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working class
Trump's Tariffs Ended Up Being Yet Another Regressive Tax on the Working Class
In other words, working Americans, who make up most of the nation’s consumers, paid for checks that are now being written to corporations and that will enrich their (mostly wealthy) shareholders. Trump’s tariffs have played out as a straightforward redistribution of income from ordinary Americans to corporations, much like the two other major tax cuts he’s pushed through as president.
Of course, this is not how Trump marketed his trade policies.
Because he chose instead to levy these tariffs using authority the law simply doesn’t give him, the Trump tariff experiment now amounts to a multibillion-dollar transfer of cash from working families to shareholders.
The administration promised, at various points, that the new tariff revenue would be enough to replace the entire federal income tax, boost military spending by 50%, pay a $2,000 dividend to every American, and somehow simultaneously reduce the national debt.
The court’s February decision ruled that the tariffs—imposed by Trump under the International Emergency Economic Powers Act (IEEPA)—were illegal and must be refunded to the companies that had initially paid them. This was no surprise—the IEEPA was enacted in 1977 to restrict presidential power, not expand it. The decision meant that fully $166 billion, well over half of the additional tariffs collected to date by the Trump administration, must be refunded.
For the millions of Americans who saw the prices of almost everything they buy increased by tariffs, the obvious question was how—if at all—these companies would pass through their tariff refunds to consumers. But as a series of corporate earnings calls have made clear over the past several weeks, in general these corporations are treating the tariff refunds—which often come with interest paid on top—not as something they should duly pass on to consumers, but a way of padding their bottom line. And this is true even of companies that acknowledged raising prices last year to offset the tariffs.
For example, in an earnings call back in summer 2025, a Nike executive estimated the company would see a tariff impact of around $1 billion, and announced that it “intend[s] to fully mitigate the impact” of the tariffs with a series of steps including “surgical price increase in the United States.” The $5 to $10 price increases introduced by the company that summer were transparently Nike’s “surgical” way of passing the buck to consumers.
Yet when Nike announced earlier this summer that it would see close to a $1 billion tariff refund, company officials simply noted that this “unplanned benefit” would boost the company’s earnings for the quarter. As a result, consumers have filed a class-action suit against Nike for extracting a double benefit from the Trump tariffs—first boosting shoe prices to offset the cost of the tariffs and then pocketing the tariff refunds.
Some companies claim that part of their refunds will lower prices for consumers going forward, but this is meaningless spin that is divorced from how prices are set. Receiving unexpected cash from the government does not create an incentive for a company to charge customers less for its products than the market will bear. But several corporations are making this claim to distract the public from their windfall.
For example, Dollar Tree recently reported it will receive $383 million in tariff refunds and said that $22 million of that $383 million in refunds will go toward “higher markdowns… related to our tariff reinvestment initiative.” While some of the remaining refund will go toward “customer messaging and marketing, and incremental improvements in store conditions and operations,” Dollar Tree has not said how much more it will devote to price markdowns. But the company’s leaders were far less squishy about announcing a $605 million stock buyback for the quarter—more than 27 times the $22 million it recorded for tariff-related markdowns.
Other big companies have vaguely promised that consumers will benefit from the giant refund checks without saying how much. Walmart says it is using refunds to support “price leadership.” Target says it will “invest in price.” Lowe’s initially promised “customer-facing actions” that will “reinforce our value proposition,” although the company subsequently pivoted toward saying its leaders “feel strongly that we want to deliver strong profitability for our shareholders.” But none have said what share of their tariff refund will actually make its way back to consumers. Levi Strauss, having previously admitted it would be taking “thoughtful, targeted pricing actions” in response to the tariffs, tops them all by saying of its $80 million tariff refund windfall only that “we haven’t figured out what to do with it.” (Levi Strauss now also faces a proposed class-action suit for not returning tariffs to consumers.)
Some companies aren’t even bothering to pretend they’re interested in offering relief to their customers. Shoe maker Steve Madden, which previously acknowledged “adjusting pricing” in response to the tariffs and subsequently noted it was “pleased overall with consumer acceptance of the price increases,” now says it will use its $92 million in tariff refunds to “pay down debt.”
This unmistakable shift of cash away from consumers and into the pockets of corporations and their shareholders is, on one level, not the companies’ fault. Once companies incorporated their tariffs into price increases across all the items they sell, there was no practical way to identify exactly which consumers bore which portion of those tariffs, or to reverse those price increases dollar for dollar: That egg can’t be unscrambled.
The ultimate responsibility for this regressive tax shift falls on the Trump administration, which chose to impose these tariffs unilaterally, without seeking the congressional authorization the law required. If Trump had gotten the approval he needed from Congress to levy these tariffs, this whole episode would merely have been an economically catastrophic, regressive tax hike on consumers.
But because he chose instead to levy these tariffs using authority the law simply doesn’t give him, the Trump tariff experiment now amounts to a multibillion-dollar transfer of cash from working families to shareholders. In that sense, Trump’s illegal tariffs are beginning to look a lot like his much-ballyhooed tax cuts of 2017 and 2025: Working families were promised big tax cuts, but corporations and their shareholders ultimately made out best.
Scott Bessent Is Dead Wrong on the K-Shaped Economy—And I'm Right
Last Monday, you criticized me, arguing that McDonald’s problems are instead due to competition from rivals like Burger King.
(By the way, Scott,Bill Clinton didn’t fire me and Berkeley won’t, either. But your boss has a well-recorded tendency to fire his Cabinet secretaries, so I’d be careful if I were you.)
In a recent interview on CNBC’s “Squawk Box,” you even declared that the U.S. economy is no longer in a K shape: “I got sick of hearing about this K-shaped economy. I can say here definitively, the K-shaped economy is over.”
As a former Cabinet secretary, I hope you won’t mind if I’m candid with a current one. Scott, your analysis is full of shite. It’s still a K-shaped economy.
Lower-income workers continue to struggle with stagnant wages and inflation, while high-income workers are riding high on the wealth effects of the stock market. Real wages may be growing slightly more for low income than high income, but the booming stock market is mostly benefiting the high income.
Widening inequalities are partly due to policies you and your boss in the Oval Office have been pursuing — especially your tariffs and war in Iran, both of which have been pushing prices upward and imposing a far greater burden on lower-income than high-income Americans.
July’s jobs report showed wage growth falling sharply, with average hourly earnings increasing at the slowest pace in five years — 3.2% year-over-year. Inflation, meanwhile, is not slowing. As a result, consumers’ purchasing power is falling. Prices are now rising 3.5% year-over-year, as wage growth has slowed to just 3.2% — meaning that the real earnings of Americans have been dropping since April.
And I’m not just talking about McDonald’s, Scott. When major retailers reported quarterly results in May, many noted the growing divide between high- and low-income consumers. Wealthier households continue to drive spending, while lower- and middle-income households struggle to keep up. “We certainly see with our higher-income consumers, they’re benefiting probably from the wealth effect of a buoyant stock market,” said Walmart’s CFO John David Rainey. “But with low-income consumers, they don’t necessarily get that benefit, and then it’s a little bit more of paycheck to paycheck.”
Grocery chains like Kroger are considering rolling back prices to gain market share in this K-shaped consumer environment. Target is also trying to adjust to it. We’re “expanding both low, low price points, starting at $1, all the way up to some of the new premium brands,” says Cara Sylvester, who became Target’s chief merchandising officer in mid-February.
On recent quarterly earnings calls, CEOs in grocery, outdoor apparel, and kids’ apparel noted the same K-shape pattern. Kevin Depew, deputy chief economist and industry eminence program leader at RSM, attributes what’s happening to an economy in which lower- and middle-income households face real spending pressure while upper-income consumers remain cushioned by equity gains. Home improvement retailer Home Depot notes the impact of higher fuel costs in particular. “There’s no question that the average consumer is feeling pressure from rising fuel costs,” Home Depot CFO Richard McPhail said.
Other major firms report that premium travel and high-end goods (luxury airline seats and high-tier tech products) have seen double-digit growth, while discount retailers and dollar stores report high demand for basic necessities from budget-constrained consumers.
Researchers at the Federal Reserve Bank of Kansas City confirm the same trend. After analyzing changes in consumer spending between 2021 and 2025, they found that households with high incomes (fourth and fifth quintiles) increased their spending substantially faster than did consumers with low incomes (first to third quintiles). Because inflation-adjusted wage growth for the bottom quartiles has lagged behind top earners, everyday expenses like groceries, rent, and insurance are consuming larger shares of lower-income budgets.
The Federal Reserve’s May Beige Book also reflects this K-shaped divide, noting that higher-income households have remained relatively resilient, while lower-income consumers are showing greater financial strain and increased reliance on credit.
According to Moody’s Analytics, the richest 10% of American earners — composed of households making about $250,000 a year or more — are driving a record 49.7% of total U.S. consumer spending, significantly boosting the economy through the wealth effect of higher stock and home prices. They own over 90% of the value of all shares of stock, so big gains in the stock market have encouraged them to splurge on everything from vacations to designer handbags. “The finances of the well-to-do have never been better, their spending never stronger and the economy never more dependent on that group,” says Mark Zandi, who oversaw the analysis, based on data from the Federal Reserve. Zandi says the K-shaped economy remains “firmly intact.”
All told, rich Americans have increased their spending far beyond inflation, but nobody else has. The bottom 80% of earners spent 25% more than they did four years earlier, barely outpacing price increases of 21% over that period. And they’re going into debt to do so (researchers find auto repossessions and credit card delinquencies rising among lower-to-middle-income borrowers). But the top 10% spent 58% more.
Research by U.S.Bank also shows the K-shaped economy’s divide across household balance sheets, labor market access, generational wealth-building, and sector performance. “Higher-income households are more likely to own homes, equities, and retirement assets,” says Matt Schoeppner, senior economist for U.S. Bank, “allowing them to participate more directly when financial markets and home values rise.”
Federal Reserve distributional data reveal that wealth is increasingly concentrated. As of the fourth quarter of 2025, the richest 1% of Americans held 29.2% of the nation’s aggregate wealth (up from around 20% in the early 1990s), compared with just 5.3% for the bottom half.
Meanwhile, lower- and middle-income households are struggling. “Wage gains for most have been moderating, while essential costs for rent, groceries and gasoline remain elevated,” notes Schoeppner. “At the same time, savings buffers have continued to narrow while reliance on credit — particularly credit cards — has increased.”
Scott, what more evidence do you need? If this isn’t a K-shaped economy, what is it?
The labor market further reveals the K-shape. Hiring rates have fallen to 15-year lows of around 3.2% while layoff rates remain near historically low levels of 1.1%. In this “low-hire, low-fire” environment, workers who are already employed have some stability, but job seekers and those looking to advance are in trouble.
This is significant because mobility is the major way for workers to improve earnings, move into higher-productivity roles, and build financial buffers. “When hiring slows and job-switching premiums narrow,” says Beth Ann Bovino, U.S. Bank’s chief economist, “pathways to higher pay and better job matches become more limited.”
As a result, the labor market can appear stable at the aggregate level while becoming less dynamic beneath the surface — particularly for workers in lower-wage or more cyclical industries.
I’ve got to emphasize how badly the war in Iran is aggravating this K-shaped divide. U.S. Bank’s Schoeppner notes that “the resulting higher gasoline prices … may be more of an inconvenience for higher-income households, but for those with thinner buffers, they can quickly crowd out discretionary spending.” The San Francisco Fed has similarly noted that elevated gasoline and grocery costs are consuming a larger share of household budgets among the bottom 80%.
Credit conditions reveal the same widening divide. Bovino notes that lower-income households “tend to rely more heavily on higher-cost borrowing and devote a larger share of income to debt service, leaving them more sensitive to higher rates and reduced credit availability.” Recent Beige Book commentary also points to increased reliance on credit among lower-income households. The April 2026 Senior Loan Officer Opinion Survey shows tighter lending standards across key segments, suggesting that access to financing is becoming more constrained.
Scott, it’s important that you and your colleagues at the treasury and elsewhere in the Trump administration know what’s going on. The K-shaped economy can make the macro environment appear more stable than it is actually experienced by average working Americans. The fact is, the overall health of the economy increasingly depends on a narrowing base of consumption coming from the wealthy — who are spending because their stock market assets have risen so high but will stop spending if and when the stock market comes back to earth.
Meanwhile, inflation and credit pressures continue to land especially hard on lower-income Americans. In that sense, the K-shaped economy is not just a feature of recent cycles. It’s become the defining characteristic of how today’s economy absorbs shocks and generates growth.
Go ahead, Scott — attack me with all the ad hominem arguments you want. But you need to know the reality I’m talking about. You’re the one with the power. I’m just a retired professor. Your failure to comprehend the struggles facing average working Americans makes me worry that you and your boss will continue to pursue policies that worsen them.
Best wishes, Scott.
'This Man Is So Out of Touch': Hakeem Jeffries Slammed for Opposition to Medicare for All
But pressed by Welker if he "personally" supports Medicare for All at this time, Jeffries said, "No," explaining that "it’s not legislation that I currently am co-sponsoring or that I support."
The remarks were hardly surprising, but landed hard for critics, who quickly pointed out that a new CBS/YouGov poll released Sunday showed—as survey after survey has also documented—that hunger for Medicare for All among Democratic voters is remarkably high.
As Common Dreams reported last week, a recent Yale University study found that Medicare for All, as drafted in a bill by Sen. Bernie Sanders (I-Vt.), would save over 114,000 lives annually and $1 trillion per year in US healthcare spending.
In the poll, conducted between Aug. 12-14, a full 90% of Democratic voters said they would "like to see the Democratic Party focus on plans for passing Medicare for All," compared to just 10% who said it should not be a focus.
"A reminder that the vast majority of Democrats across the country support Medicare for All," said progressive journalist Mehdi Hasan in response to Jeffries' answer on the question. "This man is so out of touch with his party. How is he their leader?"
The Lever's David Sirota also issued a rebuke, explaining that Jeffries' comments, juxtaposed with the CBS/YouGov poll, show exactly "why Democratic voters are so enraged."
Also notable from the poll were responses to two questions that preceded the question about the specific policies Democrats should focus on.
Asked if it was more important for the Democratic Party to "show they are fighting for people" or that "they have detailed policies," 83% said it was more important for Democrats to show they are fighting, while just 17% said detailed policies were more important. Similarly, when it came to economic issues, voters—by a 68% to 29% margin—said they'd prefer "big or fundamental changes in policies and approach, even if they are harder to do" compared to those who wanted "smaller or incremental changes to policies and approach, that might be easier to do."
Appearing after Jeffries on "Meet the Press," Rep. Ro Khanna (D-Calif.), a top ally of Sanders and a current co-sponsor of the Medicare for All Bill introduced earlier this year in the House, disagreed with the Minority Leader's position.
"Medicare for All is arguably the most important priority," Khanna said. "It would save money, and it would save lives. Look, there was just a Yale study that came out. It would save $1 trillion in terms of costs, in terms of health care."
Asked by Welker if he was "disappointed" in Jeffries' remarks, Khanna said that while "I respect the difference" of opinion, "I will say this: it needs to have a vote on the House floor."
"The majority of the House Democrats are going to support it," he continued. "It is one of the most important policies if you actually believe in saving lives and in helping increase wages for working-class Americans. You talk to folks, and they’ll say, 'The biggest thing that pushes me into bankruptcy is if someone gets cancer. And I can’t afford the bills.' And even people who have insurance, look at how many premiums have been increasing. This would save money for ordinary Americans. And it would increase their wages. It’s the single biggest roadblock in our economic system hurting working families."
In a social media post on Sunday, Sanders—while not mentioning the latest comments by Jeffries—said, "Our current healthcare system is broken. Progressives understand healthcare must be a human right, guaranteed to all, not a source of billions in profits for insurance and drug companies.
"A recent poll showed 64% of Americans want Medicare for All," added Sanders. "They’re right. Let’s do it."
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