The budget deals of the past two years and a recovering economy are rapidly mopping up the tide of red ink that swept over Washington after the 2007 recession.

After four years of budget deficits in excess of $1 trillion, the nonpartisan Congressional Budget Office forecast Tuesday that this year’s deficit will plummet to $642 billion, or 4 percent of the nation’s total economic output.

That’s $200 billion lower than the CBO forecast in February. Analysts attributed the sunnier outlook to higher-than-expected tax revenue and about $95 billion in higher payments from mortgage giants Fannie Mae and Freddie Mac, which are profiting from a recovering housing market.

The forecast puts the nation on track for its smallest deficit since 2008, before the recession hit in full force. And the CBO predicts that the gap between revenue and spending will continue to shrink through 2015, when it will fall to just over 2 percent of the economy — well within the bounds of what economists consider to be economically sustainable.

Source: Washington Post | Lori Montgomery