A surging economy and the ensuing rise in federal tax revenues could cut the US budget deficit this year, according to the Congressional Budget Office.
The US government is burdened with a massive budget deficit
It said the deficit for the year to 1 October could be as low as $300bn (£162bn), well below an earlier White House's estimate of $423bn.
The office said a "robust growth in revenues" was responsible.
In March, Federal Reserve boss Ben Bernanke said a big deficit threatened future living standards.
Cost of war
He said he was worried about the strain on federal finances as more "baby-boomer" Americans retired and started collecting social security and Medicare benefits.
But his concerns look like they could be partly relieved by a surging US economy, which grew at an annual rate of 4.8% in the first three months of 2006.
A growing economy means more revenues for the federal government.
The US budget deficit for the 2005 fiscal year was $318bn.
Billions of dollars are being spent on hurricane relief
Seven months into the 2006 financial year, the deficit is running at $183bn, $53bn lower than it was at the same period last year.
In producing its estimate, the Congressional Budget Office assumes the enactment of a spending bill for the Iraq war and hurricane relief, worth up to $109bn, and a package of tax bills costing $70bn.
Earlier in the week Congress passed the Iraq spending bill, adding $15bn to the Bush Administration's request.
And keeping spending under control will be a key task of the new Budget director Robert Portman, the former US Trade Representative whose appointment is still awaiting Congressional approval.