This article on claims by Joseph Stiglitz regarding the economic implications of the Iraq war is worth reading. It repeats Stiglitz's claims that the war will cost the US $3 trillion and that it has raised oil prices by at least $5-$10 (but more plausibly by $35) per barrel.
It also claims that to fund the war the US central bank flooded its economy with cheap credit leading to a housing bubble and a consumption boom.
Finally, Stiglitz notes that the war leaves the next US president with the largest budget deficit in history. Of course the significant deficit will also in part be generated by US tax cuts. Interesting 'big picture' claims. Stiglitz and Linda Bilmes have written a book expanding on these themes - The Three Trillion Dollar War. I pre-ordered a copy today.
Linking the issue of war financing to global macroeconomic conditions has been a recurring theme in the economics literature given the inflationary consequences of the Vietnam War. This time around the flood of money creation has driven down interest rates and created an asset price boom rather than cost-push inflation. Wage and other costs I assume have been pegged by the expanding role of cheap Chinese labour.
I have made several posts on the cost of the Iraq war (here, here, here) and January 2007 had a discussion concerning the Stiglitz estimates with JS himself.
The Stiglitz-Bilmes estimated costs have increased steadily over time from early estimates of about $1 trillion. They are at the upper end of the range of estimates I have seen and ignore possible benefits from the war and the costs saved by not pursuing the earlier containment approach using sanctions.
The source of the high costs in the Stiglitz-Bilmes study is partly due to the high incidence of costly injuries to US service people from the war. These should not put immediate pressure on US budgets - the main implications of injury costs will be drawn out over the coming decades.