MARY LOUISE KELLY, HOST:
President Trump says the economy is roaring - that as Americans are paying an average of $4.48 a gallon for gas on Tuesday. A year ago, it was three bucks 17. Now, the reason for that increase is the U.S.-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 big one. So we wanted to take a few minutes to measure how the war is affecting Americans' bottom line. So we have called Martha Gimbel. She is co-founder and executive director of the Budget Lab at Yale. We check in with her from time to time about the economy. Martha Gimbel, welcome back to ALL THINGS CONSIDERED.
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 weird.
KELLY: (Laughter) 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 lay out why they are so significant when we're talking about the big-picture health, or lack thereof, of the economy.
GIMBEL: I think there's, you know, 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 at the place right across the street from me where I usually 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.
KELLY: They're on the big sign as you drive around, yeah.
GIMBEL: 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. 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.
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.
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PRESIDENT DONALD TRUMP: Thanks to these progrowth 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.
KELLY: I guess my question there, Martha, is our economy roaring?
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 nonvolatile measures, has been fine. And that sounds like damning with faint praise, 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. Consumer sentiment...
KELLY: I was - that was my - that was where I was going next.
GIMBEL: (Laughter).
KELLY: He says it's way up. Does that square with what you hear, with what we hear, from consumers?
GIMBEL: It's not. You know, consumers have been expressing for quite some time that they are not happy. You get some, you know, 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, you know, relatively low right now. It's probably going to face some headwinds in the months to come.
KELLY: If someone were able to wave a magic wand, open the Strait of Hormuz this afternoon, pull a permanent deal between Iran and the U.S. out of their magic hat, would Americans still be facing an affordability crisis?
GIMBEL: I mean, there are many factors that go into affordability. One thing to keep in mind is that we've already seen, you know, not just holding back of supply but supply destruction. And so it's going to take time to rebuild facilities to start production up again. It's not the case that you can just turn it on and off like a switch.
KELLY: Are there steps the administration can take in this moment that we're in right now to ease the pressure on Americans?
GIMBEL: I mean, apart from the one that you just mentioned of ending the war? When you have actual removal of supply, there's just not that much you can do to prevent higher prices.
KELLY: All that said, when are gas prices going to go down?
GIMBEL: If you find out, let me know, and I will time the filling up of my gas tank accordingly.
KELLY: Martha Gimbel is executive director and co-founder of the Budget Lab at Yale University. Thanks so much.
GIMBEL: Thank you for having me. Transcript provided by NPR, Copyright NPR.
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