K-Shaped Economy Remains Divided, Despite Treasury Secretary's Claim

Robert Reich recently responded to Treasury Secretary Scott Bessent's claim that the K-shaped economy is 'dead.' According to Reich, this assessment is incorrect and the economy remains divided between high- and low-income households. He pointed out that lower-income workers continue to struggle with stagnant wages and inflation, while high-income workers benefit from the wealth effects of the stock market.

Reich cited various examples, including sales data from McDonald's, which showed a double-digit decline in customers among lower- and middle-income households. He also referenced quarterly earnings calls by major retailers like Walmart and Target, where CEOs noted the growing divide between high- and low-income consumers. The Federal Reserve Bank of Kansas City's analysis confirmed this trend, showing that households with high incomes increased their spending substantially faster than those with low incomes.

Reich emphasized that widening inequalities are partly due to policies pursued by Bessent and his boss in the Oval Office, including tariffs and a war in Iran, which have pushed prices upward and imposed a greater burden on lower-income Americans. He also highlighted that the richest 10% of American earners drive a record 49.7% of total U.S. consumer spending.