I think the thought of the middle class is shrinking isn't exactly right.  The middle class is still there but have to go through great lengths to remain there these days.  In the 50's you could be in the upper middle class on one 9 to 5 income.  These days families have two 9 to 5 incomes and some sort of supplemental income just to stay in the lower middle class.  The middle class is being strangled and if not helped soon it will not exist.

My opinion is that this came to be through higher costs of living...  Houses went up 800%(30,000 for decent house then to 240,000 for one now) in cost since the early 80's while minimum wage has gone up 400%(2.25 to 8.25 in my state) in that time.  That instantly sets you back.....  If you remember it was the Reaganites in the 80's that sold America on housing prices going up was good for you.  It was a way to remove the middle class threat while making the middle class think it was benefiting from it by hiding the debt in 2nd and 3rd mortgages and of course credit cards.   This is also where our current economic woes are stemming from... People have reached the limit on how high of a mortgage they can take out or in many cases have jumped over the limit causing all the foreclosures.   That means we can't hide the debt the reaganites dumped on the middle class.  And of course if housing increased twice as fast as paychecks that leaves the average american with 50% less money to spend on other things which means a 50% smaller economy.

this of course means that light changes in tax rates wont save anything.  What needs to be done is a housing cost correction to the tune of dropping the housing prices by at least 25%.  I would have used the bailout money to compensate everyone the difference of the new value of their house.  I then would've subsidized the cost of building materials and also put limits on how much you can charge for housing compared to the building costs so that the price of housing would stay down. 

The money given for the compensation would've been an instant boost to the economy and the housing part would ensure that the economy would still grow from there.... This would've alleviated the problems that currently plague the middel class and the economy

So how's that for back on topic..  And I'm supposed to be the Ass around here dammit.