How much is the war hitting American's bottom line?

Summary

Podcast Summary: Consider This from NPR

Episode: How much is the war hitting American's bottom line?
Date: May 5, 2026
Host: Mary Louise Kelly
Guest: Martha Gimbel, Executive Director and Co-founder of the Budget Lab at Yale

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Episode Overview

This episode examines the economic effects of the ongoing US-Iran conflict, with particular attention to how it impacts ordinary Americans' finances. Mary Louise Kelly explores claims by President Trump about a "roaring" US economy and investigates the real toll on consumer costs, especially gas prices, housing, and inflation. Yale economist Martha Gimbel offers insights into the war's ripple effects on energy, supply chains, and long-term economic stability.

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Key Discussion Points and Insights

1. How Is the War Affecting US Consumers?

[00:40, 01:57, 02:43]

• Gas Prices:

  • Americans are currently paying an average of $4.48/gallon for gas, up significantly from $3.17 the previous year.
  • The closure of the Strait of Hormuz due to the US-Israel-Iran war is directly responsible for this jump.

• Affordability Crisis:

  • Rising gas prices are compounding an existing affordability crisis, raising costs for essentials like food and making day-to-day life more expensive.

• Visibility of Gas Prices:

  • Gas prices are uniquely visible and immediate compared to other expenses. People notice changes because prices are publicly posted everywhere.
  • Quote:

    "You see them everywhere, are on the big sign as you drive around."
    — Martha Gimbel [03:46]

• Energy as a Core Economic Driver:

  • Increased energy costs affect the price of all goods and services since energy is required for production and transportation.
  • Quote:

    "When you start seeing energy prices going up, it can often be a leading indicator that some other prices are going to start rising too."
    — Martha Gimbel [03:48]

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2. Fact-Checking the “Roaring” Economy Narrative

[04:34–06:16]

• President Trump’s Claim:

  • Asserts that the US economy is “roaring,” with upswings in factory construction, consumer confidence, and business investment.

    "Thanks to these pro growth policies, our economy is roaring and factory construction is way up. Consumer confidence is way up. Business investment is more than triple..."
    — President Trump (quoted) [04:50]

• Expert Response:

  • Gimbel refutes the "roaring" designation; she states the economy has been "fine," with steady unemployment rates and stable (but unspectacular) growth.
  • Consumer confidence is, in reality, quite low—contrary to Trump’s claim—and is especially affected by rising energy costs.
  • Quote:

    "Our economy is not roaring, but it has been fine... Slow and steady wins the race here."
    — Martha Gimbel [05:09]

  • Quote:

    "Consumers have been expressing for quite some time that they are not happy...in general, consumer sentiment is quite low."
    — Martha Gimbel [05:46]

• Consumer Sentiment Data:

  • April’s Consumer Sentiment Index (University of Michigan) hit a record low—even surpassing pandemic-era lows.
  • Quote:

    "They found it hit an all time record low and that includes lower than June 2022, when we were still in the midst of the pandemic."
    — Mary Louise Kelly [06:16]

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3. Housing and Interest Rates

[06:57–07:51]

• Housing Market Pain Points:

  • Housing remains unaffordable for many; persistently high mortgage rates further hinder buyers.

• War’s Impact on Rates:

  • The Iran war complicates the Federal Reserve’s efforts to cut interest rates. Expectations of rate cuts have diminished due to ongoing instability.

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4. Energy Supply and Long-Term Impact

[08:06–09:56]

• Inflation and Supply Shocks:

  • Ongoing war increases monthly energy prices (in March, over 10%—the largest monthly rise since 2005).
  • The conflict is causing long-term damage to Middle Eastern production facilities; even a sudden peace would not instantly restore supply or reduce prices.
  • Quote:

    "It's not like if the war ended tomorrow, they can all just flip a switch and send out all the oil that's been missing..."
    — Martha Gimbel [08:40]

• Inventory Depletion:

  • Countries have been releasing reserves to prevent outright gas and oil shortages, but upward price pressure will continue due to lasting supply destruction.
  • Quote:

    "But you're still going to see some upward pressure on prices here because there's been long term destruction of supply and it takes time to rebuild these facilities."
    — Martha Gimbel [09:44]

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5. Policy Options & Short-term Relief?

[09:56–10:37]

• Limited Solutions:

  • Other than ending the war—an unlikely short-term option—there are few immediate solutions available to policymakers for reducing prices.
  • Some countries have suggested working from home as a small mitigation measure, but actual removal of supply inherently raises prices.

• Humorous Quote about Uncertainty:

  • Quote:

    "If you find out, let me know and I will time the filling up of my gas tank accordingly."
    — Martha Gimbel, on when gas prices might go down [10:42]

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Notable Quotes and Memorable Moments

• On significance of gas prices:

  “Gas prices and energy prices in general flow through to everything else. You need energy to produce all of these other goods and services that we buy.”
  — Martha Gimbel [03:48]

• On economic narrative:

  “Our economy is not roaring, but it has been fine... Slow and steady wins the race here.”
  — Martha Gimbel [05:09]

• On consumer sentiment:

  “Consumer sentiment is quite low...and so just going back to where we started, not only is consumer sentiment relatively low right now, it’s probably going to face some headwinds in the months to come.”
  — Martha Gimbel [05:46]

• On post-war recovery:

  “It’s not like if the war ended tomorrow, they can all just flip a switch and send out all the oil that’s been missing for the past however many weeks.”
  — Martha Gimbel [08:40]

• On gas price outlook:

  “If you find out, let me know and I will time the filling up of my gas tank accordingly.”
  — Martha Gimbel [10:42]

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Important Timestamps

• [02:43] - Start of interview with Martha Gimbel
• [03:11–03:48] - Why gas prices matter so much
• [05:09–05:46] - Fact-checking claims about the “roaring” economy and consumer confidence
• [06:16–07:51] - Discussion of housing market challenges and mortgage rates' link to the war
• [08:06–09:04] - Explaining how the war causes sustained inflation and energy supply issues
• [09:56–10:37] - Policy responses and global strategies to cope with energy shortage
• [10:42] - Uncertainty about future gas prices (humorous exchange)

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Conclusion

This episode underscores the wide-ranging effects of the US-Iran war on the daily cost of living for Americans. Despite political claims of economic vigor, the reality is one of strain, uncertainty, and little immediate relief. Persistent high energy and housing costs are deepening affordability challenges, with the war amplifying these difficulties and limiting policy options for swift improvement.

Transcript

[Mary Louise Kelly]

It's consider this where every day we go deep on one big news story. Today, living in a war economy.

[President Trump (quoted)]

Our country's booming now despite the fact that we're in a I call it a mini war. Cause that's all they are, a mini war.

[Mary Louise Kelly]

That's what President Trump is calling the war with Iran. And on Monday, at a White House event for Small Business Week, he seemed to downplay how that war is affecting the US Economy.

[President Trump (quoted)]

Thanks to these pro growth policies, our economy is roaring and factory construction is way up.

[Martha Gimbel]

Up.

[President Trump (quoted)]

Consumer confidence is way up. Business investment is more than triple compared to that of just a short time ago.

[Mary Louise Kelly]

The data does not reflect consumer confidence being way up. American families are feeling the pinch. Mortgage rates are climbing. Gas prices are the highest they've been in nearly four years, and that is driving up the cost of food. Consider this. We already had an affordability crisis in the US now the war with Iran is making life worse, more expensive. From npr, I'm Mary Louise Kelly.

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[Mary Louise Kelly]

It's consider this from npr. President Trump says the economy is roaring, that as Americans are paying an average price of $4.48 a gallon for gas on Tuesday. A year ago it was $3.17. The reason for that increase is the US Israel war with Iran, which resulted in the closing of the Strait of Hormuz. Gas prices are just one measure of the cost of living in the United States, but they're a significant one. We wanted to take a few minutes to measure how the war is affecting American's bot. So we have called Martha Gimbel. She's co founder and executive director of the Budget Lab at Yale. We check in with her from time to time about the economy. Martha Gimble, welcome back.

[Martha Gimbel]

Thank you so much for having me. I feel like you only check in with me about the economy when it seems like things are about to get

[Mary Louise Kelly]

weird, which is frequently, which is why we speak to you often, I guess. Speaking of weird gas prices, I feel like I'VE spent more time talking about gas prices these last eight weeks than any other eight weeks I can recall. Just briefly, carefully lay out why they are so significant when we're talking about the big picture, health or lack thereof of the economy.

[Martha Gimbel]

I think there's three things to keep in mind here. One is people need to spend money on gas prices, right? It's not a luxury good. They need to go to work, they need to drop their kids off at school. Second is we see them, right? I can tell you what the gas prices are. And at the place right across the street from me where I usually get get gas, I don't know, you know, offhand how much a gallon of milk has changed since last month. I know about what it is, but I don't have the exact down to the penny number in my head. Gas prices, you see them everywhere, are

[Mary Louise Kelly]

on the big sign as you drive around.

[Martha Gimbel]

Yeah, the big sign. But the third thing, and I think this is really important, is gas prices and energy prices in general flow through to everything else. You need energy to produce all of these other goods and services that we buy. So, you know, for instance, right after the pandemic, we spent a lot of time talking about the rise in used car prices. That was astonishing. That affected people, but it wasn't like you needed a used car to produce food or apparel. Energy flows into everything else that we buy. And so when you start seeing energy prices going up, it can often be a leading indicator that some other prices are going to start rising too.

[Mary Louise Kelly]

So with that as context, let me ask you to help us fact check the comment I just attributed to President Trump, that it's roaring. He said that while he was speaking to a group of small business leaders, he was at the White House. This was on Monday. He said a few things about the economy.

[President Trump (quoted)]

Thanks to these pro growth policies, our economy is roaring and factory construction is way up. Consumer confidence is way up. Business investment is more than triple compared to that of just a short time ago.

[Mary Louise Kelly]

I guess my question there, Martha, is our economy roaring?

[Martha Gimbel]

Our economy is not roaring, but it has been fine. Right? You know, the unemployment rate has stayed relatively low. Economic growth, if you look at non volatile measures, has been fine. And that sounds like damning with faint price, but you know, fine is nothing to sneeze at. Slow and steady wins the race here. I do want to seize on one thing the President said, which is about consumer confidence.

[Mary Louise Kelly]

That was where I was going next. He says it's way up. Does that square with what you hear, with what we hear from consumers.

[Martha Gimbel]

It's not, you know, consumers have been expressing for quite some time that they are not happy. You get some wiggles month to month. But in general, consumer sentiment is quite low. And one of the things that we know that does really impact consumer sentiment is energy prices. And so just going back to where we started, not only is consumer sentiment relatively low right now, it's probably going to face some headwinds in the months to come.

[Mary Louise Kelly]

I'll drop a marker here with some data. We were looking at April's consumer Sentiment Index. This is from the University of Michigan. They found it hit an all time record low and that includes lower than June 2022, when we were still in the midst of the pandemic. Other things top of mind for you because we've been talking about the cost of living and affordability since well before President Trump returned to office. We've been talking about it more in this last year since the Trump administration began impos steep tariffs on a lot of other countries. But what are the other aspects of the economy that are just making it challenging right now for Americans?

[Martha Gimbel]

You know, I think housing is still a real pain point for a lot of people. You know, housing prices are still, relatively speaking, high. And a thing that makes a huge difference for the affordability of buying a house is where mortgage rates are. Mortgage rates have not been coming down. And a war, even a mini war in the Middle east is going to make it much, much harder for the Federal Reserve to cut rates coming into this year. People really assumed that the Federal Reserve was plausibly going to cut rates more than once this year. And that's going to flow through to the mortgage market. People have been moving away from that as the Iran war has extended on.

[Mary Louise Kelly]

So let me focus us on the Iran war and how that is affecting all of these challenges we have been talking about. I guess, number one, you're saying mortgage rates aren't going to shift, inflation isn't going to shift because of the war.

[Martha Gimbel]

I mean, first of all, inflation could shift exactly because of the war just month over month. In one month. Energy prices in March went up over 10%. That is the most that they have gone up in a single month since 2005. And I think that people are anticipating that those prices are going to keep rising. And I think one thing that's really important for people to keep in mind here is that this war has affected supply. It has taken supply off the market. Every day that it goes on, it takes more supply off the market. And also it's doing long term damage to production facilities in the Middle East. So it's not like if the war ended tomorrow, they can all just flip a switch and send out all the oil that's been missing for the past however many weeks.

[Mary Louise Kelly]

If the war did end tomorrow, if somebody could wave a magic wand, open the Strait of Hormuz as you and I speak, pull off a permanent deal between the US And Iran, you're saying Americans would still be facing an affordability crisis.

[Martha Gimbel]

I am saying that you would expect, you know, the any increase in energy prices in the coming months to be substantially moderated. We have been getting through this partly because countries have been spending down on their inventories and so they've been trying to avoid putting their citizens into a situation where there is a literal shortage of gas and oil. But you're still going to see some upward pressure on prices here because there's been long term destruction of supply and it takes time to rebuild these facilities.

[Mary Louise Kelly]

Are there steps the administration can take in this moment that we're in right now to ease the pressure on Americans?

[Martha Gimbel]

I mean, apart from the one that you just mentioned of ending the war. This is, you know, why wars are such an economic quagmire. There's not a really good solution here. And you've seen this around the world, right? You know, countries that are trying to handle this have been doing things like suggesting people work from home one day a week such that they're not spending money on commuting. When you have actual removal of supply, there's just not that much you can do to prevent higher prices.

[Mary Louise Kelly]

All that said, when are gas prices going to go down?

[Martha Gimbel]

If you find out, let me know and I will time the filling up of my gas tank accordingly.

[Mary Louise Kelly]

Martha Gimble is executive director and co founder of the Budget Lab at Yale University. Thanks so much.

[Martha Gimbel]

Thank you for having me.

[Mary Louise Kelly]

This episode was produced by Karen Zamora with audio engineering by Ted Mebane. It was edited by Christopher Inteliata and Courtney Dorning. Our executive producer is Sammy Yenigun. It's Consider this from npr. I'm Mary Louise Kelly.

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