The Bankruptcy Option

By Nick Catoggio

Friday, July 24, 2026

 

Several times in the last 60 years, the United States fought a war in which it not only failed but came to realize long before the fighting ended that it was likely to fail—yet fought on anyway.

 

Vietnam is the most notorious example, Afghanistan (and to a lesser extent Iraq) the most recent. Those are the “forever wars” to which the president contemptuously alluded as a candidate in 2024 when he attacked Washington’s liberal foreign policy consensus. And so one of the few virtues of a second Trump administration, we might have surmised, would be that it wouldn’t get sucked into a conflict whose initial rationale has decayed into an elaborate sunk-cost fallacy.

 

His personal history almost guaranteed it. In his career as a developer, Donald Trump declared corporate bankruptcy no less than four times. When the going gets rough on an endeavor, the president is used to cutting his losses and leaving others to clean up the mess.

 

His aversion to using infantry also reduced the risk of a “quagmire,” to borrow a media cliche for military stalemates. Deploying thousands of ground troops in the “forever wars” I mentioned earlier gave the White House and Pentagon an argument for extending the fighting indefinitely: Our boys can crush this insurgency. All they need is more time.

 

But the president sticks to air power, which has the upside of minimizing American casualties and the downside of being a blunt-force object. Once an air campaign is reduced to bouncing the rubble, having failed to break the enemy’s will or ability to resist, the case for staying the course and continuing the bombardment collapses. One would think.

 

Put all of that together and you might have reasonably assumed back in February that there was no scenario in which the United States would end up fighting on in Iran aimlessly. Either the regime would quickly be brought to its knees or Trump, finding himself stymied, would bug out. He’d take the bankruptcy option and leave others to clean up the mess, as he threatened to do when the agony in the Strait of Hormuz first began to confound him.

 

You would have been wrong. Remarkably, in less than five months, we’ve arrived at a point that it took many years to reach in Vietnam and Afghanistan: Strategic defeat seems assured, yet the United States sees little choice but to keep going.

 

As I write this on Friday morning, all signs point to escalation. The Pentagon is surging soldiers and weapons to the Middle East in case the president opts for all-out war, replete with special operations forces this time. And despite warnings from his own intelligence deputies that more bombs won’t break the regime, Trump is rattling his saber. “I am considering a massive attack. Bigger than ever before,” he told Axios on Thursday, insisting that the Iranians “haven’t received enough pain yet.”

 

The president “believes that the only thing Iran understands is military force,” the Wall Street Journal reported, citing a senior administration official. Allegedly he’s now in “revenge mode” against the Iranians for spoiling his peace deal, “calling them scumbags and lunatics, and unleashing a series of expletives” in a recent Oval Office meeting.

 

But amid all the rage and bluster, he seems to grasp the futility of what he’s doing. Apparently the White House quietly reached out to Iran with a new ceasefire offer this week—and was rebuffed. The regime, or at least its most hardline factions, is now more eager to keep this fiasco going than the United States is.

 

Unless the U.S. naval blockade in the strait forces an unexpected capitulation, in record time the president will have ended up maneuvering himself into one of those unwinnable wars he despises. He got elected promising not to start any foolish conflicts that drag on for years before ending with America losing; what he meant, it turns out, is that on his watch we’d lose those foolish conflicts much more expeditiously.

 

And there’s no bankruptcy option for him this time.

 

‘A politically impossible situation.’

 

“What Trump should do is walk away,” Jonathan Last wrote a few days ago at The Bulwark. “Swallow the loss, regroup, ‘liberate’ Cuba, get into an online slap fight with the Spanish national team. Whatever. Take the L and all of the geostrategic consequences that come with it. Yet for some reason he doesn’t seem able to do that. Why?”

 

Last’s theory is that the president, consumed as he is with dominance, lacks the self-discipline to choose submission even when it’s in his interest to do so. Normally you can’t go wrong with theories about psychological problems when trying to explain Trump’s behavior, but I don’t know in this case: Wasn’t the terrible peace deal that he embraced last month tantamount to submitting to Iran in hopes of walking away?

 

The man was so plainly elated to have been given an apparent exit ramp from this conflict that he turned into a sort of military spokesman for the regime for a few days. He’s willing to abase himself publicly, it turns out, when the political pain of not doing so gets intense enough.

 

There’s no doubt that Trump would have walked away months ago if not for Iran’s gambit in the strait. All of the original grounds for war, from regime change to finishing off the country’s enrichment program to destroying its ballistic missile capabilities, faded in importance once the closure of Hormuz began to bite—to the point that the White House began treating reopening it as the start of an entirely separate conflict. Despite failing to achieve his initial objectives, Trump could have and would have called it a day and declared victory had he managed to restore the status quo in oil traffic. Once gas began climbing toward $5, he couldn’t.

 

If it were 2028 instead of 2026, I suspect he would have walked away from the war even with the strait closed. With his presidency winding down, the prospect of Republicans being annihilated at the polls due to the knock-on effects of soaring oil prices wouldn’t have bothered him. As long as he faced no consequences personally from having Iran in control of Hormuz, Trump would be content to leave someone else—his party and its new presidential nominee—holding the bag. That’s the whole point of declaring bankruptcy, no?

 

But it’s 2026. He will face personal consequences if the strait doesn’t open, starting with having to spend his last two years in office fending off corruption investigations by a new Democratic-controlled Congress. Whatever’s left of his economic legacy after 18 months of tariffs and inflation will also crumble: Unlike in 2028, when he could have pawned off a Hormuz-driven recession on his successor, that misery will land in his own lap. And he knows it.

 

It already has to some extent. A Politico poll published a few days ago found that Americans understand that Trump’s war is the reason gas has grown more expensive. Overall, 63 percent cited the conflict when asked why fuel prices are up, including 57 percent of self-described MAGA voters. The same survey found support for the war deteriorating within the GOP, with just 21 percent of non-MAGA Republicans now willing to say that they believe it’s worth paying more for gas to see it through.

 

That’s in line with new data from Fox News that finds Trump’s approval on Iran down to 37-63 among members of his own party who don’t identify as MAGA.

 

All of this is to say that the president would happily choose the bankruptcy option, I’m sure, if only the Iranians would offer it to him. By signing last month’s humiliating peace agreement, he showed that he’s willing to accept the public embarrassment of admitting that a project he championed has failed, as bankruptcy requires. But bankruptcy is supposed to release him from the financial obligations created by that project, which in this case would mean oil commerce returning to prewar levels in the strait before November’s midterms. And the Iranians simply refuse to do that.

 

When there’s no bankruptcy option available, all he can do is continue to plow money into the project and hope for the best. If his choice is between being ruined economically while looking weak and being ruined economically while looking somewhat tougher, why not keep bombing?

 

One person close to the White House framed the situation starkly for Politico. Trump and his team are “at a maximum level of frustration right now, and I was told by very senior people that the president is now fully aware that the only way to the victory that he wants is completely politically impossible,” the source said, alluding to a massive ground force. “The American people just will not support the kind of escalation it would take at this point. We’ve got more dead Americans and a politically impossible situation.”

 

“Politically impossible” is the right term. Especially for congressional Republicans.

 

To fund?

 

For Republicans in the House and Senate, the only silver lining to the war is that their predicament could be worse. They could be J.D. Vance.

 

My guess is that the vice president wanted to lead the White House’s diplomacy with Iran, believing that doing so would reassure dismayed postliberals that he was still a proud member of Team Peace. He plainly hoped to parlay the agreement the sides reached into something more lasting too, declaring excitedly last month that “the coolest thing about the progress we’ve made over the last few weeks is that you see people within the Iranian system … say, ‘You know what? We may have some animosity, we may have some mistrust. But we recognize the way that we’ve done business with the United States for 47 years is a mistake. Let’s try something else.’”

 

He looks like a Grade-A schmuck today, particularly with the man whose endorsement he needs in 2028 reduced to cursing a blue streak in the Oval Office about Iranian “scumbags and lunatics.” Right-wing hawks have predictably turned Vance into a punching bag as the war has resumed, partly because they dare not blame the president himself and partly because they’re eager to wound the Tucker Carlson wing of the party before the battle over post-Trump Republican foreign policy heats up. There’s even evidence that the VP’s role in the peace process has begun to hurt him with GOP voters, with one recent New Hampshire poll showing Vance’s lead over Marco Rubio in a hypothetical primary way down since February.

 

“I just don’t think they’re serious about making a deal,” one prominent Trump official said yesterday of the Iranians. “These guys, the problem with them is you can’t make a deal with people unless they’re going to keep it, and these people make deals and then they break it almost immediately, or they decide, oh, let’s change the deal. That’s not how deals work.” Those comments felt like a thinly veiled rebuke of Vance’s naivete about the enemy. Guess which prominent Trump official made them.

 

Few Republicans will be as wounded by Trump’s war as J.D. Vance but all of them will be wounded. (Except maybe for the secretary of state, weirdly, even though he’s nominally in charge of foreign relations.) Republicans in Congress now face a “politically impossible” dilemma of their own: Do they vote to fund this spiraling fiasco or do they block funding in hopes that swing voters will reward them for trying to stop an unpopular war?

 

If they fund it they’re meekly submitting to the most audacious executive power grab of the Trump era, a presidential war of choice with momentous military and economic consequences that began without so much as a courtesy heads-up to Congress. That would be pitiful even by the standards of America’s pitiful postliberal Duma-fied legislature, especially given the shenanigans to which the White House has stooped to hide the costs—human and otherwise—of its project.

 

An administration that cares more about pretending that it’s fighting an entirely different war than it was in February than it does about properly honoring fallen U.S. troops doesn’t deserve to be rewarded with a financial lifeline.

 

Appropriating new money for the war could have unwelcome ramifications too. The Justice Department has argued in the past that Congress’ decision to fund a war that it never authorized initially amounts to de facto authorization of the conflict. On that view, voting to support operations now would mean that Republican lawmakers have taken ownership of the war not just politically, as will be the case in Democratic attack ads, but legally.

 

And of course there’s a prudential reason not to fund it, namely, that Trump is Trump. As much as he’d like to declare bankruptcy in this war and get out, there remains a chance that our “very stable genius” will do something not so stable or ingenious as the conflict spirals and further inflames his rage. Better to pull the plug on him sooner rather than later.

 

On the other hand.

 

Or not to fund?

 

Blocking funding would bring his wrath down on the heads of wayward congressional Republicans and risk alienating the right-wing voters without whom they stand no chance of winning in November.

 

It would also get them accused of strengthening the enemy’s leverage, with some justification. The U.S. election calendar has already given the Iranians an incentive to fight on, as they surely know that the war is unpopular here and that Trump will suffer in November if it persists. A bipartisan push in Congress to defund operations would boost that incentive: The clearer it becomes that America’s will for war is weakening, the more willing Iran should be to refuse a mediocre peace deal and hold out for more.

 

There’s a prudential reason for Congress to keep the money flowing as well. How would any lawmaker, Republican or Democrat, rationalize defunding the war as long as the Strait of Hormuz remains closed? Trump’s solution—more bombs!—is dumb but there’s at least a hypothetical endgame in which Iran cries uncle and lets oil tanker traffic resume. Defunding the war would force him to walk away with the strait still bottled up, at which point the plan is—what? To tell oil companies to pay whatever ransom Iran is demanding from them, knowing what that will do to gas prices?

 

Besides, if you’re a House or Senate Republican, aren’t you going to own this war whether you fund it or not? How many people will walk into the booth on Election Day furious at Trump for what he’s done to the cost of living yet scrupulously conscientious about not faulting the local Republican congressman for the president’s policies without first inspecting his or her voting record?

 

In the same way that there’s little the president can feasibly do to stop the war if Iran insists on continuing it, there’s little that congressional Republicans can do to stop the war if Trump—at Iran’s behest—insists on continuing it. The bankruptcy option is no more realistic for Article I in this case than it is for Article II.

 

So my guess is that congressional Republicans will end up doing what they usually do, making guttural noises about independence and accountability before finding excuses to dutifully carry out the president’s wishes. Take Utah Sen. John Curtis, who boldly declared this week that “I think it’s clear that it is time for Congress to act” before quickly clarifying that that “doesn’t mean that it’s necessarily acting, constraining the president, but in fact defining what this looks like.” Curtis seems to want Congress to authorize the war, albeit possibly on terms narrower than Trump might like.

 

And what will happen if and when the president violates those terms, daring Curtis and the rest of his conference to do something about it? Nothing, of course.

 

Even more pathetic was the reliably pathetic Sen. Thom Tillis, who has nothing to lose by standing on principle against the president in light of his looming retirement yet who continues to find ways to make Trump happy. Tillis told reporters this week that he’s serious about the rule in the War Powers Act that (supposedly) limits presidents to waging unauthorized war for no more than 60 days. The senator intends to enforce that rule—on September 10, when the 60-day time limit on the “new” Iran war we’re allegedly fighting runs out.

 

Yes, really: Thom Tillis, whose career was ended by Trump, is abetting the White House’s preposterous claim that the 60-day rule hasn’t already been violated because we’re in an entirely separate conflict now. That’s how eager he is to avoid an uncomfortable floor vote despite the fact that he’ll never face a primary electorate again.

 

If you couldn’t understand before how America ended up stumbling into a crisis in which our options consist of (a) a gigantic ground invasion, (b) letting Iran hold the global oil supply hostage unto eternity, and (c) continued bombing to no obvious effect, you should be able to now. Federal leadership has been completely bankrupted by hubris, stupidity, cowardice, and partisanship. Americans elected that bankruptcy, and this time they won’t be let off the hook.