Economist explains how the ‘K-shaped economy’ is impacting the midterms

WASHINGTON (Gray DC) - As voters prepare to head to the polls for the midterm elections, a conflicting economic sentiment is once again emerging on the campaign trail.

“Voters reflect the perception of the cost of living as they experienced, as opposed to what is in the data,” said Alessandro Rebucci, an economics professor at Johns Hopkins Carey Business School. “In the data, you have an economy that is very strong as a whole. How that pie is distributed affects how a large segment of the population and the voters are feeling about the economy right now.”

The contradiction has been described by many economists recently, as the “k-shaped” economy, using a graph to depict how high-income earners and asset owners are doing compared to middle and lower-income earners.

“To be concrete, the wealthiest households are presumed to spend much more than the lowest ones, not only in absolute terms, which is obvious, but also as a share of their income and in their wealth,” Rebucci said.

In recent months on the campaign trail, President Donald Trump has said that the U.S. economy is doing well, often conflicting with what recent consumer surveys have found on voters’ economic opinions.

“The economy is the greatest economy we’ve ever had, by far,” said Trump, at an Aug. 5 rally in Las Vegas.

The trend is not unusual. Each election cycle, the party in power in Washington typically proclaims that the U.S. economy is strong.

Despite the stark differences that voters appear to be thinking about this election season, Rebucci said Americans have long lived with inequality in the economy.

“This is an economy that is comfortable with inequality,” he said. “The issue is not about eliminating the inequality, but to adjust the system in such a way that we can live better with that inequality. And in particular, the most important thing that people need to be perceiving is that they’ve got a shot at being in that top 10%, top 1%.”