Treasury Secretary Scott Bessent wants Americans to stop worrying about the wealth gap.
On CNBC’s “Squawk Box” on Aug. 4, he said he was “sick of hearing about this K-shaped economy” and declared, “I can say here definitively, the K-shaped economy is over.”
In his telling, the country has shifted into what he called a “C-shaped economy,” where lower-wage workers are finally closing ground on wealthier households.
It’s a bold claim heading into the midterms. It’s also one that several economists say the data don’t support.
What Bessent is pointing to on the K-shaped economy
Bessent’s case rests on two pillars. First, he cited a 2% real wage gain for blue-collar workers, likely referencing a 2025 Treasury report showing blue-collar wage growth for hourly workers rose 1.7% during the first five months of President Donald Trump’s current term, the strongest such gain in nearly 60 years.
“The only other time it has been this high was during President Trump’s first term,” Bessent said, describing a C-shaped economy “where the lower end of wage earners are finally calling it back, just like they did in President Trump’s first term.”
Second, he leaned on the One Big Beautiful Bill Act, the tax package that introduced new, temporary tax deductions for workers receiving overtime pay and seniors on Social Security.
The White House has promoted the law as delivering one of the largest tax cuts in history, with an average 15% cut for households earning between $15,000 and $80,000, according to the White House.
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This framing isn’t new. At the American Bankers Association in April 2025, Bessent said “it’s Main Street’s turn,” as TheStreet reported. He has been saying versions of that ever since. The data just haven’t moved as fast as the talking points.
The Federal Reserve Bank of Atlanta’s Wage Growth Tracker, a 12-month moving average by income quartile, showed the bottom 25% of earners posting 3.6% wage growth in June, and 3.9% for the top quartile. At no point in 2026 has bottom-quartile wage growth actually overtaken the top.
Where the wage and tax numbers push back on Bessent’s claims
Moody’s chief economist Mark Zandi wrote last month that the K-shaped economy is still very much alive. His evidence: Fed data showing that households earning $200,000 or more grew their spending 6.5% in the year through Q1 2026, close to 4% in real terms, according to Fast Company.
Meanwhile, the bottom 80% spent the same as the year before, after adjusting for inflation. Same dollars. Higher prices.
The tax-cut math has also hit a wall at the gas pump. Goldman Sachs and Morgan Stanley both say the Iran conflict’s effect on fuel prices has eaten through most or all of what lower earners were supposed to gain from the One Big Beautiful Bill Act.
Goldman puts the annualized household hit at around $140 billion. That wipes out a significant chunk of the promised windfall before it reaches anyone’s wallet.
Then there’s the stock market, which has been doing a lot of the heavy lifting in this recovery. According to RSM Chief Economist Joe Brusuelas, roughly three-quarters of the spending generated by the AI-driven equity rally flows through the top income quintile.
“If we are counting on the stock market to sustain the consumer economy, we are leaning on a channel that deepens the K-shape rather than offsets it,” Brusuelas said, according to CNN.
Not every data point cuts against Bessent. Bank of America Chief U.S. Economist Aditya Bhave noted last week that consumer spending, excluding gas, had briefly stopped trending K-shaped on a year-over-year basis.
But Bhave attributed that mostly to a favorable base effect and a temporary drop in gas prices, not a structural narrowing of the gap.
Michael/Getty Images
A pattern of optimistic framing
This isn’t the first time Bessent’s public statements have run ahead of the underlying numbers.
He recently told lawmakers that the federal deficit had already fallen to 5.5% of GDP, a figure Treasury has yet to reconcile with the Congressional Budget Office, which projects a 5.8% deficit for fiscal 2026. Treasury has not publicly detailed how it arrives at the lower figure.
Even as he has talked down concerns about inflation and rates, the bond market has kept sending a different signal, with long-term Treasury yields holding well above where they started the year.
That pattern matters here. Bessent’s K-shaped declaration isn’t just a talking point. It’s meant to reassure voters and markets that the benefits of this administration’s policies are reaching everyone, not just asset holders. The data suggest that reassurance is, at best, premature.
The bottom line on the underlying economy
Blue-collar wages are up. That’s real. But real wages being up doesn’t mean the K flattened into a C. The top quartile still outpaces the bottom on wage growth. Top earners are spending more; bottom earners aren’t.
The equity rally keeps flowing to people who own equities. Bessent changed the letter of the curve, while economists say the shape is the same.
Investors watching Washington for signals on consumer strength should treat Bessent’s declaration as aspiration rather than data.
The economists tracking the actual numbers, from the Atlanta Fed to Moody’s to RSM, are telling a story that hasn’t changed nearly as much as the Treasury Secretary suggests.
Related: Scott Bessent sends strong message on oil price and Iran
