War with Iraq may eclipse $50 billion

How much would a war with Iraq cost? Most estimates fall in the $50 billion range, though a top White House economic adviser suggested this week it could rise as high as $200 billion.

With so many uncertainties in war, the reality is that nobody knows. Still, under most scenarios, the federal budget could absorb the financial cost of waging a war without much trouble, economists say.

From an economic standpoint, what's more worrying than the cost of invading Iraq is the potential impact of a war on the U.S. and global economies. A war could drive up the price of oil and depress consumer and business confidence. Steep oil prices and declining confidence could push today's anemic economy into recession.

That's unlikely to happen if a war is won quickly, as military experts expect. In fact, battlefield success could boost confidence and calm oil markets. But given the uncertainty of war, a recession can't be ruled out.

"The U.S. is moving forward in a way that is going to drag its economy down," worries Peter Navarro, a business school economist at the University of California-Irvine.

Any war costs would add to a projected federal budget deficit of $145 billion for the next fiscal year, which begins Oct. 1. But economists aren't concerned about the impact on the federal budget because it would be a one-time expense.

Short-term deficits generally aren't worrisome, and any war spending might even provide a boost to the sluggish economy. Budget deficits become a problem when they occur year after year. Then, the steady government borrowing to finance the deficits can push up interest rates, which can slow the economy by raising borrowing costs for consumers and businesses.

A one-time borrowing by the government for a war is unlikely to impact interest rates much.

"As far as the direct cost of the war, I don't think it's a big deal," said David Wyss, the chief economist for Standard & Poor's, the New York-based bond rating agency.

Gauging the costs, though, remains educated guesswork at best.

"It is not knowable what a war or conflict like that would cost," Secretary of Defense Donald H. Rumsfeld told a congressional committee Wednesday. "You don't know if it is going to last two days or two weeks or two months. It certainly isn't going to last two years." Cost estimates tend to be based in part on the cost of the 1990-91 Gulf War, which came in around $60 billion, or about $80 billion in today's dollars.