Federal Deficit Shrinking In 2007

The federal deficit so far this budget year is running sharply lower, driven by record revenues pouring into government coffers.

The Treasury Department reported on Friday that the government produced a deficit of $157.3 billion for the budget year that began last Oct. 1. That's a substantial improvement from the red ink figure of $239.6 billion produced for the corresponding 10-month period last year.

The lower year-to-date deficit was the result of a record of $2.12 in revenues. Spending, however, was higher — $2.27 trillion, which also marked an all-time high.

The White House predicts that the deficit this year drop to $205 billion.

But the nonpartisan Congressional Budget Office predicts the government will produce even less red ink this year. It recently said the deficit will be "toward the lower end" of a $150 billion to $200 billion range.

Democrats and the Bush administration have been at odds over the fiscal situation of the United States. Democrats believe the shrinking deficits won't last. President George W. Bush, meanwhile, has called on the Democratic-controlled Congress to show some restraint in its spending.

In a 60 Minutes, the comptroller general of the Government Accountability Office, David Walker, warned that entitlement programs such as Medicare and Social Security are making the U.S.'s current standard of living is unsustainable.

"The fact is, is that we don't face an immediate crisis. And, so people say, 'What's the problem?' The answer is, we suffer from a fiscal cancer. It is growing within us. And if we do not treat it, it could have catastrophic consequences for our country," Walker said.

"If nothing changes, the federal government's not gonna be able to do much more than pay interest on the mounting debt and some entitlement benefits. It won't have money left for anything else – national defense, homeland security, education, you name it," Walker warned.