Donald Trump's war against Iran has plunged the US military into a severe funding crisis, with the US Navy being forced, according to documents and testimonies cited by the Guardian, to transfer money even from payroll funds and other sources in order to cover operational wartime costs. The US-Israeli operation, which has significantly depleted stockpiles of American munitions and triggered Iranian retaliation causing destruction to strategic US bases in the Middle East, is now exerting suffocating pressure on the budgets of the entire American military apparatus. An internal Pentagon memorandum regarding US Navy funding, which has reportedly come to the attention of the Guardian, warns even of "deficits in payroll accounts," as funds have effectively been "looted" to finance active combat operations.
"The piggy bank is broken"
Experts and former officials maintain that available funds are being rapidly exhausted. "The piggy bank has broken," remarked Harlan Ullman, a retired US Navy officer and member of the National Commission on the Future of the Navy, clarifying however that he was not speaking on behalf of the commission. An official and a defense contractor reported that non-urgent maintenance work on land installations has already been deferred due to the liquidity shortage. When Donald Trump launched the war on February 28, the conflict almost immediately began straining pre-approved military budgets, particularly that of the Navy. The US Navy not only participated in the initial wave of strikes but subsequently assumed the role of enforcing an extensive naval blockade. The White House ultimately requested emergency funding from Congress to cover war expenditures. However, prospects for congressional approval appear slim, as the military conflict remains deeply unpopular.
Transferring funds from payroll
A US Navy official, who has been briefed on how the service is attempting to plug financial gaps, described a scenario where money is being moved by any means available. "Payroll money was 'taken' to fund overseas operations and is now being covered back up with unspent funds. They are replenishing payroll accounts so that there is enough money for our salaries," he stated. The US Navy budget for 2026 approaches $300 billion and encompasses distinct funding categories approved by Congress for personnel, shipbuilding, procurement of specific weapons systems, operations, and maintenance. Legislation, however, strictly limits the Pentagon's ability to freely reallocate funds from one category to another. The issue has already surfaced in congressional hearings. On July 21, during a meeting of the Senate Appropriations Committee, Susan Collins stated she had been informed that certain service branches are facing short-term solvency challenges. According to an aide, the US Navy was among the military branches referenced.
The Navy's official denial
A spokesperson for the US Navy, responding to the allegations, contended that operational and maintenance funds have not been exhausted. "The Department of the Navy actively manages its resources to meet current payroll obligations on time. We continue to work closely with Congress to address ongoing operational needs and maintain personnel and combat readiness throughout the fiscal year," the spokesperson stated. However, according to Todd Harrison, a defense analyst at the American Enterprise Institute, the cash shortfall is an open secret within the service. "They just aren't talking publicly about it," he noted, assessing that the silence represents a deliberate political choice by top Pentagon leadership. In Harrison's view, political leaders do not want to appear to be sacrificing future military readiness for the sake of a war that is increasingly becoming a political liability.
"We are facing critical shortfalls"
The US military knew the crisis was approaching. In mid-May, Adm Daryl Caudle, head of naval operations, warned Congress that pressure would become evident by July. "The fiscal year 2026 budget did not account for Operation Epic Fury," he stated. "I fear that in July I will need to start making decisions regarding how forces are generated and sustained. This may impact how routine exercises and military operations are conducted, in order to ensure necessary funds exist to continue the war effort of Epic Fury." Defense Secretary Pete Hegseth has pressed Congress for emergency war funding, warning in July that without it "we face critical shortfalls." The US Defense Secretary testified that the war with Iran has already cost $35.7 billion, though it remains unclear whether this figure represents the total cost of conflict. When the Trump administration requested $67 billion in emergency funds for the Department of Defense from Congress, it did not specify how much would be allocated to the US Navy. The House of Representatives had approved a $1.15 trillion defense bill in July alongside a separate spending authorization allocating $73 billion for the war in Iran; however, neither is expected to ultimately be signed into law. Harlan Ullman recalled that during the wars in Iraq and Afghanistan, congressional funding was easier to secure because those specific conflicts were authorized through formal military authorizations. "In this case, there is no Authorization for Use of Military Force. Is Congress obligated to fund a conflict it never approved?" he questioned.
"They ran out of money"
The fact that the US Navy faces a severe financial deficit represents a personal blow to Donald Trump, who has repeatedly expressed admiration for Theodore Roosevelt and the projection of naval power built by the US in the early 20th century. Trump has attempted to champion his own naval vision under the banner of the "Golden Fleet," drawing a contrast with the "Great White Fleet" of the Roosevelt era. His naval ambitions include plans for massive war vessels of the "Trump class," which were envisioned to be the largest battleships in US history. His intervention extends even to technical details regarding aircraft carriers. Trump has asked the Navy to redesign its fighter launch systems, advocating for steam and hydraulic catapults over modern electromagnetic systems. In the past, he has repeatedly voiced preferences regarding aircraft launch mechanics aboard American carriers. Now, however, the primary problem facing Washington is financing a war without end. A former US military officer currently working for a Navy contractor, who was briefed on the funding shortfalls, summed up the situation bluntly: "They're done. They fired all their munitions, wrecked their ships, and ran out of military funding."
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