File:CBO Budget Deficit Assuming Continuation of Policies.png

Chart Explanation
This is a CBO chart taken verbatim from "An Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022" from August 2012.

CBO baseline assumes certain tax cuts and spending will expire per current law, which significantly reduces future budget deficits. The baseline assumes the Bush tax cuts of 2001 and 2003 (extended by President Obama in 2009) will expire at the end of 2012 as scheduled, along with other Obama tax cuts in 2009 and 2010. If these tax cuts are extended and spending continued, the budget deficit is considerably higher, by 3.5% GDP in 2021 for example.

However, CBO has reported it unlikely that the baseline scenario will come to pass, as Congress has consistently voted to extend the tax cuts and defer spending reduction.

Specifically, allowing laws on the books in 2011 to take effect would reduce future debts by up to $7.1 trillion over a decade:
 * $3.3T from letting temporary income and estate tax cuts enacted in 2001, 2003, 2009, and 2010 expire on schedule at the end of 2012;
 * $1.2T from letting the sequestration of spending required if the Joint Committee does not produce $1.2 trillion in deficit reduction take effect (i.e., implementing the Budget Control Act of 2011);
 * $0.8T other temporary tax cut expirations (the “extenders” that Congress has regularly extended on a “temporary” basis) expire on schedule;
 * $0.3T from letting cuts in Medicare physician reimbursements scheduled under current law (required under the Medicare Sustainable Growth Rate formula enacted in 1997, but which have been postponed since 2003) take effect (i.e., no longer applying the Doc fix);
 * $0.7T from letting the temporary increase in the exemption amount under the Alternative Minimum Tax expire, thereby returning the exemption to the level in effect in 2001;
 * $0.9T in lower interest payments on the debt as a result of the deficit reduction achieved from not extending these current policies.