Federal deficit now lowest in 4 years

Federal deficit now lowest in 4 years
Both spending, tax revenues climb to all-time highs

The federal budget deficit, helped by a gusher of tax revenues, fell to $247.7 billion in 2006, the smallest amount of red ink in four years.

The deficit for the budget year that ended Sept. 30 was 22 percent lower than the $318.7 billion imbalance for 2005, handing President Bush an economic bragging point as Republicans go into the final four weeks of a battle for control of Congress.

Both spending and tax revenues climbed to all-time highs. The sharp narrowing of the deficit reflected the fact that revenues climbed by 11.7 percent, outpacing the 7.3 percent increase in spending.

The 2006 deficit was far lower than the $423 billion figure the administration had projected last February and also represented an improvement from a July revised estimate of $295.8 billion.

It was the smallest deficit since a $159 billion imbalance in 2002, a shortfall that came after four straight years of budget surpluses, the longest stretch that the government had finished in seven decades.

Since that time, the government has recorded three of the biggest deficits in history in dollar terms including an all-time record of $413 billion in 2004.

The reason for the improvement this year was the big jump in revenues, propelled by strong economic strongth.

The administration credits its tax cuts for the improving economy, contending they helped the nation withstand the 2001 recession, the terrorist attacks and a wave corporate accounting scandals.

Democratic critics, however, contend that this year's improvement in the deficit will be only temporary. They contend the deficit is set to explode over the next decade as the baby boomers begin to retire and demands on Social Security and Medicare increase.