This may be drawn out, but I don't think restoring the middle class can be summed up quickly.
I'm sure most mildly reasonable minded folk on both sides of the political spectrum can agree that most actions by government are band aids to fix symptoms as opposed to getting dirty and solving the underlying problem. Of course, underlying problems are big and hard to fix, and band aids can stem the tide in the meantime. When band aids are the only solution and the underlying problems are ignored you get what we have now - in this case a destruction of the middle class.
So what things caused the destruction of the middle class? Why do we have in wealth disparity on par with third world countries?
As I mentioned above, globalization is a factor. But unlike many of the extreme left and extreme right, I don't think protectionism is the answer. No society throughout history was prosperous for any extended period of time by walling off. Trade has always been beneficial, and if the rest of the world is doing it without us, we
will be left behind. In my illustration earlier I gave a quick and dirty run down of how globalization hurts the middle class but does not harm the elite/ruling class.
We need to globalize our economy, but we also need to employ our citizens. Think of how dumb the average person is, and then think that half of the country sits below that on the bell curve. A couple centuries ago those bottom half (*this* close to a majority BTW) could farm and make an honest living, albeit tough. A century ago those bottom half could perform factory work and make an honest living, albeit tough. Now that all that work has become automated or moved to psuedo slave labor in other countries, the bottom half are able to work simple service jobs.
Do we need 70% or so of the workforce doing service jobs? In a strict sense, no, because service jobs just move money around, they don't really create anything. But we need them because we have to have something for the bottom half (and then some) to do. While globalization has brought cheaper prices, the middle class is not better off.
http://www.youtube.com/watch?v=akVL7QY0S8A
The three biggest factors in middle class erosion are the shrinking income, exploding cost of healthcare, and debt servicing. Now those three factors tend to collide with each other in some ways, but to me they are the three most important problems.
How do you fix shrinking income? I think one of the driving factors that pushes wages down are the mega corporations. There simply isn't a true free market, or anything close, for workers seeking employment. When you have a handful of companies that employee the majority of workers in a given field/market, they can and do dictate cheaper labor.
The minimum wage has decreased with inflation in the same time frame that the middle class has seen their wages decline with inflation. A low minimum wage drags the entire middle class down. Illegal immigrant labor does the same thing as a low minimum wage, only depresses labor cost/value further because they can and do work for below minimum wage. It isn't slave labor, but it is just a slight step up. That devalues any labor going up the chain.
How do you fix healthcare costs? Universal healthcare would be the easiest way. Of course, it has to be done right. That is easier said than done as lobbyists would likely wipe their collective asses all over a good bill. Three things would make UHC better than private alternatives.
First, there is no profit. That is worth a few hundred billion a year depending on how much of the healthcare industry goes public. You pass those savings onto the public so that they can decide where that money goes. You would essentially pass the money paid by the citizens into taxes, but it would be much lower than what they pay now. If it is done right.
Second, there is a reason to push preventative care. In a for profit industry, it is "better" to treat problems instead of cure them. It is better to let someone become catastrophically sick than to have them be fit and healthy. As a society vested in UHC, we want to cure problems instead of treat them, and we certainly don't want to wait until people are catastrophically sick before giving them medical care. This is huge, because healthcare as a business by rule must be opposed to the health of its customers, because healthy customers don't make them money. The incentives are polar opposites for business and citizens.
How do you fix debt servicing? Make debt harder to obtain. Raise interest rates. This one is strongly tied into shrinking income, as it is a result. It has grown to be such a problem that it stands as its own deeply embedded issue that needs to be solved in its own right. This one is also deeply tied into Wall Street. Finance is debt creation, and finance makes up 40% of all corporate profit in the US. While some of that is money smart people use to leverage debt into profit, a considerable chunk is made up of those who use debt because they cannot afford things outright. Student loans, mortgages, cars, and of course credit cards and payday loans.
The poorest and those in the most dire of financial situations are also saddled with the most onerous interest rates. For example, I earn between 2 and 5% cashback on nearly every purchase I make. With signup bonuses, I probably pull in around 5 to 6% of the money I spend on anything other than rent as reward money. I pay no interest, and ultimately goods are cheaper for me than the purchase price. Someone who is poor, down on their luck, or just plain bad at managing money will pay more for goods and services. They pay heft interest rates and usually get hammered by late fees and overlimit fees as their paycheck to paycheck living leaves them little wiggle room. Ultimately they pay more money than the purchase price.
On a large scale, those that pay interest (including student loans and mortgages) are paying money to those that already have money and have plenty extra to invest. Like I said, finance makes up 40% of corporate profits and a ton of that money is just moving straight from the poor to the rich. Eliminate the Bush tax cuts and you don't fix that problem. Go more aggressive with pre Reagan era tax rates and you would still have debt servicing funnel vast sums of money from the poor to the rich.
So, income, healthcare and debt. Those are the big three. We can go much much deeper into each issue, and there are countless other issues that can address the destruction of the middle class, but those are the biggest to me. I'm pretty sure at this point very few people are still reading...