CBO deficit projection lower, but still gloomy

The shortfall is still the second largest in more than six decades, coming in at 9.1 percent of GDP. It is exceed by last year's shortfall, which was 9.9 percent of GDP. 

The CBO prediction is also highly optimistic since it does not include the continuation of Bush-era tax cuts. Democratic leaders have vowed to extend at least some of them and not pay for their cost, which will increase the deficit in the short term. 

Senate Budget Committee Chairman Kent Conrad (D-N.D.) on Thursday said CBO's current deficit projection should sharpen lawmakers' focus on stimulating the economy while putting deficit-reduction measures in place that will kick in once the economy is back on its feet. 

"By putting these policies in place now, we will reassure the financial markets that the U.S. is addressing its long-term fiscal challenges and boost confidence in the long-term stability of the economy," he said in prepared remarks.

"I remain hopeful that the president's fiscal commission will agree on a bipartisan plan to address the projected long-term fiscal imbalance," he added. "We cannot allow partisanship and political posturing to get in the way of this vital work. The nation's economic security is dependent on our success."