That estimate is relative to a benchmark where all the Bush tax cuts expire and the the fiscal cliff stays in place. Technically, that’s what would happen if Congress had done nothing to avert the cliff.
But that was never a likely scenario. For one thing, most economists said that such abrupt fiscal tightening would hurt economic growth in the near term.
Plus, few expect Congress to stick to such a strict fiscal regimen anyway.
Instead, most expected Congress to largely preserve the Bush tax cuts and cancel or weaken the rest of the fiscal cliff.
Compared to that more realistic scenario, the fiscal cliff bill will actually reduce deficits somewhat — various estimates suggest by roughly $600 billion, and more with interest savings. The CBO did not offer a cost estimate for the Senate bill relative to this more realistic scenario.