The total cost of the wars in Iraq and Afghanistan could balloon to $3.5 trillion over the next decade because of such “hidden” costs as oil market disruptions, forgone investments, long-term healthcare for veterans and interest payments on borrowed war funding, according to a report released by congressional Democrats on Tuesday.

The projection, by the Democratic majority on the Joint Economic Committee, is more than $1 trillion higher than a recent forecast by the nonpartisan Congressional Budget Office, which accounted only for direct spending and interest payments and assumed a moderate withdrawal of troops between now and 2017.

“The full costs of this war to our economy are manifested in ways that have never been accounted for by this administration: We are funding this war with borrowed money, Americans are paying more at the gas pump, and it will take years for our military to recover from the damage of the president’s failed war strategy,” Senate Majority Leader Harry Reid (D-Nev.) said at a news conference Tuesday.

For the Iraq and Afghanistan wars so far, those costs total about $1.6 trillion, the report found -- almost double the direct appropriations of $804 billion in fiscal years 2002 to 2008. Of that, $1.3 trillion, or more than twice the $607 billion appropriated, is for Iraq alone.

The report by the Joint Economic Committee Democrats -- Republicans on the panel did not participate -- comes as the House and the Senate prepare to vote, probably this week, on a $50-billion spending bill for operations in Iraq and Afghanistan. The bill would provide the funding on the condition that the Bush administration begins immediate withdrawal of U.S. troops, with a goal of complete withdrawal by Dec. 15, 2008.

If Bush does not agree to the conditions and vetoes the bill, then he “won’t get his $50 billion,” Reid said, and the Pentagon would have to use its own budget to cover the costs of the conflicts. On Tuesday Bush signed a $470-billion Defense Department appropriations bill that mainly covers costs unrelated to the wars.

At the White House, Press Secretary Dana Perino defended the administration’s Iraq policies, pointing to reduced violence and improvements in the Iraqi economy. She said the Joint Economic Committee report had “obvious motivations” behind it.

“This committee is known for being partisan and political,” Perino said. “They did not consult or cooperate with the Republicans on the committee. And so I think it is an attempt to muddy the waters on what has been some positive developments being reported out of Iraq.”

Aside from the obvious costs of direct appropriations and the interest on borrowed funds, the report said, the war takes money from such “productive investments” as education, law enforcement and healthcare.

The report noted that more than 30,000 U.S. troops had been wounded so far in Iraq and Afghanistan. It did not specify how many had been significantly disabled, but it found that costs related to soldiers’ inability to return to productive work and to their need for care could total more than $30 billion.

The price of oil has also been affected by the war, the report said, with the cost of a barrel peaking at more than $98 last week, almost triple the $37 price the week before the U.S. invasion of Iraq in 2003. Although it is difficult to quantify the war’s effect on prices, the report said, it has “been one factor contributing to a generally unsettled state of oil markets over the past several years.”

The problems in Iraq, particularly the loss of production, contributed to at least a $5 increase in the cost of a barrel of oil, said the report, which can be found at jec.senate.gov.

tina.macias@latimes.com