Scott Bessent is ‘sick of hearing about’ the K-shaped economy and declares it’s over—but the data would beg to disagree

**Treasury Secretary Declares End of K-Shaped Economy, But Data Tells a Different Story**

The K-shaped economy, a phenomenon where the wealthy have continued to thrive while the lower-income households struggle to keep up, has been a topic of concern for economists and policymakers alike. However, Treasury Secretary Scott Bessent has made a bold claim, stating that the K-shaped economy is officially over. In a recent CNBC interview, Bessent declared that the economy has shifted to a C-shaped model, where the lower end of wage earners are finally seeing a comeback. But is this a cause for celebration, or just a premature declaration?

Background & Context

The K-shaped economy has been a persistent issue in the United States, with the wealthiest households experiencing significant gains in income and wealth, while the lower-income households have struggled to keep up. This has led to concerns about income inequality and the overall health of the economy. The One Big Beautiful Bill Act, a comprehensive tax reform package signed into law last year, aimed to address some of these issues by providing tax relief to middle- and low-income households.

However, the impact of this bill on the economy has been a subject of debate. While some have argued that it has helped to boost household finances, others have pointed out that its effects have been largely offset by other economic factors, such as the Iran war's impact on gasoline prices.

Key Details

According to Bessent, the lower end of wage earners have seen a 2% real wage gain, which he attributes to the positive effects of the One Big Beautiful Bill Act. The act provided tax relief to households earning between $15,000 and $80,000, with an average tax cut of 15%. Additionally, the bill promised to increase tipped and overtime workers' take-home pay by $1,500 a year, and has reportedly increased after-tax income for a typical two-child family by $7,600 to $10,900.

However, not all data supports Bessent's claims. The Federal Reserve Bank of Atlanta evaluates a 12-month moving average of wage growth by income quartile on an hourly basis. Its June update found that the lowest quartile of wage distribution saw growth of 3.6%, while the top 25% of earners saw growth of 3.9%. At no point in 2026 has median wage growth for the bottom percentile of earners exceeded the growth rate of the top percentile.

What Experts Say

While Bessent's claims may be encouraging, they are not universally accepted. Bank of America's chief U.S. economist, Aditya Bhave, has observed that some elements of the K-shaped economy are beginning to close. In a note last week, Bhave wrote that consumer spending (excluding gas) has ceased to be K-shaped on a year-over-year basis. However, this trend may be due to a combination of factors, including stronger job growth, lower tax withholding, and the base effect of the gap opening up in June last year.

Broader data does not yet fully support Bessent's theory. The Iran war's impact on gasoline prices has almost entirely canceled out the promised windfall from the One Big Beautiful Bill Act, according to Goldman Sachs and Morgan Stanley. Additionally, wage growth by income percentile data does not suggest that the K-shaped economy has ended.

Key Takeaways

• The Treasury Secretary has declared the end of the K-shaped economy, citing the positive effects of the One Big Beautiful Bill Act.
• However, the data does not yet fully support this claim, with wage growth by income percentile data showing little change in the gap between the wealthy and the lower-income households.
• The One Big Beautiful Bill Act has had a mixed impact on the economy, with some households benefiting from tax relief, while others have been offset by the Iran war's impact on gasoline prices.
• Further analysis is needed to determine the full effects of the One Big Beautiful Bill Act and the impact of the K-shaped economy on the overall health of the economy.

What This Means For You

While the debate over the K-shaped economy may seem abstract, its impact on your daily life is very real. If the economy continues to shift towards a more equal distribution of wealth, you may see benefits such as increased consumer spending, higher wages, and greater economic stability. However, if the K-shaped economy persists, you may continue to see income inequality and a widening gap between the wealthy and the lower-income households.

As a consumer, it's essential to stay informed about the economy and its impact on your finances. By staying up-to-date with the latest developments and trends, you can make informed decisions about your money and your future. So, what does the future hold for the K-shaped economy? Only time will tell.