NOTE:
The paragraphs below were copied from The Motley Fool. Someone else other than I wrote it. That's as much attribution I can muster right now, so know that this is not (intentional) plagiarism.

Demographically speaking, the American middle class is responsible for the largest portion of discretionary spending and should therefore face the greatest decline in living standards. There are many poor, but their ability to decrease consumption without dying is minimal. The wealthy consume a great deal more, but their numbers are few and raising taxes isn't likely to slow their consumption much. Dividing the economic pie is a political game and there is little doubt that wealthy Republican supporters have been spared much of the pain as their people have been in control in Washington.

Meanwhile, working class and poor Americans have been taking on a disproportionate share of the pain as rising expenditures for heating, transportation, housing and debt service have cut into already tight budgets. Going forward, there is likely to be much more pain to share (especially from rising energy costs) and political change is possible if there is enough outrage over declining living standards for middle and working class families. Whether or not the political focus shifts to providing a better safety net for the poor while raising taxes on the wealthy, the continuing Middle Class Squeeze will be necessary to reduce American consumption to ecologically and financially sustainable levels.

Implications for investors
Going forward, there are certain sectors that should be avoided by prudent investors. While the broader indices have remained remarkably stable, many retail stocks have been declining since late July 2005 as retail sales have been disappointing and consumer confidence has fallen off a cliff. Service sector companies and jobs in particular are at risk because they are most dependent on discretionary spending. Housing and financial stocks have also begun breaking down and are vulnerable to bigger declines as trends accelerate, especially homebuilders and mortgage lenders who profited by taking on high levels of leverage and risk during the boom. Public utilities are vulnerable as energy costs rise if the political will shifts to shielding consumers form rising energy costs as it did in California during that state's recent energy crunch.

Lastly, most bond investments should not be considered 100% safe. Municipal bonds in particular are vulnerable as many local governments have gotten themselves deeper and deeper in debt. Even US treasuries should not be considered as the national debt has reached a point where it may be politically impossible for the government to pay it off. Not all middle class Americans have been over-consuming as badly as the average citizen, and many have saved up diligently for retirement. In recent months Asian stocks in particular have done well, and a steady shift in consumption from the US to the countries who've financed the trade gap likely means that this is an early stage of a much larger trend. It is imperative that middle class investors be aware of the evolving trends so that their retirement portfolios can provide a cushion against the ongoing Middle Class squeeze.

So is the middle class aware they've been spending too much?

Is the middle class in its entirety the 95% of Americans who think they are (incomes ranging from $20K -> $140K)?

Which will bring down the economy faster: the middle class reining (not reigning, that is synonymous with ruling) its expeditures or the current rate of government spending?

Do the middle class intentionally elect politicians and parties to give them the discretionary spending paddling and SQUEEZE ("really, I squeeze you out of love") because they secretly hate themselves?

Is 95% of the US population really the middle class? Would 95% of the US population be able to effect legislative change? What % of the middle class enjoys being squeezed?

Do people who believe in making indebtedness as excruciating as possible also believe that should also apply to the federal government when it's indebted to foreign interests?

Also, a look at July 10, 2006's G.19 Release of Consumer Credit Outstanding (billions of dollars) from the Federal Reserve indicates that total consumer credit is up to 2.1616 trillion dollars. Finance companies hold 43% more obligations than they did in 2001, commercial banks 25% and credit unions 23%.

For major types of revolving credit, all noteholders have increased the amount due to them.

For nonrevolving debt, finance companies are holding fewer securities.

Another item: whereas the overall public aren't going into debt for plasma TV screens and iPods, the Department of Homeland Security and other border protec....