Before you get the details, it's good to understand the underlying reason for the deficits projection, and for that here's Ezra Klein:
Here's the question: Do tax cuts cause deficits? If not, then there's no reason to worry about the Congressional Budget Office's revised estimate that the deficit will reach $1.5 trillion this year, not $1 trillion, as they'd predicted in 2010. The bulk of the difference, as you can see in this table, is due to the tax deal, which shaved expected revenue by about $400 billion.
Republicans, however, are caught between a rock and a hard place: They don't like deficits, but they do like tax cuts. So they've emerged with a fairly creative answer: A balanced budget amendment that caps spending at 20 percent of GDP and requires a two-thirds vote for tax increases. It's hard to imagine looking at this revised CBO estimate -- or the last decade of fiscal policymaking more generally -- and concluding that one of our major problems is that it's been too easy to raise taxes. Quite the opposite, actually. But if the 21 Senate Republican behind this proposal have their way, the Congress will adopt the two-thirds budgeting rules that have worked so well in, yes, California. Now, don't get me wrong: I'm a native Golden Stater, and I love -- and miss -- the sun and the people and the tacos. But I don't miss the dysfunctional, supermajoritarian budget process, which has sent the state to the edge of total bankruptcy, and I don't know that Washington would be wise to adopt it. Can't we just steal the warm weather, instead?
Now the details:
MSNBC: The big headline number from Wednesday’s Congressional Budget Office report is a jolting shot of bad news: a budget deficit this fiscal year of close to $1.5 trillion, or 9.8 percent of gross domestic product (GDP). More bad news: CBO’s forecasters don’t see employment returning to anything like normal before 2016.
Look inside the 190-page report … there’s data in the report that give Democrats ammunition for arguing that the tax increases that Obama called for Tuesday night on upper-income Americans must be part of any deficit solution. “To keep annual deficits and total federal debt from becoming unsustainable, lawmakers will need to increase revenues as a percentage of GDP significantly above historical levels, sharply decrease projected spending, or pursue some combination of the two approaches,” the budget office said.
Due to so many Americans not working, tax revenues have fallen. The government is forced to borrow partly because tax revenues are so low by historical standards
New revenue gained from health care law: And CBO reminds Congress that the health care law does have tax increases and new revenues in it: For example, $91 billion will be collected through 2021 from a new fee on health insurers set to begin in 2014 … And CBO does not back away from its estimate that the health care law, largely due to its cuts in future Medicare spending, will reduce future deficits.
Deficits should shrink to about 3.6 percent of GDP, starting next year and for the next several years … if Congress does three:
Allow the alternative minimum tax to bite more and more middle-class people.
Raise taxes on upper-income people by reverting to the pre-2001 income tax rates. (Obama renewed his call for the tax hike on Tuesday night.)
Curb the annual increase in Medicare’s payment rates for physicians, to bring them into line with the inflation rate in the wider economy. Again, Congress has repeatedly passed temporary “doc fix” bills to shield doctors from these cost curbs.
If Congress can’t find the will to do those three things, Elmendorf said, deficits from 2012 through 2021 would average about 6 percent of GDP