If the current laws that govern federal taxes and spending do not change, the budget deficit will shrink this year to $642 billion, CBO estimates, the smallest shortfall since 2008. Relative to the size of the economy, the deficit this year—at 4.0 percent of gross domestic product (GDP)—will be less than half as large as the shortfall in 2009, which was 10.1 percent of GDP. [...]That's with existing law: e.g., the sequester, current tax rates, and continued falling health care costs, primarily for Medicaid. In other words, look what raising taxes can do for the deficit.
CBO’s estimate of the deficit for this year is about $200 billion below the estimate that it produced in February 2013, mostly as a result of higher-than-expected revenues and an increase in payments to the Treasury by Fannie Mae and Freddie Mac. For the 2014–2023 period, CBO now projects a cumulative deficit that is $618 billion less than it projected in February. That reduction results mostly from lower projections of spending for Social Security, Medicare, Medicaid, and interest on the public debt.
CAP's Michael Linden has a fun comparison: Today's CBO estimate puts the deficit at 2.1 percent of GDP by 2015. Simpson-Bowles called for reducing the deficit to 2.3 percent of GDP by 2015. So we got beyond their recommendation without punishing any old people or cutting taxes even more for the wealthy and corporations. Go figure. That's not to say the sequester is not hurting the population and doesn't need to be replaced. But it doesn't need to be replaced with more pain.
Also of note in the new CBO report, it projects that the Treasury's "extraordinary measures" to avoid defaulting on the federal government’s obligations if the GOP continues to take the debt ceiling hostage will expire in October or November, rather than the August-September timeframe they previously projected.
All of which makes a rather large hole in the argument that we need a grand bargain with Medicare and Social Security cuts to save the nation from the scary deficit.