“It’s always difficult to reduce prices after someone else has caused significant economic disruption, like President Joe Biden allegedly did,” Trump stated during a January news briefing. “We will bring prices down. I expect to see substantial price drops soon.” n nExit polls from the November 2024 election suggest many Americans responded positively to Trump’s emphasis on affordability. Data showed that voters without college degrees and those earning under $100,000 annually were more likely to support Trump, reinforcing a decade-long trend of working-class alignment with conservative politics. n nYet recent economic indicators suggest this alignment may be weakening. The concept of a K-shaped recovery—initially coined on social media during the pandemic as a satirical take on traditional recovery models—has evolved into a tangible reality, highlighting stark disparities between high- and low-income Americans. One year into Trump’s second term, confidence in both the economy and the administration has declined, particularly among those who expected relief from rising living costs. n nAlthough working-class voters helped secure Trump’s 2024 victory, their sentiment shifted in the November off-cycle elections, where Democratic candidates won every contested race. This includes moderate figures such as Mikie Sherrill and Abigail Spanberger in New Jersey and Virginia, as well as progressive mayors like Zohran Mamdani and Katie Wilson, all of whom centered their campaigns on cost-of-living concerns. n nEconomic data underscores a widening gap: lower-income workers are experiencing historically slow wage growth, while top earners see accelerating gains. According to the Federal Reserve Bank of Atlanta, wage increases for the lowest earners have dipped to a near-decade low, whereas high-income groups outpace others. Moody’s Analytics reported that in Q2 2025, the wealthiest 10% accounted for nearly half of all consumer spending. NYU economist Edward Nathan Wolff found that the top 20% of households hold approximately 93% of stock market assets. n nCorporate earnings calls in the third quarter revealed growing awareness of this economic split. Delta Airlines noted that premium and business travel demand will surpass economy seating by 2026—earlier than projected. McDonald’s CEO described a “divided consumer landscape,” with stronger traffic from wealthier customers. Meanwhile, fast-food chains thrived, while higher-end casual dining brands like Sweetgreen, Cava, and Chipotle struggled with declining same-store sales as consumers opt for cheaper alternatives. n nThe housing market, once a source of wealth accumulation during low-rate years, has stalled due to the “lock-in effect.” With mortgage rates above 6%, homeowners are reluctant to sell, freezing inventory. The average first-time buyer age reached 40 in 2025, according to the National Association of Realtors, indicating that only those with long-term savings can enter the market. n n”We’ve likely made homeownership unattainable for an entire generation,” said Sean Dobson, CEO of The Amherst Group, speaking at the ResiDay real estate conference in November. He added that many followed societal advice—pursuing education and stable careers—yet still fell short of financial stability. n nTrump’s influence on this divergence is notable. Analysts from Pantheon Macroeconomics, Samuel Tombs and Oliver Allen, argued in a September report that his tariff policies suppressed wage growth, especially in trade and transportation sectors, as firms cut labor costs to offset import taxes. n nPeter Loge, a media and public affairs professor at George Washington University and former FDA advisor, observed that Trump’s inner circle reflects a preference for elite interests. He cited Elon Musk’s role as head of the Department of Government Efficiency and the administration’s outreach to tech leaders like Larry Ellison and Sam Altman. n nThe July passage of a $4 trillion tax package, primarily benefiting corporations and high-net-worth individuals, further tilted economic gains upward. These beneficiaries often reinvest in equities, amplifying wealth concentration at the top, Loge noted. Additionally, the administration’s decision to suspend SNAP funding during a government shutdown—requiring low-income recipients to reapply—added strain on vulnerable populations, according to Agriculture Secretary Brooke Rollins. n nHowever, economists emphasize that the K-shaped trend predates Trump’s policies. The 2025 “low-hire, low-fire” labor environment, particularly affecting younger, entry-level workers, stems from post-pandemic corporate caution after over-hiring during the Great Resignation. n nConsumer sentiment now mirrors this economic split. Peter Atwater, an adjunct economics professor at William & Mary who helped popularize the K-shaped economy concept, pointed out that confidence levels differ sharply by income. University of Michigan data showed the bottom third of earners expressed far less optimism about the economy than the top third. n n”We now have a small group with absolute certainty and control, contrasted by a vast wave of despair,” Atwater told Fortune. “This emotional divide is rarely acknowledged.” n nThis sentiment aligns with Financial Times columnist Robert Armstrong’s observation that while inequality is not new, the current crisis lies in eroded expectations. “After five stagnant years, households in the lower half may now expect a dimmer future and adjust spending accordingly,” he wrote. n nPublic opinion reflects this disillusionment. A recent NBC News poll found 30% of Republicans believe Trump has failed to meet economic expectations. Two-thirds of independents blamed him for rising inflation, per an ABC News/Washington Post survey from October. CNN data shows Trump’s approval rating has dropped to its lowest since returning to office. n n”People want assurance they can cover medical bills, that their children will have better lives,” Loge said. “When citizens feel the system isn’t working, they replace those in power.” n n”Voters are signaling that Republican policies aren’t reducing costs,” Loge added. “Life feels too chaotic and expensive. They’re ready for a new approach.” n nTrump has acknowledged shifting attitudes, proposing measures like 50-year mortgages and $2,000 rebate checks funded by tariff revenues. In a Fox News interview, he admitted his party hasn’t adequately addressed affordability. n n”We’ve learned a lot,” Trump said. “Republicans don’t talk about affordability enough.” n nPaul Donovan, global chief economist at UBS Wealth Management, warned that affordability could become a persistent political and economic challenge. In his weekly analysis, he distinguished it from inflation and cost-of-living issues, framing it as a deeper emotional grievance—”I can’t afford that”—which is hard to refute. n n”People desire better lives and are frustrated when they can’t achieve them,” Donovan wrote. “Social media worsens this by showcasing idealized lifestyles just beyond reach.” n nLooking ahead, Loge cautioned against overconfidence in political predictions, noting that successful tariffs could still boost Republican support. Yet he expects difficulty for establishment figures across parties. Atwater believes the demand for affordability transcends ideology. n n”We drastically underestimate how unified the lower-income population is across party lines,” he said. “There’s shared desperation, and it fuels anti-establishment voting.” n nAs long as the wealth gap appears to widen, resentment toward the ultra-wealthy may intensify. Atwater referenced a 2011 study linking food price spikes to unrest during the Arab Spring, suggesting economic despair can trigger broader instability. n n”This is fundamentally a crisis of trust,” Atwater said. “Those best positioned to act seem indifferent—and people at the bottom notice.” n nNick Lichtenberg contributed reporting
— News Original —
K-shaped economy math shows why Trump’s base feels betrayed
“It’s always hard to bring down prices when somebody else has screwed something up like [President Joe Biden] did,” Trump said in a news conference in early January. “We’re going to have prices down. I think you’re going to see some pretty drastic price reductions.” n nAccording to exit polls from the November 2024 election, Americans resonated with Trump’s messaging around prices. Exit polls indicated a higher proportion of voters without college degrees and those making less than $100,000 per year cast their ballot for Trump, cementing a rightward shift for the working class that has been trending in that direction for about a decade. n nBut those patterns are shifting once more as emerging economic data shows that the K-shaped economy, coined on Twitter during the pandemic as a half-joking response to debates about whether the recovery would be “U” or “V” shaped, is real. One year into Trump 2.0, the notion is becoming reality of diverging fortunes for wealthy and poor Americans. It has tanked confidence in the economy—and the president who promised to solve the affordability crisis in the U.S. n nWhile a wave of working-class voters flooded the Republican party ahead of the 2024 presidential election, that same group sent a loud message in the early November off-year elections, electing Democrats in every single race in which they were running. This included moderates Mikie Sherrill and Abigail Spanberger in New Jersey and Virginia, respectively, and firebrand democratic socialist mayors in New York and Virginia: Zohran Mamdani, and Katie Wilson. Their common theme: affordability. n nEconomists have made it clear that something real is shifting: The rich are getting richer, and the poor are getting poorer. This week, Apollo chief economist Trosten Slok noted wage growth for the lowest-income Americans plummeted to its lowest in about a decade, while wage growth for the highest-income group surpassed all other income levels, citing data from the Federal Reserve Bank of Atlanta. Moody’s Analytics found last month that for the second quarter of 2025, the top 10% of households made up nearly 50% of all consumer spending. According to calculations by New York University economics professor Edward Nathan Wolff, the top 20% of America’s wealthiest households own nearly 93% of all stock. n nComments from executives in third-quarter earnings made clear that the Fortune 500 see a “bifurcated” economy. Delta seemed almost surprised at how its premium and business travel seats are due to eclipse the main cabin in 2026, a year ahead of schedule. While McDonald’s CEO talked about a “bifurcated consumer base,” with traffic growth strong among higher-income consumers. By and large, fast-food companies boomed in the quarter while higher-priced “slop bowl” chains such as Sweetgreen, Cava and Chipotle have been struggling to arrest a decline in same-store sales as consumers trade down. n nThe housing market, only in recent memory a booming segment of the economy where many locked in huge equity gains at low mortgage rates, has become nearly frozen because of the “lock-in effect.” It’s simply unaffordable to sell your house and buy another one with mortgage rates above 6%. The first-time homebuyer age hit 40 years old in 2025, according to the National Association of Realtors, revealing that only people with some degree of wealth accumulated over many years of adulthood can afford to make purchases in the housing sector. n n“We’ve probably made housing unaffordable for a whole generation of Americans,” The Amherst Group CEO Sean Dobson said at the ResiDay real-estate conference in New York in November, telling Fortune on the sidelines that people have done what they’ve been told by getting an education and good jobs “and then they didn’t get what they were promised.” n nTrump’s role in the K-shaped economy n nSome of these indicators can be traced back to Trump, who himself rode affordability concerns to a 2024 election victory that once seemed implausible. Pantheon Macroeconomics analysts Samuel Tombs and Oliver Allen said in a September research note that suppressed income growth was a result of Trump’s tariff policies, which had forced businesses to slash wages in order to preserve margins that took a hit from the import taxes. In the wake of the November elections n n“Data show wage growth has slowed more in the trade and transportation sector, and to a lower level, than any other major sector since the end of last year. Fears workers would be able to secure larger wage increases in response to the tariffs look highly unlikely to be realized,” the analysts wrote. n nPeter Loge, a professor of media and public affairs at George Washington University, who served as senior advisor to the FDA commissioner under President Barack Obama, told Fortune that Trump’s economic priorities can be ascertained by whom he surrounds himself with. n n“President Trump has installed very wealthy people with very senior positions in government, which isn’t a bad thing, but it’s limiting,” Loge told Fortune, naming in particular Elon Musk, who served as head of the Department of Government Efficiency in the administration’s first months. n nLoge said the installation of these wealthy figures, as well as the courtship of powerful tech CEOs like Larry Ellison and Sam Altman, illustrates priorities to serve these individuals. The president signed a law in July for a roughly $4 trillion package of tax cuts, primarily benefiting companies and wealthy Americans. Those wealthy individuals, in turn, pour their money into the stock market, feeding the top half of the K, Loge noted. n nThese factors are on top of the administration’s controversial decision to halt funding for SNAP benefits during the government shutdown and require millions of low-income Americans to reapply for the benefits in an effort to combat “fraud,” according to Agriculture Secretary Brooke Rollins. n nBut to be sure, the K-shaped economy has existed for decades, economists say, and other economic factors have little to do with the president’s policies. The “low-hire, low-fire” labor market of 2025, for example—which has in particular battered lower-income, entry-level workers such as Gen Z—is more a result of businesses becoming more conservative in their hiring and firing practices following a pandemic-era labor shortage and a hiring binge that may have gone too far during the so-called “Great Resignation.” n nChanging sentiments n nLower-income Americans are noting these changes, with consumer sentiment similarly diverging in a K-shape, something Peter Atwater, adjunct professor of economics at William & Mary, who popularized the term “K-shaped economy”, believes is being overlooked in the K-shaped conversation. Last month, the bottom third of income levels felt much less confident about the U.S. economy compared to the top third, according to data from the University of Michigan’s Survey of Consumers. n n“What we have today is a small group of individuals who feel intense certainty paired with relentless power control—and on the other, it is a sea of despair,” he told Fortune. “And that’s the piece that never gets talked about.” n nAtwater’s diagnosis rhymed with a Financial Times column from Robert Armstrong, of Unhedged, who wrote this week that America has always been unequal, but what makes this moment K-shaped is a loss of faith in future earnings among the lower-income cohort. “It could be,” he wrote, “that after five years of going nowhere, households in the bottom half of the wealth and income distributions have started to anticipate a bleaker future and are changing their spending habits accordingly.” n nNose-diving confidence in the U.S. economy is reflected in the attitudes of Republicans and independents who voted for Trump. About 30% of Republicans believe Trump has fallen short of their expectations regarding the economy, according to a national NBC News poll this month. Two-thirds of independents blamed Trump for increasing inflation, per an ABC News/Washington Poll poll conducted in October. CNN polling data meanwhile shows Trump’s approval rating has reached its lowest level since he took office the second time. n n“People want to know that they can afford a medical bill if they get sick, their kids will have a better future than they do, or have a chance of a better future,” Loge told Fortune. “And if voters feel like things aren’t working, they fire their politicians in charge to hire new ones.” n n“Voters are pretty well saying, ‘We don’t think whatever the Republicans are doing is making stuff less expensive. We need life to be more affordable and less chaotic. It’s pretty unavoidably chaotic. Now we’re going to bring in new people to try a new thing,’” Loge said. n nTrump has noted the changing political attitudes following the election, floating a raft of proposals aimed at easing consumers’ pain, such as a 50-year mortgage and $2,000 rebate checks coming from tariff revenue. He said in a Fox News interview earlier this month his party has not done enough to assure Americans about the state of the economy. n n“We learned a lot,” Trump said. “Republicans don’t talk about it. They don’t talk about the word affordability.” n nUBS Wealth Management’s global chief economist, Paul Donovan, warned that “affordability” may prove to be an enduring, even intractable problem in both economic and political discourse. In his weekly blog, Donovan wrote that the concept is “subtly different” from both “inflation” and from the “cost-of-living crisis.” It’s an anger about the feeling “I can’t afford that,” he added, one that could be tricky to disprove. n n“People want things (generally ‘better’ things than they currently have) and are upset that they cannot afford those things,” Donovan wrote. “This may make affordability a more enduring problem than in the past.” He added that social media “fuels resentment” about affordability, as it presents “carefully curated, idealized lifestyles” that are just out of reach to anyone with a smartphone. n nShifting political tides n nLoge hesitated to make predictions about what this changing sentiment means for upcoming elections, particularly if Trump’s tariffs are indeed successful, which could result in an outpouring of support for future Republican candidates. However, he suggested legacy or incumbent politicians from both major parties will have challenges getting elected. Atwater believes the desire—and need—for affordability transcends party lines. n n“We, particularly those on the left and the right and the establishment, woefully underappreciate how purple the bottom is,” he said. “The unified despair, the sheer desperation on both sides of the aisle, and that will continue to lead to an anti-establishment vote,” he said. n nAtwater suggested that so long as Americans perceive a broadening wealth gap, lower- and middle-income consumers will continue to harbor resentment for the ultra-wealthy that could simmer over. He cited a 2011 study from the New England Complex Systems Institute, which linked social unrest in North Africa and the Middle East during the Arab Spring of 2010 to rising food prices. n n“This is a crisis of confidence,” Atwater said. “Sadly, those who are in the best position to address it seem at best indifferent, and that does not go unnoticed by those at the bottom.” n nNick Lichtenberg contributed reporting