Is the Middle Class Shrinking?

In order to find out if the middle class is truly shrinking or being hollowed out as some say we first need to to define the middle class.  This has been brought up recently in national politics as both Governor Romney and Obama refer to the middle class as those making "between $200,00-$250,000 and less".  Obama doesn't want to increase taxes on anyone making less then $250,000 a year.  According to the New York Times Cathrine Rampell, both candidates have been referring to the ceiling of the middle class not the midpoint.  She continues however that this is a very high ceiling.  The Census Bureau reported that the median household income was $50,000 a year.

Any definition of middle class tied to raw income levels or earning percentiles will be flawed by its failure to factor in vast geographic differences in cost of living, not to mention variations in household size and other relevant factors. As we can presume a given level of income goes further for a childless couple in Nashville than for a family of four in San Francisco.

The consensus among economist is that the simplest definition of the middle class is "not rich and not poor".  Eric at the Atlantic defined the Middle class as follows:
You should define class by the ability to pay for two new cars, a $1200 mortgage, private schools, a $3,000 health insurance deductible, and organic/sustainably produced foods. (Huh?  Organic food?  who is this guy?) Then assume that most people pay for cable and cell service. Anyone who doesn't worry about these things is above middle class. Anyone who must make trade-offs among them is in the middle. Anyone who cannot pay for any of these is poor.

Some people believe that being middle class is a state of mind and there are several surveys that go out and ask people if they believe they are in the middle class.  Apparently many who earn more then $100,000 still believe they are middle class. Much of economics is perception and I guess that can extend to peoples own perception of their economic standing.

Most people in the US refer to tax brackets to define the middle class.
Wall Street Journal Marketwatch piece simply asserted that the middle class is comprised of "the 50% of American households earning between $39,000 to $118,000." Using the Journal's calculator, that range runs from the 46th to the 84th percentile of tax filing households.  Another Wall Street Journal article defines the middle class as households with between two-thirds and double the nation’s median income.  The median income is $50,000 So let us loosely define the middle class as those earning between $35,000-$120,000.  Now back to our original question, what is happening to the middle class?

The Pew research center indicates that in 2011 the middle class shrank to 51% from 61% back in the 1970s.  The Pew research shows that the Upper crust has grown by 6% while the Lower income bracket has grown by 4%.  This sounds like reason to cheer until we consider the sheer population numbers.

Since 1971, the ranks of the upper crust have grown by 27.9 million, but the ranks of the lower-income group have grown by 34.5 million. The largest group by far, the middle class, has grown by the smallest percentage, adding just 27 million people since 1971.  (In other words, 4% of a big number is a lot more then 6% of a small number)  As pew puts it, there has been virtually equal parts movements up and down the income ladder. So there has been both progress and regression in the economic status of American families."  So the country is indeed becoming more polarized economically speaking.  I guess it is true what they say "your either moving forward or falling behind, never standing still.  So which way is your household moving?