A MARTÍNEZ, HOST:
The latest escalation between the U.S. and Iran prolongs a war that has made life expensive for American households. Amid uncertainty over the ceasefire, costs are still piling up in a way that could have major implications for the midterm elections that are just four months away. Mark Zandi, chief economist at Moody's Analytics, has put a number on that financial pain. Mark, so you're trying to figure out what the average household in the U.S. is paying for the war? What did you find?
MARK ZANDI: Well, if you tote it all up, then we can kind of go through the accounting, but if you add it all up, the cost for the typical American household, is about $1,100. So, you know, it's consequential for a lot of Americans, particularly low- or middle-income Americans. And just to give you context, if you look at the typical American household spending patterns, that's roughly the amount we spend on, let's say, all the fruits and vegetables we buy in a given year or all the money we spend on public transportation. So it's consequential. It's adding up, and, you know, it's really hard on many middle- or lower-income Americans.
MARTÍNEZ: Actually, I'm intrigued how you calculated those figures. How did you get to that number?
ZANDI: Well, it is a bit of an accounting exercise. I mean, the most obvious is the higher cost of gasoline. That's the biggest increase. And that's pretty straightforward, right? 'Cause everyone sees that when they drive to work or go to school every morning, and we know what the price is, and we know what people are spending, how much gas people are buying. So we can - that adds up pretty easily. Then there's the cost of diesel. And diesel's important because that is the cost of transporting goods. And, you know, that's when it impacts grocery prices because you have to get the food from the seaport or the farm to the store shelf. Anything you get delivered by Amazon and UPS.
MARTÍNEZ: Yeah.
ZANDI: If most Americans are like my household, that's a lot of packages, so that costs money. Jet fuel, that goes to, you know, the cost of airline tickets, and airlines have been operating at full capacity, so they pass through a lot of the higher cost. That's the biggest cost, the higher energy costs. That's pretty straightforward.
MARTÍNEZ: Right.
ZANDI: Then there's the cost of interest rates. You know, they're up a lot. We can talk about that as well. And, of course, the military. And if you add it all up, it comes to just about $150 billion - almost, not quite. And there's a lot of uncertainty around that, obviously. But there's 133 million American households, so you do the accounting, you do the arithmetic, it's $1,100 per household.
MARTÍNEZ: Mark, who do you think gets exposed the most? Because you mentioned how, you know, the gas the price of gas, obviously is the one that goes up. But if someone, say, maybe needs to drive more than other people or maybe someone on a fixed income, who gets exposed most to the cost of this war?
ZANDI: Yeah, it's really folks in the bottom part of the income distribution, lower-income, middle-income Americans, 'cause they have to spend - they devote a higher share of their budget to the cost of energy, cost of gasoline. And it varies a lot by where you live in the country. I mean, obviously, if you live in New York City, that's one thing. But if you live in the southeast U.S., the people tend to drive longer distances to work or school or shopping or whatever. So they have to spend a lot more. But, you know, it varies quite a bit, but at the end of the day, it's folks that have lower incomes 'cause just a higher share of their budget goes to that particular expenditure.
MARTÍNEZ: One more thing, Mark, really quick. I mean, how have Americans adjusted to the fact that they are going to have maybe less money to spend?
ZANDI: You know, so far, it's - they've cut back on their saving. If they were saving anything, they've cut back on that. Saving rates are now about as low as they've been. They've been lower, but rarely, and there's a lot of other reasons why saving rates are down, but that's the principal way so far. They haven't cut back on their spending, but I suspect if the war continues on and the costs continue to amount, that's what they'll be doing. They'll have to pull back on their spending.
MARTÍNEZ: Mark Zandi, chief economist of Moody's Analytics, Mark, thanks.
ZANDI: Thank you.
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