By Valerie Volcovici

WASHINGTON (Reuters) - Senator Bernie Sanders, a former Democratic presidential candidate, said on Thursday he will help rebuild party support outside of Washington and craft a new economic message for all Americans.

Sanders, who will become outreach chair on the Senate Democrats leadership team, will try to engage Americans who feel disconnected from the political process. Sanders is an Independent from Vermont but tends to vote with Democrats.

“The real action to transform America won’t take place on Capitol Hill, it will be in the grassroots America among millions struggling economically and young people,” Sanders said at a breakfast hosted by the Christian Science Monitor.

Democrat Charles Schumer of New York, elected the Senate's new minority leader on Wednesday, said Sanders will join his 10-member leadership team. He wants to harness Sanders' popularity with young and working class voters during the hard-fought primary battle with Democratic nominee Hillary Clinton.

Democrats are regrouping after the upset victory of Republican Donald Trump and after Republicans gained control of the Senate and House and made big gains in control of state legislatures.

Sanders, who will also become the ranking Democrat on the Senate Budget Committee, said he will make sure the panel represents the needs of working families, not billionaires.

One problem for the Democrats is while they make the point that the economy is better off today than it was eight years ago, it has not improved for the middle class for decades, he said.

"What the Democrats I think too often have ignored is that for the last forty years ... the middle class of this country has been shrinking," Sanders told the breakfast, saying that real wages have gone down while income inequality has risen.

Sanders said he supports fresh leadership for the Democratic National Committee, the party's organization and has endorsed Congressman Keith Ellison, of Minnesota, as the new leader of the party. Ellison, who is a progressive and a Muslim, reflects the diversity of the party, Sanders and other Democrats say.

Sanders also said that Hillary Clinton should play a key role. After her defeat last week, Sanders said he did not talk to her directly, only on a conference call.

"She ended up getting more votes that Mr. Trump and it goes without saying that she has a very important role to play about the future of the Democratic party," he said.

(Editing by Jeffrey Benkoe)