Even before the bombs have fallen on Baghdad, Capitol Hill is projecting victory for the U.S., emphasizing that any campaign against Iraq would likely be short and snappy, with minimal impact on the U.S. economy. But some people just aren't convinced.

While there is little doubt that the U.S. ultimately would prevail in a military conflict, some analysts say the confrontation could be much more protracted and costly than many people currently expect.

"Unlike Kuwait, where it was over within six weeks and the market just surged, this is going to drag on a lot longer, and it will be negative for the economy," said Ted Davis, senior vice president of the Financial Management Group at Texas-based Frost National Bank.

Despite the obvious military superiority of the U.S., analysts say Iraq could defend itself with urban warfare, or use chemical or biological weapons, which would seriously undermine the U.S. advantage. And with little global support for a war, the U.S. could well end up carrying most of the financial burden.

William Nordhaus, a professor of economics at Yale University, said that in a worst-case scenario, the cost of a war could add up to as much as $1.9 trillion.

That's much higher than the $200 billion estimate provided by former economic adviser Lawrence Lindsey, and about 30 times as much as the Congressional Budget Office and House Budget Committee are projecting.

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Both groups have said they envision about 30 to 60 days of combat followed by about 10 weeks of post-victory troop presence for a total cost of between $44 billion and $60 billion. Still, those costs don't take into account the potential impact on oil prices or dent to consumer confidence.

Since Iraq supplies around 9% of U.S. oil, any disruption could cause prices to spike, particularly if other Arab countries decide to sympathize with Iraq and cut production. This would seriously damage businesses that are reliant on fuel and would essentially act as a tax on consumers.

If the consumer started to pull back on spending, either because of higher energy costs or fear of traveling or worries about further economic weakness, the main engine of growth would be gone. And with expected GDP growth of just 1.5% in the fourth quarter, some analysts say it wouldn't take much to send the economy back into recession.

"This is a huge wild card in the outlook," said Richard DeKaser, chief economist at National City Corp.

That said, DeKaser believes oil prices would probably go down in the event of war, as OPEC increases oil supply and the U.S. opens its strategic oil reserves. Meanwhile, other analysts say a war would remove uncertainty from the stock market. During the first Persian Gulf War, stocks actually rallied once the bombs started to fall and it became apparent that the conflict would soon be over.

Letdown Looms

Still, those expecting a repeat of the last Gulf War could be in for a disappointment.

"Kuwait involved chasing an enemy out of friendly soil. Here we're actually invading enemy soil," said Frost's Davis. "In Iraq, you've got all sorts of logistical problems."

Davis said he is worried that the battle will spill outside of Iraq and potentially spark retaliation from terrorist groups around the globe. "So the net effect is a severe negative on the consumer, whose confidence is already in a fragile state," he said.

A war with Iraq could hamper the economy in other ways, too. The House suggests that the U.S. may need to forgive up to $4 billion in loans to Turkey in order to win its support. And by claiming the resources and the attention of the nation, domestic issues, such as a stagnant economy, fiscal deficits or the crisis of corporate governance, could take a back seat, Yale's Nordhaus said.

Even if the war with Iraq were to be concluded within a few weeks or months, as the government hopes, the costs would continue to mount. Once Saddam Hussein is removed from power, the U.S. would need to spend billions more to rebuild the nation.

Nordhaus says the cost of peacekeeping operations alone could cost anywhere from $75 billion to $500 billion over the next decade. And it's not as if the U.S. can share the financial burden with its allies to the same extent that it did in 1991, because many allies are against a war.

It isn't surprising that the government and many Wall Street analysts are underestimating the length and cost of a war with Iraq. In fact, it is quite common historically for leaders to promote wars as short, cheap and bloodless in order to win popular support for them.

Lessons From Vietnam

In 1966, the Pentagon underestimated the cost of the Vietnam War by about 90%, assuming it would be over by the following year. Instead, the war dragged on until 1973, costing between $110 billion and $150 billion.

Still, Richard Rosen, a money manager at New York Life Investment Management's MainStay Value A fund, said the costs of action must be weighed against the potential costs of inaction.

"In this case, I think people feel that it would be worth the investment to rid the world of this type of threat and hopefully deter threats in the future," he said. "When you look at it that way, it doesn't look as prohibitive."

Whether the American public feels the same way six months from now remains to be seen.

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