I am inclined to agree with Juan Cole’s pessimism on the current situation in Iraq:
… major fighting in most Shiiite urban areas is unambiguous in its significance. It means that the Bush administration rule of Iraq is FUBAR. It seems inevitable to me that the US military will pursue a war to the death with the Army of the Mahdi, the Sadrist movement, and Muqtada al-Sadr himself. They will of course win this struggle on the surface and in the short term, because of their massive firepower. But the Sadrists will simply go underground and mount a longterm guerrilla insurgency similar to that in the Sunni areas.
The United States has managed to create a failed state, similar to Somalia and Haiti, in Iraq.