. That may sound like a lot, but it is a quantity that, compared to the normal operation of the strait, is indistinguishable from zero. The Strait of Hormuz normally sees around 120 transits per day (including both directions). That scale should both explain why five or six ships a day paying Iran to transit is not going to really impact this equation – that’s still something like a 95% reduction in traffic (and all of the Iran-approved transits are outbound, I think) – but also why a solution like ‘just do escorts’ is so hard. Whatever navies attempted an escort solution would need to escort a hundred ships a day, with every ship being vulnerable at every moment from when it entered the Strait to when it docked for loading or offloading to its entire departure route. All along the entire Gulf coastline. All the time.

Likewise, even extremely punishing bombings of Iranian land-based facilities are unlikely to wholly remove their ability to throw enough threat into the Strait that traffic remains massively reduced. Sure some ship owners will pay Iran and others will take the risk, but if traffic remains down 90% or just 50% that is still a massive, global energy disruption. And we’ve seen with the campaign against the Houthis just how hard it is with airstrikes to compromise these capabilities: the United States spent more than a year hammering the Houthis and was never able to fully remove their attack capabilities. Cargo ships are too vulnerable and the weapons with which to attack them too cheap and too easy to hide.

There is a very real risk that this conflict will end with Iran as the de facto master of the Strait of Hormuz and the Persian Gulf, having demonstrated that no one can stop them from determining by force which ships pass and which ships cannot. That would, in fact, be a significant strategic victory for Iran and an enormous strategic defeat for the United States.

Peace Negotiations?

Which brings us to the question of strategic outcomes. As the above has made clear, I think the Trump administration erred spectacularly in starting this war. It appears as though, in part pressured by Israel, but mostly based on their own decisions (motivated, it sure seems, by the ease of the Venezuela regime-change) they decided to go ahead on the hopeful assumption the regime would collapse and as a result did not plan for the most likely outcome (large war, strait closure), despite this being the scenario that political leadership (Trump, Hegseth, Rubio) were warned was most likely.

The administration now appears to be trying to extricate itself from the problem has created, but as I write this, is currently still stuck in the ‘trap’ above. Now this is a fast moving topic, so by the time you actually read this the war well could have ended in a ceasefire (permanent or temporary) or intensified and expanded. Who knows! As I am writing the Trump administration claims that they are very near a negotiated ceasefire, while the Iranian regime claims they have rejected both of the United States’ interlocutors as unsuitable (‘backstabbing’ negotiators), while reporting suggests Israel may feel it in their interests to blow up any deal if the terms are too favorable to Iran.

That is a lot of uncertainty! But I think we can look at some outcomes here both in terms of what was militarily achieved, what the consequences of a ‘deal’ might be and what the consequences of not having a deal might be.

The Trump administration has offered a bewildering range of proposed objectives for this war, but I think it is fair to say the major strategic objectives have not been achieved. Initially, the stated objective was regime change or at least regime collapse; neither has occurred. The regime very much still survives and if the war ends soon it seems very plausible that the regime – able to say that it fought the United States and made the American president sue for peace – will emerge stronger, domestically (albeit with a lot of damage to fix and many political problems that are currently ‘on pause’ coming ‘un-paused’). The other core American strategic interest here is Iran’s nuclear program, the core of which is Iran’s supply of roughly 500kg of highly enriched uranium; no effort appears to have been made to recover or destroy this material and it remains in Iranian hands. Actually destroying (dispersing, really) or seizing this material by military force would be an extremely difficult operation with a very high risk of failure, since the HEU is underground buried in facilities (mostly Isfahan) in the center of the country. Any sort of special forces operation would thus run the risk of being surrounded and outnumbered very fast, even with ample air support, while trying to extract half a ton of uranium stored in gas form in heavy storage cylinders.

When the United States did this in Kazakhstan, removing about 600kg (so roughly the same amount) it required the team to spend 12 hours a day every day for a month to remove it, using multiple heavy cargo planes. And that facility was neither defended, nor buried under rubble.

Subsequently, administration aims seem to have retreated mostly to ‘fixing the mess we made:’ getting Iran to stop shooting and getting the Strait of Hormuz reopened and the ships moving again. They do seem to be asking for quite a bit more at the peace table, but the record of countries winning big concessions at the peace table which they not only haven’t secured militarily but do not appear able to do so is pretty slim.

Now it is possible that Iran blinks and takes a deal sooner rather than later. But I don’t think it is likely. And the simple reason is that Iran probably feels like it needs to reestablish deterrence. This is the second sudden bombing campaign the country has suffered in as many years – they do not want there to be a third next year and a fourth the year after that. But promises not to bomb them don’t mean a whole lot: establishing deterrence here means inflicting quite a lot of pain. In practice, if Iran wants future presidents not to repeat this war, the precedent they want to set is “attacking Iran is a presidency-ending mistake.” And to do that, well, they need to end a presidency or at least make clear they could have done.

Iran is thus going to very much want a deal that says ‘America blinked’ on the tin, which probably means at least some remaining nuclear program, a de facto Iranian veto on traffic in the strait and significant sanctions relief, along with formal paper promises of no more air strikes. That’s going to be a hard negotiating position to bridge, especially because Iran can ‘tough it out’ through quite a lot of bombing.

And I do want to stress that. There is a frequent mistake, often from folks who deal in economics, to assume that countries will give up on wars when the economics turn bad. But countries are often very willing to throw good money after bad even on distant wars of choice. For wars close to home that are viewed as existential? Well, the ‘turnip winter‘ where Germans started eating food previous thought fit only for animals (a result of the British blockade) began in 1916. The war did not end in 1916. It did not end in 1917. It did not end until November, 1918. Food deprivation and starvation in Germany was real and significant and painful for years before the country considered surrender. Just because the war is painful for Iran does not mean the regime will cave quickly: so long as they believe the survival of the regime is at stake, they will fight on.

There is a great deal of ruin in a nation.

Strategic Implications

So my conclusion here is that the United States has not yet achieved very much in this war on a strategic level. Oh, tactically, the United States has blown up an awful lot of stuff and done so with very minimal casualties of its own. But countries do not go to war simply to have a war – well, stupid fascist countries do, which is part of why they tend to be quite bad at war – they go to war to achieve specific goals and end-states.

None of the major goals here – regime change, an end to Iran’s nuclear ambitions – have been achieved. If the war ends tomorrow in a ‘white peace,’ Iran will reconstitute its military and proxies and continue its nuclear program. It is in fact possible to display astounding military skill and yet, due to strategic incoherence, not accomplish anything.

So the true, strategic gains here for all of the tactical effectiveness displayed, are functionally nil. Well what did it cost?

Well, first and foremost, to date the lives of 13 American soldiers (290 more WIA), 24 Israelis (thousands more injured), at least a thousand civilian deaths across ‘neutral’ countries (Lebanon mostly, but deaths in Kuwait, Iraq, Qatar, Bahrain, Saudi Arabia, etc) and probably at least a thousand if not more Iranian civilians (plus Iranian military losses). The cost of operations for the United States is reportedly one to two billion dollars a day, which adds up pretty quickly to a decent chunk of change.

All of the military resources spent in this war are in turn not available for other, more important theaters, most obviously the Asia-Pacific (INDOPACOM), but of course equally a lot of these munitions could have been doing work in Ukraine as well. As wars tend to do, this one continues to suck in assets as it rumbles on, so the American commitment is growing, not shrinking. And on top of spent things like munitions and fuel, the strain on ships, air frames and service personnel is also a substantial cost: it turns out keeping a carrier almost constantly running from one self-inflicted crisis to the next for ten months is a bad idea.

You could argue these costs would be worthwhile it they resulted in the destruction of Iran’s nuclear program – again, the key element here is the HEU, which has not been destroyed – or of the Iranian regime. But neither of those things have been achieved on the battlefield, so this is a long ledger of costs set against…no gains. Again, it is not a ‘gain’ in war simply to bloody your enemy: you are supposed to achieve something in doing so.

The next side of this are the economic consequences. Oil and natural gas have risen in price dramatically, but if you are just watching the commodity ticker on the Wall Street Journal, you may be missing some things. When folks talk about oil prices, they generally do so via either $/bbl (West Texas Intermediate – WTI – one-month front-month futures) or BRN00 (Brent Crude Oil Continuous Contracts). These are futures contracts, meaning the price being set is not for a barrel of oil right now but for a barrel of oil in the future; we can elide the sticky differences between these two price sets and just note that generally the figure you see is for delivery in more-or-less one month’s time. Those prices have risen dramatically (close to doubled), but may not reflect the full economic impact here: as the ‘air bubble’ created by the sudden stop of oil shipments expands, physical here-right-now prices for oil are much higher in many parts of the world and still rising.

Essentially, the futures markets are still hedging on the idea that this war might end and normal trade might resume pretty soon, a position encouraged by the current administration, which claims it has been negotiating with Iran (Iran denied the claim). The tricky thing here is that this is a war between two governments – the Trump administration and the Iranian regime – which both have a clear record of lying a lot. The Trump administration has, for instance, repeatedly claimed a peace deal between Ukraine and Russia was imminent, and that war remains ongoing. The markets are thus forced to try and guess everyone’s actions and intentions from statements that are unreliable. Cards on the table, I think the markets are underestimating the likelihood that this conflict continues for some time. Notably, the United States is moving assets into theater – an MEU, elements of the 82 Airborne – which will take some time to arrive (two weeks for the MEU which is still about a week out as I write this) and set up for operations.

In either case, while I am not an expert on oil extraction or shipping, what I have seen folks who are experts on those things say is that the return of normal operations after this war will be very slow, often on the order of ‘every extra week of conflict adds a month to recovery’ (which was Sal Mercogliano’s rule of thumb in a recent video). If the war ends instantly, right now, ship owners will first have to determine that the strait is safe, then ships will have to arrive and begin loading to create space in storage to start up refineries to create space in storage to start up oil wells that have been ‘shut in,’ some of which may require quite a bit of doing to restart. Those ships in turn have to spend weeks sailing to the places that need these products, where some of the oil and LNG is likely to be used to refill stockpiles rather than immediately going out to consumers. For many products, refineries and production at the point of sale – fertilizer plants, for instance – will also need to be restarted. Factory restarts can be pretty involved tasks.

This recovery period doesn’t just get pushed out by 24 hours each day it gets longer as more production is forced to shut down or is damaged in the fighting. As I write this, futures markets for the WTI seem to be expecting oil prices to remain elevated (above $70 or so) well into 2028.

Meanwhile, disruption of fertilizer production, which relies heavily on natural gas products, has the potential to raise food prices globally. Higher global food prices – and food prices have already been elevated by the impact of the War in Ukraine – are pretty strongly associated with political instability in less developed countries. After all, a 25% increase in the price of food in a rich country is annoying – you have to eat more cheaper foods (buy more ramen, etc.). But in a poor country it means people go hungry because they cannot afford food and hungry, desperate people do hungry, desperate things. A spike in food prices was one of the core causes of the 2010 Arab Spring which led in turn to the Syrian Civil War, the refugee crisis of which significantly altered the political landscape of Europe.

Via Wikipedia, a chart of the food price index, with the spikes on either side of 2010 clearly visible; they are thought to have contributed to the intense political instability of those years (alongside the financial crisis).

I am not saying this will happen – the equally big spike in food prices from the Ukraine War has not touched off a wave of revolutions – but that it increases the likelihood of chaotic, dynamic, unsettled political events.

But it does seem very clear that this war has created a set of global economic headwinds which will have negative repercussions for many countries, including the United States. The war has not, as of yet, made Americans any safer – but it has made them poorer.

Then there are the political implications. I think most folks understand that this war was a misfire for the United States, but I suspect it may end up being a terrible misfire for Israel as well. Israeli security and economic prosperity both depend to a significant degree on the US-Israeli security partnership and this war seems to be one more step in a process that very evidently imperils that partnership. Suspicion of Israel – which, let us be honest, often descends into rank, bigoted antisemitism, but it is also possible to critique Israel, a country with policies, without being antisemitic – is now openly discussed in both parties. More concerning is polling suggesting that not only is Israel underwater with the American public, but more Americans sympathize with Palestinians than Israelis for the first time in American history.

Again, predictions are hard, especially about the future, but it certainly seems like there is an open door to a future where this war is the final nail in the coffin of the American-Israeli security partnership, as it becomes impossible to sustain in the wake of curdling American public opinion. That would be a strategic catastrophe for Israel if it happened. On the security side, with Israel has an independent nuclear deterrent and some impressive domestic military-industrial production the country is not capable of designing and manufacturing the full range of high-end hardware that it relies on to remain militarily competitive despite its size. There’s a reason Israel flies F-35s. But a future president might well cut off spare parts and maintainers for those F-35s, refuse to sell new ones, refuse to sell armaments for them, and otherwise make it very difficult for Israel to acquire superior weapons compared to its regional rivals.

Economic coercion is equally dangerous: Israel is a small, substantially trade dependent country and its largest trading partner is the United States, followed by the European Union. But this trade dependency is not symmetrical: the USA and EU are hugely important players in Israel’s economy but Israel is a trivial player in the US and EU economies. Absent American diplomatic support then, the threat of economic sanctions is quite dire: Israel is meaningfully exposed and the sanctions would be very low cost for the ‘Status Quo Coalition’ (assuming the United States remains a member) to inflict under a future president.

A war in which Israel cripples Iran in 2026 but finds itself wholly diplomatically isolated in 2029 is a truly pyrrhic victory. As Thucydides might put it, an outcome like that would be an “example for the world to meditate upon.” That outcome is by no means guaranteed, but every day the war grinds on and becomes less popular in the United States, it becomes more likely.

But the United States is likewise going to bear diplomatic costs here. Right now the Gulf States have to shelter against Iranian attack but when the dust settles they – and many other countries – will remember that the United States unilaterally initiated by surprise a war of choice which set off severe global economic headwinds and uncertainty. Coming hot on the heels of the continuing drama around tariffs, the takeaway in many places may well be ‘Uncle Sam wants you to be poor,’ which is quite a damaging thing for diplomacy. And as President Trump was finding out when he called for help in the Strait of Hormuz and got told ‘no’ by all of our traditional allies, it is in fact no fun at all to be diplomatically isolated, no matter how powerful you are.

Of course the war, while quickly becoming an expensive, self-inflicted wound for the United States has also been disastrous for Iran. I said this at the top but I’ll say it again: the Iranian regime is odious. You will note also I have not called this war ‘unprovoked’ – the Iranian regime has been provoking the United States and Israel via its proxies almost non-stop for decades. That said, it is the Iranian people who will suffer the most from this war and they had no choice in the matter. They tried to reject this regime earlier this year and many were killed for it. But I think it is fair to say this war has been a tragedy for the Iranian people and a catastrophe for the Iranian regime.

And you may then ask, here at the end: if I am saying that Iran is being hammered, that they are suffering huge costs, how can I also be suggesting that the United States is on some level losing?

And the answer is simple: it is not possible for two sides to both win a war. But it is absolutely possible for both sides to lose; mutual ruin is an option. Every actor involved in this war – the United States, Iran, arguably Israel, the Gulf states, the rest of the energy-using world – is on net poorer, more vulnerable, more resource-precarious as a result.

In short, please understand this entire 7,000+ word post as one primal scream issued into the avoid at the careless, unnecessary folly of the decision to launch an ill-considered war without considering the obvious, nearly inevitable negative outcomes which would occur unless the initial strikes somehow managed to pull the inside straight-flush. They did not and now we are all living trapped in the consequences.

Maybe the war will be over tomorrow. The consequences will last a lot longer.

Economic indicator	D.C. Core impact	Suburban impact
Class A office vacancy	+5.2%	-1.8%
Corporate tax revenue	-3.4%	+4.1%
Infrastructure strain	High	Critical
Rental rate volatility	+2.1%	+4.5%

NISAR’s View of Mount Rainier

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Thursday, March 17, 2016 German organ transplant law should be amended or reinterpreted to allow kidney exchange: my op-ed in Der Tagesspiegel

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