It’s the Ekonomy, Stupid

James Carville’s famous political slogan was “It’s the economy, stupid.”

Three decades later, the problem may be that we’re looking at the wrong economy. Or more precisely, a K-shaped economy.

Imagine nine people earning $40,000 a year and one person earning $1 million. Together, their average income is $136,000. On paper, the group looks prosperous. In reality, nine out of ten people are still making $40,000.

That arithmetic helps explain a growing disconnect in America today.

By most conventional measures, the economy is performing well. Unemployment remains relatively low. Inflation has cooled significantly from its 2022 peak. GDP continues to grow. The S&P 500 has reached record highs.

And yet many Americans feel as though they are falling behind.

Housing costs have surged. Groceries remain significantly more expensive than they were four years ago. Childcare, insurance and healthcare continue to consume a growing share of household budgets. The economy described in the headlines often feels very different from the economy experienced at the kitchen table.

Part of the explanation lies in who is driving growth.

According to Moody’s Analytics, the top 10 percent of earners now account for nearly half of all consumer spending — the highest share since records began in 1989. Their share has risen from roughly 43 percent in 2020 to 49.2 percent in 2025. Meanwhile, middle-income household spending has remained largely flat, even as prices have climbed 25 percent since 2020.

This does not mean the economy is failing. It means growth is increasingly concentrated.

The distinction matters.

Owners vs. Earners

Over the past four decades, income growth has been heavily skewed toward higher earners. According to the Peter G. Peterson Foundation, the top 20 percent of Americans saw income grow 165 percent between 1981 and 2021. For the bottom quintile, growth was 38 percent.

The divide is increasingly less about rich versus poor and more about owners versus earners.

Owners benefit from appreciating assets: stocks, real estate and business equity. Earners depend primarily on wages. When asset prices rise faster than wages, wealth compounds for one group far more quickly than for the other.

Federal Reserve data shows the top 1 percent of Americans own roughly half of all equities. Over the past decade, the S&P 500 has risen more than 260 percent. Those gains created enormous wealth. They were not distributed evenly.

The result is an economy that can appear remarkably healthy from a distance while feeling increasingly strained to the people living inside it.

The Geography of Separation

Few places make this more visible than Miami. Luxury real estate hitting record highs. Cash buyers representing more than a third of transactions. And local residents priced out of the city they built.

But Miami is not the story. It’s a symptom.

Scott Galloway, NYU professor and economist, put the larger dynamic plainly: when he was growing up, his dad’s boss had a bigger house — but they lived in the same neighborhood. That proximity is gone. The top 0.1 percent, in his words, are no longer living in America. They’re living in a reasonable facsimile of it, one where the bottom 99.9 percent have been optimized around them.

America, he argues, is becoming one giant gated community.

That is not a metaphor about real estate. It is a description of economic architecture. When the ruling class no longer shares infrastructure, schools, neighborhoods or cost-of-living pressures with the rest of the population, they lose the feedback mechanism that might otherwise motivate change. They stop feeling the problem. So the problem compounds.

The AI Accelerant

This brings us to artificial intelligence — and a question worth asking plainly.

AI may prove to be one of the most transformative technologies in human history. The potential to increase productivity, accelerate discovery and improve living standards is real.

But early evidence suggests its financial upside has accrued primarily to asset owners and investors. Oxford Economics estimates that AI-related gains have already contributed meaningfully to household wealth, with the largest benefits flowing to higher-income households — the ones who own the equities of the companies building and deploying these systems.

The people who own the tools get richer. The people displaced by the tools face a harder path.

That does not mean the outcome is predetermined. It means the window for a different outcome is narrowing. Oxford Economics projects the K-shaped dynamic will persist until 2035 as a direct consequence of how AI wealth is currently distributed.

A decade is a long time to wait for a correction.

When the Headline and the Kitchen Table Diverge

Critics of this argument will point out that unemployment remains low, wages have risen and consumer spending is resilient. Those observations are true.

But they do not contradict the broader trend. They illustrate it.

When a growing share of spending and investment gains is concentrated among a relatively small segment of the population, aggregate indicators can remain strong even as affordability worsens for the majority. The economy can grow while opportunity becomes less accessible. Both things are true at the same time. That is precisely what makes the K-shape dangerous — it is invisible in the averages.

Consumer confidence among middle-income earners has fallen to its lowest point since the peak of the 2022 inflation crisis. A majority of Gen Z believes they will be financially worse off than their parents — the first generation in modern American history to hold that expectation.

When enough people feel excluded from the prosperity being described to them, they stop trusting the institutions doing the describing. That erosion of trust is not a soft concern. It is a structural risk.

Healthy societies depend on a strong middle class: people who can afford homes, build savings, raise families and expect their children to do better. A K-shaped economy, left unchecked, hollows out that middle. And when the middle hollows out, the system that depends on it becomes fragile.

History is consistent on this point. Economic progress is most durable when it is widely shared.

That’s the economy we should be building.

The question is whether the people with the power to build it can still see the problem clearly — or whether the view from inside the gated community has become too comfortable to leave.