In the top graph below, the dotted line represents projected revenue and the straight line projected spending (broken down by entitlement and discretionary spending, in blue) if the Bush tax cuts expire completely. Notice that, after the tax cuts expire, we get back to balance very quickly.
The bottom graph projects an alternative scenario in which most of the tax cuts are extended and a few smaller hypothetical policy changes are made. In that scenario, revenues don't ever match spending, so there would be major deficits far into the future.
In this scenario, a $700 billion difference between the Democrats' plan and the Republicans' would not make a huge dent in the deficits.
Still, the Democrats' plan is a recipe for somewhat smaller deficits. And, they predict fiscal doom if Republicans get their way and extend all the Bush tax cuts. Senate Budget Committee Chairman Kent Conrad called it "a formula for the decline of the United States."
But barring some panacea (say, from the White House's fiscal commission) we're in for yet more fighting over taxes down the line. Check out how the Center for Budget and Policy Priorities projections.
The light blue area represents the U.S. debt forecast if Congress does nothing and all the tax cuts expire. The dark blue area is the debt forecast if Republicans get their way and make the tax cuts permanent. But if Obama gets his way, we'll get something in between -- and debts will continue to rise nonetheless.
Before Obama was sworn in, the Tax Policy Center said he was too deferential to the Bush tax cuts and that his "claims of fiscal responsibility measure up only in comparison to that reckless yardstick." Something will eventually have to give.