CBO is estimating that budget defict for 2011 will be $1.3 trillion or 8.5 percent of gross domestic product (GDP).
Under CBO's baseline scenario, deficits are expected to fall to 6.2 percent of GDP in 2012 and 3.2 percent in 2013, and will average 1.2 percent of GDP from 2014 to 2021. Over the period of 2012 through 2021, deficits are expected to average 1.8 percent of GDP under the baseline scenario.
This means that the cumulative deficits between 2012 and 2021 will total $3.5 trillion -- well below the March forecast of $6.7 trillion. As a result, by the end of 2021, debt held by the public will equal 61 percent of GDP -- down from the current level of 67 percent of GDP. CBO states that about two-thirds of the reduction will arise from the enactment of the Budget Control Act.
The projected decline in deficits under the baseline scenario occurs because revenues are expected to increase, in large part due to the expiration of tax provisions enacted during the past 10 years. Under CBO’s current-law projections, revenues are expected to rise from 16.8 percent of GDP in 2012 to 20.2 percent in 2014 and to 20.9 percent in 2021.
However, if some or all of the current policies are extended, the outcome will be larger deficits and more debt. CBO writes:
"For example, if most of the provisions in the 2010 tax act that were originally enacted in 2001, 2003, 2009, and 2010 were extended (rather than allowed to expire on December 31, 2012, as scheduled); the alternative minimum tax was indexed for inflation; and cuts to Medicare’s payment rates for physicians’ services were prevented, then annual deficits from 2012 through 2021 would average 4.3 percent of GDP, compared with 1.8 percent in CBO’s baseline projections... With cumulative deficits during that decade of nearly $8.5 trillion, debt held by the public would reach 82 percent of GDP by the end of 2021, higher than in any year since 1948."
Read the CBO Report.