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If the Economy Is Doing So Well, Why Is Everyone Pissed Off? · Common Sense - Red State Finance

• 0:00
  [upbeat music] From Red State Finance, this is Common Sense, the news, the money, and the nonsense explained for people who think. Here are your hosts, Cole and Savannah.
• 0:15
  The Treasury Secretary went on TV this week and said, and I'm quoting here, "The K-shaped economy is over." Over, like a TV show. Somebody canceled it. He says we're in a C-shaped economy now.
• 0:28
  Cole, I just paid twenty-two percent on a credit card. I don't care what letter it is. Today on Common Sense. Washington swapped out a letter of the alphabet and called it an economy.
• 0:40
  Why first class is sold out while the drive-thru is empty. The three things keeping half the country stuck on the bottom of the K. And four moves to get yourself on the right side of it. That's all coming up.
• 0:52
  Stick around. [upbeat music] All right. Welcome to Common Cents from Red State Finance. Not left. Not right. Just over it. I'm Savannah. I'm Cole. And Savannah, I need you to do something for me. Picture the letter K.
• 1:10
  Okay. I'm picturing it. Straight line up and down on the left. That's the big hit, the pandemic, the inflation spike, whatever. Then two arms come off it. One going up, one going down.
• 1:23
  The arm going up is people who own stuff: stocks, rental houses, a business. When the market's at record highs, their net worth goes up while they sleep.
• 1:33
  And the arm going down is everybody living on a paycheck: rent, groceries, gas, insurance. Most of the money's gone before it ever hits savings. That's the K-shaped economy.
• 1:44
  Economists have been talking about it for years. And this week, Treasury Secretary Scott Bessent went on CNBC and basically said, "I'm tired of hearing about it."
• 1:54
  His words, "I got sick of hearing about this K-shaped economy." And then, "I can say here definitively the K-shaped economy is over." Definitively. Love the confidence.
• 2:06
  And now it's a C, a phrase he borrowed from the CEO of Hilton Hotels. The hotel guy. The guy selling five hundred dollar suites is gonna explain my grocery bill to me. Okay. To be fair, what's his actual argument?
• 2:21
  Because I wanna give him a real shot. Fair. His argument is that wages at the bottom have been growing faster than wages at the top.
• 2:29
  And he says the tax changes in the one big beautiful bill, like the overtime and social security deductions, are lifting that bottom arm up. So the bottom curls up, and you get a C. That's the pitch.
• 2:41
  And is that true, the wage part? For some stretches, low-wage hourly pay did grow faster in percentage terms. That part's real. But? But percentages are sneaky.
• 2:53
  A three percent raise on fifteen bucks an hour is forty-five cents. A three percent raise on a three hundred thousand dollar salary is nine grand. Same percent, very different Christmas.
• 3:04
  And look at what that forty-five cents is up against. Home insurance, car insurance, electric bills, groceries. Some of those are up twenty, thirty percent from a few years ago. I call those the non-negotiables.
• 3:18
  You can't skip your electric bill. You can't tell your insurance company, "I'm gonna sit this month out." So when a raise doesn't cover the stuff you can't cut, you didn't catch up.
• 3:27
  You just slowed down how fast you're falling behind. And economists like Mark Zandi over at Moody's have been pointing at that exact gap for years. [upbeat music] Okay. You want proof that K is alive?
• 3:41
  Don't listen to Washington. Listen to corporate America on their earnings calls. Oh, I love this part. Delta and Hilton keep saying the same thing. Their high income customers are still booking.
• 3:53
  First class, premium seats, nice hotels, not slowing down. Meanwhile, fast food chains are saying the opposite. Lower income customers are coming in less.
• 4:03
  Because a family of four at a drive-thru is pushing fifty bucks now. For burgers. Fifty dollars for burgers that came out of a bag.
• 4:11
  And the dollar stores and discount chains are doing great because everybody's trading down. So same week, same economy. First class is full, and the drive-thru is empty. That's not a C, Cole. That's a K in a nice outfit.
• 4:25
  And here's the number that ties it together. Moody's estimates the top ten percent of earners now account for about half of all consumer spending in America. Half? Ten percent of people? Half.
• 4:38
  So when you hear consumer spending is strong, a lot of that is the top arm of the K doing the shopping.
• 4:44
  And the Federal Reserve's own wealth data, the top one percent owns about thirty-one percent of all the wealth in the country. The bottom half of the country, about two and a half percent. Combined. Combined.
• 4:57
  Half of America, two and a half percent of the pie. So why is it stuck? I've got three reasons, and none of them are about which letter you pick. Hit me. Number one, interest rates.
• 5:10
  If you're carrying debt, high rates are brutal. Credit cards around twenty-two percent, mortgages around seven, car loans through the roof. And if you've got a pile of cash? Those same high rates pay you.
• 5:23
  Money market funds have been paying around four, five percent, basically risk-free. So the same rate that's crushing the guy with a credit card balance is paying the guy with cash. Money moves from borrowers to savers.
• 5:37
  And guess which arm of the K has the savings? Number two is mine, the non-negotiables again. If you're living paycheck to paycheck, food, rent, utilities, and insurance eat almost everything.
• 5:49
  When they go up, there's nowhere to cut. And if you make a lot more? Those same bills are a small slice of your income. Groceries up thirty percent is annoying. It's not a crisis.
• 6:01
  Number three, housing If you bought a house years ago at 3%, congratulations. You're sitting on a pile of equity. And if you're a young family trying to buy right now? Higher prices plus 7% rates. It's a wall.
• 6:15
  On one side, owners. On the other side, people who might rent forever. That one makes me mad because that's the actual American dream. Not a stock portfolio, a house. Okay, before I get worked up, quick break.
• 6:30
  If this show's helping you out, the Red State Finance shop has our Not Left, Not Right, Just Over It tee. Links in the show notes. He wears it to the grocery store as a protest. It's a very effective protest. It is not.
• 6:45
  [upbeat music] All right. Fact or fairy tale? The claim, straight from the Treasury Secretary, the K-shaped economy is over. Okay. Let's be fair to him. Is any part of it true?
• 7:00
  Some hourly wages at the bottom did grow fast for a while, and the overtime and tip deductions are real money for some workers. Okay, that's real. Now the other side.
• 7:10
  The top 1% still holds more than 10 times the wealth of the entire bottom half of the country. Spending is still mostly coming from the top, and the stuff working families can't skip is still way up.
• 7:22
  If anything, it's a tilted K. The top keeps climbing, and the bottom is just trying to move forward at all. So, verdict? Fairy tale. And look, this isn't a one party thing. Every administration does this.
• 7:36
  When it's your guy, the economy's amazing. When it's the other guy, it's a disaster. Not left, not right. Just over it. Changing the letter doesn't change your grocery bill. [upbeat music] Okay. Kitchen table takeaway.
• 7:52
  How do you get onto the top arm, or at least stop sliding down the bottom one? Four moves. Number one, do your own audit. Forget what anybody on TV says. Add up the stuff you can't skip: housing, food, energy, insurance.
• 8:08
  And if that's eating 70, 80% of your take home? Then something has to change, and it's better to find out on paper than at the checkout line. Number two, kill high interest debt first.
• 8:20
  22% on a credit card is a house fire. You can't build anything while you're paying a bank that much. Number three, turn some of your paycheck into stuff you own.
• 8:30
  That's the whole difference between the two arms, owners and earners. Even 50 or 100 bucks a month. Index funds, a retirement account, whatever fits. Automate it, so you don't have to think about it.
• 8:43
  And number four, don't let your emergency funds sit in a checking account earning basically nothing. High yield savings or short-term treasury bills have been paying around 4 to 5%.
• 8:54
  Check the fees, shop around, and talk to somebody you trust. Not financial advice, just common sense. That's the show, Savannah. That's the show.
• 9:04
  And if you want the numbers behind today, there's a guide for that in the vault. Our digital library. It's called The Greatest Economic Lies Americans Are Told.
• 9:13
  Like the average retirement account that sounds great until you see what the typical person actually has. 14 of those. Five bucks. Cheaper than a combo meal now. Way cheaper.
• 9:25
  Plus, the free newsletter every Sunday goes deeper on all of it, with every source. Links are in the description. Go read it. She checks. I do check. I'm Savannah. I'm Cole. Stay sharp. And stay over it.
• 9:38
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• 9:49
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• 9:58
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