Johns Hopkins Professor Describes Split U.S. Economy Ahead of Midterms

Alessandro Rebucci, an economics professor at Johns Hopkins Carey Business School, is describing the U.S. economy as split, with top earners and asset owners on one path and middle- and lower-income earners on another. Economists have taken to calling this pattern a K-shaped economy, a name drawn from a graph showing two diverging lines.

Rebucci said voters judge the economy through their own bills rather than the national statistics. "Voters reflect the perception of the cost of living as they experienced, as opposed to what is in the data," he said. "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 gap shows up in spending. Rebucci said wealthier households spend a larger share of their income and wealth than the lowest earners, beyond the plain fact that their total spending is larger.

President Donald Trump has told campaign crowds the economy is performing well. At an Aug. 5 rally in Las Vegas, he said, "The economy is the greatest economy we've ever had, by far." Those statements have run against what recent consumer surveys show about how voters view their own finances.

Rebucci said the party controlling Washington usually makes the same kind of claim during an election cycle. He also said economic inequality in the United States is not new. "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%."

Voters head to the polls for the midterm elections in the coming days.