3 weeks ago
Is the K-shaped US economy dead? Bessent, Reich clash
The K-shaped economy is an idea about how money is shared in America.
It gets its name from the letter K. The line going up shows richer people getting more money.
The line going down shows poorer people having a harder time.
Two experts disagree about whether this is still happening.
Scott Bessent works for the government and says the gap is getting smaller.
He says lower-paid workers are earning more money now.
Robert Reich is an economist who disagrees.
He says poorer families still can't buy as much, like fast food.
Other economists say the gap is still there too.
Treasury Secretary Scott Bessent said the K-shaped economy is over and a "C-economy" is emerging, with lower-income workers beginning to regain ground.
Economist Robert Reich called the claim "hogwash," saying the K-shaped economy is "very much alive" and even CEOs are admitting it is a problem.
Reich cited McDonald's earnings, noting fast-food chains saw a double-digit decline in visits from lower- and middle-income customers in the first quarter of 2025.
Bessent cited Bureau of Labor Statistics data showing weekly earnings for full-time workers at the 25th percentile rose 5.5% from a year earlier in the second quarter.
Moody's Analytics' Mark Zandi said the K-shaped economy remains "firmly intact," while National Retail Federation's Mark Matthews said the K-shape persists but lower-income consumers have increased their spending versus last year.
- Who
- Treasury Secretary Scott Bessent, economist Robert Reich, and economists Mark Zandi of Moody's Analytics and Mark Matthews of the National Retail Federation
- What
- A dispute over whether the US "K-shaped economy" — a widening gap between higher- and lower-income Americans — is ending
- Where
- United States
- When
- Bessent spoke last week; McDonald's customer data is from the first quarter of 2025; Zandi's comments were made in June
- Why
- Because officials and economists disagree over whether wage growth is lifting lower-income workers or whether their buying power remains weak amid inflation
Bessent / Treasury View
Reich / Critics' View
Is the K-shaped economy over?
Bessent / Treasury View
Bessent says the K-shaped economy is over and a "C-economy" is emerging, with lower-income workers "finally clawing it back" through faster wage growth, including policies such as eliminating taxes on tips.
Reich / Critics' View
Reich calls that "hogwash," saying the K-shaped economy is very much alive, even CEOs are admitting it is a problem, and stagnant wages and inflation are weakening lower-income households' buying power.
Consumer spending strength
Bessent / Treasury View
Bessent cites 5.5% growth in 25th-percentile weekly earnings; NRF's Matthews says lower-income consumers have increased spending versus last year, with discretionary spending growing faster than staples among most bottom spending groups.
Reich / Critics' View
Reich points to McDonald's earnings showing a double-digit decline in visits from lower- and middle-income customers in Q1 2025, warning that this threatens the 70% of the US economy that depends on consumer spending.
Key facts
- K-shaped economy
- A widening gap between higher- and lower-income Americans in income, spending and wealth
- 25th-percentile weekly earnings growth
- +5.5% year-over-year in the second quarter
- Consumer Price Index (CPI)
- +3.9% over the same period
- Consumer spending share of US economy
- 70%
- McDonald's customer visits (Q1 2025)
- Double-digit decline among lower- and middle-income customers
- Zandi's top-income group
- Top 20% of earners making more than $175,000
- Reich's two-tier threshold
- Consumers earning more than $100,000 in a stronger position
Quotes
Robert Reich
American economist and former labor secretary
“"K-shaped economy very much alive" – he said, "Hogwash. Not only is the K-shaped economy very much alive, but even CEOs are also admitting it's a problem."”
livemint.com
Sources
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