Dear Scott (if I may).

I’ve argued that the K-shaped economy — a term used to describe growing inequality between high- and low-income households — can be seen in sales of McDonald’s burgers, whose lower- and middle-income customers fell by double digits in the first quarter of 2025 as they struggled with affordability.

Last Monday, you criticized me, arguing that McDonald’s problems are instead due to competition from rivals like Burger King.

(By the way, Scott,Bill Clinton didn’t fire me and Berkeley won’t, either. But your boss has a well-recorded tendency to fire his Cabinet secretaries, so I’d be careful if I were you.)

In a recent interview on CNBC’s “Squawk Box,” you even declared that the U.S. economy is no longer in a K shape: “I got sick of hearing about this K-shaped economy. I can say here definitively, the K-shaped economy is over.”

As a former Cabinet secretary, I hope you won’t mind if I’m candid with a current one. Scott, your analysis is full of shite. It’s still a K-shaped economy.

Lower-income workers continue to struggle with stagnant wages and inflation, while high-income workers are riding high on the wealth effects of the stock market. Real wages may be growing slightly more for low income than high income, but the booming stock market is mostly benefiting the high income.

Widening inequalities are partly due to policies you and your boss in the Oval Office have been pursuing — especially your tariffs and war in Iran, both of which have been pushing prices upward and imposing a far greater burden on lower-income than high-income Americans.

July’s jobs report showed wage growth falling sharply, with average hourly earnings increasing at the slowest pace in five years — 3.2% year-over-year. Inflation, meanwhile, is not slowing. As a result, consumers’ purchasing power is falling. Prices are now rising 3.5% year-over-year, as wage growth has slowed to just 3.2% — meaning that the real earnings of Americans have been dropping since April.

And I’m not just talking about McDonald’s, Scott. When major retailers reported quarterly results in May, many noted the growing divide between high- and low-income consumers. Wealthier households continue to drive spending, while lower- and middle-income households struggle to keep up. “We certainly see with our higher-income consumers, they’re benefiting probably from the wealth effect of a buoyant stock market,” said Walmart’s CFO John David Rainey. “But with low-income consumers, they don’t necessarily get that benefit, and then it’s a little bit more of paycheck to paycheck.”

Grocery chains like Kroger are considering rolling back prices to gain market share in this K-shaped consumer environment. Target is also trying to adjust to it. We’re “expanding both low, low price points, starting at $1, all the way up to some of the new premium brands,” says Cara Sylvester, who became Target’s chief merchandising officer in mid-February.

On recent quarterly earnings calls, CEOs in grocery, outdoor apparel, and kids’ apparel noted the same K-shape pattern. Kevin Depew, deputy chief economist and industry eminence program leader at RSM, attributes what’s happening to an economy in which lower- and middle-income households face real spending pressure while upper-income consumers remain cushioned by equity gains. Home improvement retailer Home Depot notes the impact of higher fuel costs in particular. “There’s no question that the average consumer is feeling pressure from rising fuel costs,” Home Depot CFO Richard McPhail said.

Other major firms report that premium travel and high-end goods (luxury airline seats and high-tier tech products) have seen double-digit growth, while discount retailers and dollar stores report high demand for basic necessities from budget-constrained consumers.

Researchers at the Federal Reserve Bank of Kansas City confirm the same trend. After analyzing changes in consumer spending between 2021 and 2025, they found that households with high incomes (fourth and fifth quintiles) increased their spending substantially faster than did consumers with low incomes (first to third quintiles). Because inflation-adjusted wage growth for the bottom quartiles has lagged behind top earners, everyday expenses like groceries, rent, and insurance are consuming larger shares of lower-income budgets.

The Federal Reserve’s May Beige Book also reflects this K-shaped divide, noting that higher-income households have remained relatively resilient, while lower-income consumers are showing greater financial strain and increased reliance on credit.

According to Moody’s Analytics, the richest 10% of American earners — composed of households making about $250,000 a year or more — are driving a record 49.7% of total U.S. consumer spending, significantly boosting the economy through the wealth effect of higher stock and home prices. They own over 90% of the value of all shares of stock, so big gains in the stock market........

© Common Dreams