RESOLVING THE LEDGER
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0 Share Newsweek is a Trust Project member See more of our trusted coverage when you search. Prefer Newsweek on Google to see more of our trusted coverage when you search. President Donald Trump’s Treasury secretary has dismissed concerns that lower-earning Americans are being left behind by their affluent counterparts, and believes the idea of a “K-shaped” economy has largely faded thanks to the current president’s agenda.
Speaking to CNBC on Tuesday, Scott Bessent said he was “sick of hearing about this K-shaped economy.”
“I can say here definitively, the K-shaped economy is over,” Bessent continued, citing wage gains made by lower-income workers, as well as the benefits of Trump’s signature tax bill, which he said the American people would feel “over time.”
As a result, Bessent said the economy more closely resembled a “C”—"where the lower end of wage earners are finally calling it back, just like they did in President Trump’s first term”—but many economists continue to believe in a significant and growing prosperity gap between the nation’s different tiers.
Since at least last year, many economists have remarked on the apparently increasing bifurcation of the U.S. economy’s top and bottom earners—the top arm of the “K” representing higher-income households whose wealth and incomes continue to balloon, while the lower arm represents the poorer households suffering from weaker income growth and heavy price pressures.
Evidence of this has been observed in wage and wealth growth trends, as well as consumer spending . According to a report published in May by the New York Fed, retail spending growth has been kept afloat by households earning over $125,000 a year since early 2023, even as low-income households saw real spending decline for much of this period.
The bank has , in the past, acknowledg ed that the picture on wages is more mixed, however.
“Although the lowest wage quartile has experienced the lowest wage growth in the past year, we see that this has not always been the case,” it wrote in a separate analysis. “In fact, in some periods of 2023 and 2024, this group experienced the highest growth out of all the quartiles.”
And, on Tuesday, Bessent argued that the economy now more closely resembles a “C” shape, aligning himself with some notable business leaders who share this view .
In April, Hilton CEO Christopher Nassetta said observing occupancy trends in the first quarter of the year led him to forecast “improving performance in the lower and mid chain scales” through the remainder of 2026.
Nassetta went on to say that revenue per available room (RevPAR) was continuing to move downstream "from luxury properties” and instead toward “a more balanced convergence demand shape, or what I have been calling a C-shaped economy.”
However, many continue to tout the existence of a K-shaped divide in the U.S. economy.
Back in December, then-Federal Reserve Chair Jerome Powell said that the K-shaped economy was “clearly a thing” that the central bank had been able to observe in the data.
“If you listen to the earnings reports for consumer-facing companies that tend to deal with low- and moderate-income people, they’ll all say that we’re seeing people tightening their belts, changing products that they buy, buying less, and that sort of thing,” he said.
On Tuesday, Peter Orszag, CEO of the financial advisory firm Lazard, responded directly to Bessent’s comments, telling CNBC that “declaring the death of a K-shaped economy is a little bit premature.”
He noted “encouraging signs” that the economy may be moving in this direction, but said signals of weak consumer confidence pointed to a “still mixed” picture.
“The K-shaped economy remains firmly intact,” Mark Zandi, chief economist at Moody’s Analytics, posted to LinkedIn in late June. Zandi argued that the difference in spending between the top 20 percent of earners and the bottom 80 percent, as revealed in Federal Reserve data, made an “overwhelming case that the economy is K-shaped and becoming increasingly so.”
Contact Newsweek editors on this story: Ben Kelly and Gray R. Thomas
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