This century has known a startling decrease in global income inequality, bringing it back to levels not seen in well over a century.

• That's the conclusion that Branko Milanovic, one of the world's foremost inequality researchers, comes to in an important essay for Foreign Affairs, out this morning.

Why it matters: The USA has only about 4% of the world's population. Increasing equality is good for the planet as a whole, but it foreshadows an end to U.S. hegemony.

By the numbers: Inequality is measured using the Gini coefficient, which runs on a scale from 0 (perfect equality) to 100 (where one person would have all of the world's income).

• On that scale, inequality fell from 69 in 2000 to 60 in 2018 — and is almost certainly even lower today. That means the world is more equal now than at any point since about 1875.

Between the lines: The part of that number due to inequality within countries has ticked up slightly — it now stands at about 13, up from 7 in the 1990s. Conversely, the component due to inequality between countries plunged from a high of 63 in 1988 to just 47 in 2018.

• That's a complete reversal of what happened during most of the Cold War, when inequality between countries was rising but inequality within countries fell dramatically.

Be smart: What we're seeing is not just China getting richer, although that is a large part of the story.

• "In the 1970s, India's share of global GDP was less than three percent, whereas that of Germany, a major industrial power, was seven percent," notes Milanovic. "By 2021, those proportions had been swapped."

The big picture: People who are poor by U.S. and other rich countries' standards have been rich by global standards for as long as anyone can remember.

• "[T]hey are now being overtaken, in terms of their incomes, by people in Asia," writes Milanovic.
• In 2018, for every 100 Americans earning more than the median U.S. income, there were about 25 Chinese people earning that much. Within the next 20-30 years, the number of Chinese people earning more than the U.S. median will reach and then surpass the number of Americans.
• In turn, that "would reflect a wider shift of economic, technological, and even cultural power in the world," says Milanovic.

Yes, but: While the rise of Asia in general and China in particular is inexorable, the decline of global inequality is not. For the global Gini coefficient to continue to plunge, Africa would need to get substantially richer in coming decades — and "that remains unlikely," says Milanovic.

The bottom line: The countries with the richest citizens are generally the world's most powerful. That power is now more broadly distributed than at any point in over a century.

A persistent question about U.S. fiscal policy revolves around it being too loose to bring down inflation, something the International Monetary Fund has suggested.

Driving the news: At an Axios event this morning, we asked President Biden's top budget aide whether fiscal policy needed to tighten, even with spending cuts associated with the debt ceiling deal.

What they're saying: Shalanda Young, director of the White House Office of Management and Budget, answered by emphasizing one important area that the Biden administration is seeking to address: housing.

• "I never thought I'd use the word 'sticky' when it comes to inflation, but you do see that in core [inflation]," Young says. "And housing is really the driver."
• "Housing and shelter prices are too high. We've had proposals to get more supply of affordable housing. That is where we see the need to have some targeted conversations," she says.

The big picture: Economists are still debating what role the American Rescue Plan, the pandemic aid package passed in 2021, had in stoking inflation.

• Young pointed to the success of the pandemic-era recovery: "The economic scarring we saw from the financial collapse in 2008, we are not seeing that," she tells Axios.

What to watch: Young, who helped lead debt ceiling negotiations, says that brinksmanship was "bad for the U.S. economy." But she stopped short of calling for eliminating the debt ceiling.

• Even though a crisis has been averted, ratings agency Fitch warned that it could still downgrade the U.S.'s credit rating, noting the risks associated with "repeated political standoffs around the debt limit."