The reason the 'middle class' is smaller is because more families have become "upper middle class". All the data shows this.

You can argue that housing is too much or that inflation hasn't benefited the right things, but to say that the middle class is shrining just doesn't match reality.

“Upper middle class” has nothing to do with it.

In 1950, the median household could buy a house with 2 years of income. That is, 50% of households could do this.

Today, the median house costs $400k. Only the top 12-14% of households make 200k per year.

So proportionally, the % of households that have the same buying power as a median 1950s household has shrunk roughly 4x.

The only way one can claim that the middle class isn’t shrinking is to have a floating definition of the middle class.

If you lock it in any way to something like “home ownership and simple vacations once a year” (which was absolutely possible in the 90s), it has plummeted.

The data that deflate with CPI? The metric notorious for laundering forced substitution into voluntary substitution? The American Dream is to Owner's Imputed Rent a house?

I love BLS, they do a lot of thankless work very well, but if you give someone else control of the inflation basket you are letting them pick any slope for these graphs that they want. Don't do that. It's the economic equivalent of handing your passport to an employer, talking about your net worth in public, or signing a blank check. Just don't. Yeah, we're all busy, you probably don't have time to construct a basket more sophisticated than "gold" or "housing" -- but even though those both have big problems, they still aren't as bad long-term as CPI. Or maybe you disagree and think the CPI basket and hedonic adjustment methodology compounds better for your purposes, but if so you should be able to roughly account for the dramatic difference and articulate why.