(Adds Republican senators' reaction, edits)

By Richard Cowan

WASHINGTON, Nov 13 (Reuters) - The Iraq and Afghanistan wars could cost the United States $3.5 trillion through 2017 if "hidden costs" like higher oil prices, care for wounded soldiers and interest on borrowed money are counted, congressional Democrats said on Tuesday.

The estimate, in a report by Democrats on the Joint Economic Committee, is about $1 trillion higher than an Oct. 24 analysis of war costs by the nonpartisan Congressional Budget Office, which mostly weighed direct war expenditures and borrowing costs of more than $700 billion.

The new report assumed the United States would withdraw about half of its present combat troops from Iraq by 2013 and maintain 75,000 soldiers there from 2013-2017.

The estimate was released as the House of Representatives again prepared to debate legislation setting timetables for ending U.S. military involvement in Iraq, now in its fifth year.

Anti-war Democrats with a presidential election coming up next November want to link new war funds to a call for combat troops to withdraw from Iraq by the end of 2008.

"We cannot afford this war," Senate Majority Leader Harry Reid, a Nevada Democrat, told reporters, noting that 3,860 U.S. troops have been killed and 38,164 wounded in Iraq.

The senior Republicans on the Joint Economic Committee, Sen. Sam Brownback of Kansas and Rep. Jim Saxton of New Jersey, questioned the accuracy of the cost estimate. They added, "The wars in Afghanistan and Iraq certainly involve costs, but prematurely pulling out of these wars would also include huge costs that are ignored in the Democrats' report."

Sen. Charles Schumer, the New York Democrat who chairs the Joint Economic Committee, acknowledged his staff's analysis did not incorporate positive economic impacts.

"No. That money would've been spent on other things," Schumer replied.

Since the Sept. 11 attacks on the United States, Congress has appropriated about $604 billion to fight in Iraq and Afghanistan and President George W. Bush has asked for nearly $200 billion more.

But the Democratic report estimated the total economic cost so far was about double that amount, at $1.6 trillion.

It said the war in Iraq had further hurt the U.S. economy by helping drive up world oil prices at a time of growing demand and declining excess production capacity.

"Both the direct effect of the war in reducing Iraqi oil production and the indirect effect of creating greater instability in the Middle East can act to increase oil prices," the report said. (Additional reporting by JoAnne Allen, editing by David Alexander and David Wiessler)

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