Washington may be experiencing a break in its fiscal weather

After years of unrelenting deficits, Washington may be experiencing a break in its fiscal weather. Strong tax revenues mean that the 2007 shortfall between US income and spending will be the smallest it has been since 2002, according to new White House estimates. But these rays of progress may be fleeting, say some experts. Revenue growth is already slowing, and defense spending and huge entitlement programs such as Medicare continue to expand at a rapid clip. According to the Office of Management and Budget's annual mid-session review, the federal budget deficit is now predicted to come in at $205 billion for the fiscal year that ends this October.

That's $43 billion lower than last year's deficit and about half the recent peak of $413 billion, hit in 2004. In fact, it's $15 billion lower than OMB predictions of only five months ago.