CBO: Middle Class Tax Relief Will Increase Deficits

CBO: Middle Class Tax Relief Will Increase Deficits


Throwing a wrench in the payroll tax cut debate, here come the Congressional Budget Office with its say in the matter: the Middle Class Tax Relief and Job Creation Act of 2011 (H.R. 3630) will increase deficits by $166.8 billion in FY2012, and $25.3 billion over the period 2012-2021. Discretionary spending is expected to decrease by $26.2 during the period 2012-2021.

Unlike Medicare or Social Security spending, discretionary spending is not determined by past legislative or executive commitments. The requirements and mechanisms for determining Medicare and Social Security payments are set out in statute.

The main and probably most contentious parts of the bill would extend a payroll tax cut to the end of 2012 while expediting construction of the Keystone XL pipeline.

The current payroll tax cut expires on December 31, 2011.

The Keystone XL pipeline would cost about $7 billion and run 2,000 miles from Canadian oil sands to refining facilities in the Houston, Texas area. The pipeline has the capacity to transport 500,000 barrels of oil a day. Because the pipeline crosses international borders, the construction would require the approval of the Obama Administration.

During a recent hearing on H.R. 3630 held by the House Committee on Rules, Rep. Shelia Jackson Lee (D-TX) testified that an estimated 160 million workers would be adversely impacted if the payroll tax cuts were not extended. She added that these workers might bear the brunt of an additional $1000 to $1600 dollars a year in taxes.

Rep. Hank Johnson (D-GA) raised concerns during the hearing about the environmental impact on minority communities in the Port Arthur, Texas area where refinement of oil would take place. Johnson noted that the transported oil would be toxic, and that it would be irresponsible to ignore the health impact on citizens. He also proposed that a study be done on the environmental impact of the project. “Air pollution knows no boundaries,” the Georgia congressman said.

Rep. Tim Scott (R-SC) gave his support to H.R. 3630 and challenged Democrats to view the bill as a plus for the middle class. Other supporters have noted that not only would the United States receive oil from a friendly nation, but the project, owned by TransCanada, would create jobs.

When he introduced H.R. 3630 last Friday, Rep. Dave Camp (R-MI) said, “This bill is about strengthening our economy and getting Americans back to work through commonsense reforms. In addition to helping create jobs, this bill will ensure America’s seniors and the disabled are protected by preventing massive cuts to doctors working in the Medicare program. This package includes many of the President’s own ideas. With its passage, Americans can be confident that these programs and provisions will be available next year, that they will not result in decades of debt and that they will be paid for with fiscally responsible reforms, not job-killing tax hikes.”

If there is a death blow to this bill, it may lie in the Senate and the White House. Senate Democrats, with their slim majority, may fail to pass this bill when it gets to the Senate floor later this week. Even if the bill passes both chambers, President Obama has threatened to veto the bill mainly because of the provision speeding up approval of the Keystone pipeline project.

Question is: how will President Obama weigh the concerns of the environmentalist portion of his base against the possibility of creating at least 25,000 jobs?


  1. Congress must establish a RULE that prevents any attachments to certain bills such as the additional unemployment compensation act, which effects 7 million unemployed Americans, who by the way will be voting next year. Hint – hint… Republicans. You are messing with Americans, who will show you their anger when they needed their governments help. Funny, how we Americans help bail out the Bankers, Auto Industry and most BIG Companies, who got us into this mess of producing constant unemployment with massive lay offs in the guise of no taxes on the wealthy rich.

  2. the social security trust fund is running out of money and instead of putting more into it you stop putting half of what was going in. then you say you are replacing that with money from the general fund. well guess what there is no money in the general fund thats why you are borrowing money. all that is going into the fund is IOU's. that means 5 years from now congress will say WE WILL HAVE TOCUT YOUR BENEFITS because the fund is broke. I dont trust you people to protect my future!!!!!