Obama himself later warned that an economy delivering growth without broad participation was courting instability⁵.
Donald Trump inherited a long expansion and promised disruption. What followed was volatility. Corporate tax cuts boosted profits and stock buybacks. Tariffs were imposed, threatened, reversed, expanded, and litigated. Businesses responded predictably: they delayed hiring and long-term investment. Gains flowed upward. Bargaining power stayed weak. Then COVID arrived.
The early pandemic economy was the most visibly K-shaped downturn in modern history. Professional workers logged on from home. Service workers lost jobs overnight. Equity markets surged under massive monetary support. Food bank lines stretched for miles.
And then, briefly, the fork bent.
Under Joe Biden, the federal government chose scale over caution. The American Rescue Plan delivered direct payments, enhanced unemployment benefits, expanded child tax credits, and aid to state and local governments. When the economy reopened, labor demand surged. Employers competed for workers.
In 2021 and 2022, wages at the bottom rose faster than wages at the top. Black unemployment reached record lows. Job switching accelerated. Economists documented a measurable compression of wage inequality—something many had assumed globalization had made impossible⁶.
This is the part that matters most. The K is not inevitable. It responds to policy and power.
When labor markets are tight, the K contracts. When hiring freezes replace layoffs, the K hardens. When uncertainty favors waiting over investing in workers, the upward arm keeps moving while the lower arm stalls.
That’s why Krugman’s column resonates so sharply. People aren’t angry because wealth exists. They’re angry because they’re cutting back while being told the economy is booming.
A K-shaped economy isn’t just about inequality. It’s about direction—who gains momentum and who loses it, who can plan and who simply reacts.
We’ve lived through this fork before. We’ve also lived through periods when it narrowed. The difference has never been abstract economics. It has always been whether shared recovery was treated as a goal—or whether divergence was accepted as collateral damage.
Because if the K keeps widening, it won’t remain a metaphor. History suggests it never does.
Biibliography
1. Goldin, Claudia, and Robert A. Margo. “The Great Compression: The Wage Structure in the United States at Mid-Century.” National Bureau of Economic Research, 1992. Landmark study documenting how wartime wage controls and union growth sharply reduced inequality.