3. Escalate within Iraq
Pros -- Tighter security in the short term
Cons -- Great resentment of US forces in the long term
I'm not sure an escalation would cause long term resenetment of US forces. I think it is much more likely that Iraqis would appreciate the physical safety provided by a larger number of troops in Baghdad. The fact that people would be able to walk around without fear of being blown up might actually make us more popular within Iraq, and certainly not less popular.
Is anyone else here a student of military history? The US campaign in Iraq reminds me of Hannibal in the 2nd Punic War.
For those not in know, Hannibal marched into Italy and smashed the Roman armies thrown at him. Many times w/ vastly inferior numbers Hannibal won stunning victories over the Romans. He won over the support of a variety of Italian cities which were once loyal to Rome and used them as bases of operations.
After the Battle of Cannae the Romans finely adopted a strategy of refusing to engage Hannibal directly. Instead they used a "Fabian strategy" (similar to that used by the Washington in the Revolutionary War). They launched small attacks on his forces and wore them down. Hannibal didn't have the military power to seize Rome directly so he eventually was forced to withdraw. Many have argued that if Hannibal had the strength to attack Rome directly he could have won the war.
In my comparison the US is Hannibal and Iran is Rome. They fund the insurgents in Iraq to wear us down because they know we don't have the strength right now to launch a direct assault on them.
It is true that Iran is funding and arming the Shi'ite militias, and I have no doubt they are pleased with our struggles. But I think the comparison to the Punic War is not apt.
Even if Iran was not funding the militias, they would still exist. In fact, all evidence suggests that Iran's financing of the militias is not very extensive to begin with. If Hannibal had the manpower to sack Rome, he certainly could have won the 2nd Punic War. Things are different today becuase even if we had the manpower to strike at Iran it would not be likely to have anything more than a minor effect on events in Iraq.
I have the same objection to striking Iran to solve our troubles in Iraq as I have with the position that negotiating with Iran will solve our problems in Iraq. My objection is Iran's role in Iraq's troubles are secondary. Iraq's troubles stem from its own sectarian divisions and cannot be solved by engaging with Iran in dialogue or warfare. It can only be solved by disarming the Sunni insurgents and Shi'ite militias, finding an equitable political settlement on power sharing and resource sharing, and offering asylum those those who lay down their own arms and make peace with the new Iraq. None of these aims are furthered by war with Iran.
