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 This is Washington Edition, the newsletter about money, power and politics in the nation's capital. Today, US economy reporter Jonnelle Marte looks at the debate over the K-shaped economy. Sign up here. Email our editors here. Growth DriversIs US economic growth increasingly powered by spending by the rich? Or has the narrative of the so-called K-shaped economy — the much discussed concept that the wealthy are behind a greater share of spending while middle- and lower-income Americans account for a shrinking portion — been exaggerated or even completely made up? It's a wonkish debate, but the answer matters. An economy that rides on the actions of a small cohort of wealthy people is on shakier ground than one that is supported by broad-based spending. The answer also influences the goods and services companies invest in. There are political implications as well in an election year dominated by cost of living concerns among the majority of voters who aren't rich. Here's a look at what the numbers show and don't show, and the arguments on either side of the debate. Yes, Because Stock Gains Boost the Rich A key component of the K-shape argument is that booming asset prices, stocks especially, disproportionately benefit the rich people who own the majority of those investments. Recent gains have encouraged the well-off to keep spending, even as other households have been squeezed by elevated costs, economists say. …And It Shows Up in Real-Time Data Data tracking credit cards or bank accounts suggests spending by high-income households has grown faster than other groups in recent years - and the gap is widening. Figures from the Bank of America Institute, which are based on internal data, show high-income consumers have seen seeing stronger wage growth since the start of last year and their consumption is rising faster too.  No, because there's no big shift in official data Some economists say the K-shape is just not showing up in official spending data. An annual survey conducted by the Bureau of Labor Statistics, which is released with a lag, shows that the top 20% of households accounted for 40% of spending in 2024, largely unchanged from 2011. The share for the bottom 20% also held steady around 9%. …And Growth Isn't Just In Stuff Rich People Buy Other doubters of the K-shaped consumer story point out that the strongest spending growth has recently been in areas like clothing and health care, where low-income Americans account for a relatively large share of total spending. There's been subpar growth for the bigger ticket items that the rich tend to disproportionately spend on, like cars, according to an analysis by Pantheon Macroeconomics. "The conventional wisdom is not always right," the authors wrote. — Jonnelle Marte War With IranPresident Donald Trump abandoned his effort to recruit partners for the war with Iran and scolded allies who openly rejected his appeals, even as he repeated claims the conflict would end soon. Trump is desperate to reopen the Strait of Hormuz to ease a growing global energy crisis, but he won't achieve that easily without a ceasefire in the war on Iran. Iran has stepped up attacks on Saudi Arabia in recent days, signaling it's targeting the oil-rich kingdom more aggressively than earlier in the war and underscoring Iran's ability to destabilize the wider Gulf. Israel said it killed Iran's security chief, Ali Larijani, in an overnight attack, intensifying a region-wide war that shows no sign of abating well into its third week. A top US counterterrorism official and staunch MAGA Republican resigned over the war with Iran, claiming that Israel had misled Trump into believing that the regime in Tehran posed an imminent threat. Farmers, long one of Trump's most loyal constituencies, are increasingly worried by the Iran war as soaring fertilizer and fuel prices hammer them just as they are about to start planting crops for the year.  A worker delivers diesel fuel to a tractor in Manlius, Illinois. A Pakistani tanker became the latest vessel to sail out through the Strait of Hormuz by hewing closely to the Iranian coast, suggesting an approved route that points to Tehran's tightening grip on the narrow waterway. Irish Taoiseach Micheál Martin, sitting next to Trump, defended British Prime Minister Keir Starmer after the UK leader was criticized by the president for not more fully supporting the war on Iran. Don't MissChief Justice John Roberts said hostility toward individual Supreme Court members was creating a dangerous environment, in his first public comments since the president blasted justices who voted to strike down his global tariffs. Trump announced his highly anticipated summit with Chinese President Xi Jinping is being postponed, injecting uncertainty into the two countries' ongoing trade negotiations. The House Oversight Committee ordered Attorney General Pam Bondi to testify on the Justice Department's handling of the investigation and release of files related to sex trafficking by disgraced financier Jeffrey Epstein.  Attorney General Pam Bondi. Photographer: Aaron Schwartz/UPI/Bloomberg Secretary of State Marco Rubio said an initial move by Havana to open its economy to the Cuban diaspora fell short, with the island beginning to claw its way out of another national blackout amid intense US pressure. Arizona said it filed criminal charges against Kalshi for operating an illegal gambling business, in a significant escalation in the legal battles between the prediction market exchange and about a dozen states. A federal judge ordered the trio of attorneys running the US Attorney's Office in New Jersey to testify before him about their leadership structure, saying they "have lost the confidence and the trust" of the courts, lawyers and the public. The military official leading the effort to build the Golden Dome missile-defense shield put a $185 billion price tag on its first stage, a $10 billion cost increase that highlights the project's massive — and imprecise — ambitions. The Pentagon is working to develop alternatives to Anthropic artificial intelligence tools following a Trump administration decision to declare the company a supply-chain risk in a feud over safeguards for military use. Pending sales of existing homes unexpectedly rose in February for the first time in three months as buyers took advantage of lower mortgage rates and slower price growth. Trump's immigration policies are remaking US business schools with international enrollment in full-time MBA programs has experienced with a 5% drop across top-ranked institutions. Watch & ListenToday on Bloomberg Television's Balance of Power early edition at 1 p.m., hosts Joe Mathieu and Kailey Leinz interviewed Texas Republican Representative Michael McCaul about NATO rebuffing Trump's appeal for support in the in the war with Iran and sanctions on Russia.  On the program at 5 p.m., they talk with Tom Nides, former US ambassador to Israel, about the war and what may come next. On the Big Take podcast, host Sarah Holder talks with US defense and intelligence reporter Natalia Drozdiak about how Russia could benefit from the Iran War — and what it could ultimately mean for Russia's war in Ukraine. Listen on iHeart, Apple Podcasts and Spotify. Map of the Day Property taxes have skyrocketed in recent years, sharply outpacing income growth for most people. In some areas, mainly in parts of New Jersey, New York and California, the average property tax bill can surpass $2,000 a month, according to the Tax Foundation. Those taxes are the primary tool for financing local governments, including public schools. Some states are using tax relief to attract businesses and residents, and some, including Florida, are even discussing repealing property taxes. The property tax rates in Maryland and Virginia are around the middle range among all states, but given the high housing prices in the area the tax bills are is significant. — Alex Tanzi What's NextThe producer price index for February will be reported tomorrow. Factory orders in January also will be reported tomorrow. The Federal Reserve releases its decision on its benchmark interest rate at 2 p.m. tomorrow followed by a news conference with Chair Jerome Powell at 2:30 p.m. The nomination hearing for Senator Markwayne Mullin as Homeland Security secretary is scheduled for tomorrow before the Senate Homeland Security and Governmental Affairs Committee. New home sales in January will be released Thursday. Japan's Prime Minister Sanae Takaichi is scheduled to meet with Trump in Washington on Thursday. Construction spending in the US for January will be reported Monday. Import and export prices in February will be released March 25. The University of Michigan's index of consumer sentiment in March will be published March 27. Seen Elsewhere
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