Bessent Is 'Sick of' the K-Shaped Economy. He Just Invented a Worse Letter.

A Brief History of Economists Doing Sesame Street Impressions

Back in 2020, as the pandemic was ripping through the economy and the government was frantically shoveling stimulus money at the damage, economists started reaching for a shorthand. The one that stuck was the K-shaped economy. According to Mike Strain of the American Enterprise Institute, as NPR's Planet Money reports, the original meaning was pretty blunt: the poor were getting poorer at the same time the rich were getting richer.

For a while, federal relief programs masked how bad things actually were at the bottom. Then those programs ended. Poverty rates shot from 7.8% in 2021 to 12.4% in 2022, according to NPR. Meanwhile, government stimulus and interest rate cuts juiced the stock market, which mostly benefited the people who already owned the most stocks. The K-shape stuck because it was accurate. Rich going up, poor going down, and the divergence drawn right there in the letter.

The concept became so ubiquitous that it started getting stretched. Strain tells NPR that over time, people began using 'K-shaped' as just another synonym for inequality in general, which muddies the original meaning considerably. Inequality, he notes, can technically be widening even when both rich and poor are gaining ground in absolute terms, just at wildly different rates. The Federal Reserve has tracked this widening wealth gap more or less continuously since at least 1989. The letter changes. The chasm doesn't.

Enter: The Hotel Guy With a New Idea

Here is how the C-shaped economy was born. Christopher Nassetta, the CEO of Hilton Hotels, started talking about seeing a C-shape in the economy. His argument was that the middle class was getting squeezed. Fine. Not nothing. Except, as NPR points out, the middle class is by definition not at the bottom of the economy. It is in the middle. So the letter he was reaching for to describe economic hardship at the low end was already off by at least one rung on the ladder.

Nonetheless, Treasury Secretary Scott Bessent grabbed Nassetta's C and ran with it. Bessent announced he was 'sick of hearing about this K-shaped economy' and that the C was the more accurate frame. To be scrupulously fair, NPR notes there is at least one recent data point that looks somewhat C-shaped: after accounting for inflation, weekly earnings rose at the lower end of the wage scale and fell at the upper end. Strain also tells NPR that wage inequality between high school diploma holders and college degree holders does appear to be narrowing in recent years.

So there is a slice of real data in here. One slice. Of a very large pie.

The Part Where the Data Gets Messy

Here is the core problem that economist Claudia Sahm, of New Century Advisors, lays out in the NPR piece. When people debate K versus C, they are often not even looking at the same thing. Are we measuring wealth or income? Are we adjusting for inflation? Are we talking about wages specifically, or the whole economy, or just the bit that makes the speaker's preferred letter look right? Sahm is direct about it: 'Frankly we don't have very good data to answer this question. Because everybody's bringing their own data.'

Sahm's bigger point is that the alphabetizing game, satisfying as it is as a communications shortcut, keeps people focused on the incremental movements at the top and bottom of whatever letter they're drawing, rather than on the staggering underlying reality. That reality, per NPR: the top one percent own one third of all American wealth. The bottom fifty percent own less than three percent. That gap doesn't meaningfully shift from economic cycle to economic cycle. No letter of the alphabet is going to fix that sentence.

What Bessent Is Actually Doing Here

Scott Bessent is the Treasury Secretary of the United States. His job, among other things, is to communicate credibly about the state of the American economy. What he has chosen to do instead is borrow a letter from a hotel chain executive and deploy it to push back against a widely accepted economic concept because the widely accepted economic concept makes the current administration look bad.

This is not an economic argument. It is a branding exercise. The Trump administration has a long and well-documented history of trying to replace unflattering facts with more flattering words. 'K-shaped' implies a divergence that is happening on their watch. 'C-shaped,' in Bessent's framing, implies convergence, progress, a story where the little guy is catching up. Whether the actual data supports that story at scale is, at best, contested. At worst, it is a selective reading of one favorable wage metric in a sea of evidence pointing the other direction.