C is for C-shaped economy

When Treasury Secretary Scott Bessent told CNBC last week that "the K-shaped economy is over, and we're seeing more of a C economy," he was trying to retire a letter. The K had become a political liability—an alphabet-shaped shorthand for an economy where the rich got richer and the poor got poorer, diverging like the two arms of the letter. But what exactly is a C-shaped economy? "Like the top going down and the bottom coming up," Bessent said, before adding with a wry acknowledgment: "That's got a rather socialist whiff to it." Whether the data supports the new letter is another question entirely.

The rise and drift of the K

The K-shaped economy entered public conversation during the pandemic, when it was a reasonable description of what was actually happening. Mike Strain, an economist at the right-leaning American Enterprise Institute, says the original usage was straightforward: "The poor were getting poorer at the same time that the rich were getting richer." That divergence was real in 2020. But over the last few years, the term has drifted. "Different people are using the term in different ways," Strain notes, "and some people are using it as just another way of describing inequality, which is different than its original usage." The distinction matters: inequality can increase even when both rich and poor are improving in absolute terms