Here's the short version: Washington's most powerful budget nerds have cut their prediction for 2013 deficits by more than $200 billion. They've cut their projections for our deficits over the next decade by more than $600 billion. Add it all up and our 10-year deficits are looking downright manageable. Following are the highlights.
1) Swoosh-shaped debt.
According to the CBO, deficits over the next decade will look a bit like the Nike swoosh. They'll fall from seven percent of the economy in 2012 to 2.1 percent of the economy in 2015. That's a more than manageable debt load. In fact, that's probably too much deficit reduction, too quickly.
But then deficits will rise again. By 2023, they're back up to 3.5 percent of GDP -- not a dangerous level, but higher than is normal. That's largely the baby boomers retiring and interest rates rising, in case you were wondering.
2) Future deficits are driven by health-care costs, old people and interest payments.
Spending on Medicare and Social Security is expected to rise by 1.1 percent of GDP. That's more than all of the Affordable Care Act is expected to cost -- even though it's an entirely new program we're setting up from scratch. Interest payments are expected to rise by 1.8 percent of GDP. Pretty much everything else is falling as a percentage of the economy. This isn't the clearest graph in the world but it makes the point:
3) Sequestration is a dumb idea.
If this report clarifies anything it's that our debt problem, insofar as we have one, is a long-term problem, not a short-term problem. But sequestration disappears in 10 years. The policies in a deficit deal, by contrast, continue to grow. If you care about the long-term debt you should see a world in which sequestration replaces a debt deal to be a disaster. The calm of the Republican Party on this point either bespeaks a disinterest in debt or a misunderstanding about sequestration.
4) Obamacare has gotten a bit cheaper since it first passed.
There's been real confusion on this point as various people have misread various (confusing) CBO reports. This should clear it up: "In March 2010, CBO and JCT projected that the provisions of the ACA related to health insurance coverage would cost the federal government $759 billion during fiscal years 2014 through 2019 (which was the last year in the 10-year budget window being used at that time). The newest projections indicate that those provisions will cost $710 billion over that same period."
Here's a messy graph on the subject. The slight increase since February comes from the CBO revising up its estimate of how many states will expand Medicaid:
5) Medicare is getting cheaper, too.
"Additional data on spending in 2013 caused the CBO to reduce projected spending by about 1 percent for Medicare benefits this year and over the 2014–2023 period." Note that the February report also included a lower estimate for Medicare spending than previous reports. So it got cheaper once this year, and now it's getting cheaper again. This is the CBO beginning to believe that at least some portion of the slowdown in health-care costs is permanent.