Real World Economics: A trillion-dollar bet against uncertainty

A commentary on “Real World Economics” links rising U.S. economic uncertainty to the administration’s approach to Iran and broader Middle East risk, arguing that uncertainty feeds into job and cost concerns even when recent inflation data look reassuring. The piece focuses on the request for a $1.54 trillion defense budget for Fiscal Year 2027, describing it as the largest increase in 75 years and citing its scale relative to prior years, including 71% higher than FY 2024 and 64% above FY 2025. It frames the debate as “risk” versus “uncertainty,” explaining that risk can be modeled while uncertainty lacks reliable probability estimates. The article compares current shocks to historical moments such as the Korean War.