April 12 (Bloomberg) -- The best thing you could say about Treasury Secretary John Snow's recent attempt to argue that income inequality is declining is that at least he put this important issue in the news.

Snow's observation that the top 5 percent of earners saw their share of the national income shrink after 2000 captured the obvious fact that high-income Americans who benefited most from the bull market of the 1990s took a hit when technology and Internet stocks plunged.

Yet any thorough look at recent trends points to an inescapable truth: So far, this has been a disappointing decade on inequality.

To see why, look at the path of inequality over the last three decades. By virtually every definition, inequality increased through the 1970s and 1980s.

Consider, for example, a wonky economic measure with a name even non-economists can love: the Gini coefficient. It measures how broadly income is spread throughout the economy. The index goes from zero to one. A one would mean a single person or family earned all the income, while a zero would mean everyone made exactly the same. So if you like to see inequality decreased, you want to see the Gini coefficient go lower.

Between 1970 and 1993, however, it rose steadily, declining in only three of 24 years.

Gains at Top

Measuring inequality by looking at the growth in incomes for the highest 20 percent of earners versus the lowest 20 percent of earners tells the same story. Between 1973 and 1993, the average family in the bottom 20 percent actually saw their inflation- adjusted income decline 9.3 percent, while those in the top 20 percent saw their income rise 39 percent. The top 5 percent saw their income increase 59 percent.

Yet something good happened in the 1990s.

Between 1993 and 2000, the bottom 20 percent saw real income gains of 24 percent. That not only was a dramatic turn-around from the previous 20 years, but a higher rate than even the highest 20 percent. And while the Gini coefficient between families didn't show a decline in inequality, from 1993 to 1999 it held steady.

Shared Growth

There were other striking signs of shared growth. The typical middle-income family saw real income growth of $8,000 between 1993 and 2000. Growth for African-American families was even higher -- $9,200, or a dramatic 33 percent gain.

The period was particularly promising because this shared prosperity came alongside rising productivity and expanding globalization.

All the more reason people on all sides of the political spectrum should be so disappointed and humbled to see everything that seemed to be going so right for most of the 1990s take a wrong turn in this decade.

Inequality as measured by the Gini coefficient increased in four of the five years from 1999 to 2004, the last year data is available.

Such a rise in inequality would certainly be less troubling if those at the bottom and middle were still seeing solid income gains. But this is far from the case.

Since 2000, income growth for the bottom 20 percent has been the weakest, while the median family has actually seen an $1,600 fall in income, adjusted for inflation.

Falling Poverty

The poverty rate fell from 15.1 percent in 1993 to a quarter-century low of 11.3 percent in 2000. Then it rose, not only during the recession in 2001, but also in each of the first three years of the recovery. Now 5 million more Americans live in poverty.

The larger economic and policy causes of this return to increasing inequality will no doubt be heavily analyzed and debated in the coming months and years. Yet there is one trend that has been unswerving and uncontroversial over each of the past several decades.

As economists such as New York Times columnist Paul Krugman have pointed out, the top 1 percent of earners, and especially the top 10th of the top 1 percent, have been on a tear in each of the past three decades -- and yes, even when they faced tax increases after the 1993 deficit reduction.

While some middle-class tax relief -- and additional temporary tax cuts to stimulate the economy after the recession of 2001 -- was warranted, it is hard to justify the enormous windfall that President George W. Bush is seeking to bestow permanently on the very Americans who have been doing so much better than 99 percent of the rest of the populace.

Striking Impact

Analysis of new Internal Revenue Service data by New York Times tax reporter David Cay Johnston found that those making $1 million a year collect 43 percent of all the new investment tax cuts. Those making more than $10 million have collected about $500,000 in tax relief -- a take he says will likely climb in the years to come.

The fiscal impact is just as striking. If the president's tax cuts are made permanent in the next decade, the top 1 percent of earners (who make about $400,000 today) will collect more than $1 trillion in new tax cuts. Those making more than $200,000 in today's dollars will take in a whopping 40 percent of all the recent tax relief during the next decade.

You might wonder about an administration that thinks reducing inequality is something to brag when it wants to make permanent tax cuts for elite earners its No. 1 economic priority.

To contact the writer of this column: Gene Sperling in Washington at gsperling@cfr.org.

Last Updated: April 12, 2006 00:08 EDT