http://economix.blogs.nytimes.com/2...hrinking-budget-deficit/?partner=yahoofinance The Incredible Shrinking Budget Deficit By ANNIE LOWREY For four years, during and in the wake of the recession, the federal budget deficit ballooned to more than $1 trillion. But because of belt-tightening in Washington and a strengthening economy, it has started shrinking â and fast. The number crunchers at Goldman Sachs have lowered their estimates of the deficit both this year and next, on the back of higher-than-expected revenues and lower-than-projected spending. Analysts started the year projecting that the deficit in the current fiscal year would be about $900 billion. Earlier this year, they lowered the estimate to $850 billion. Now they have lowered it again, to $775 billion, or about 4.8 percent of economic output. âSpending in the fiscal year to date is lower than a year ago and the nominal growth rate is lower than it has been in decades,â the Goldman economists wrote in a note to clients. âRevenues have also exceeded expectations, with a 12 percent gain fiscal year to date. What is more notable is that the strength in revenues preceded the payroll tax hike at the start of the year, and the spending decline does not seem to reflect sequestration, which has just started to take effect.â To translate: the deficit could come in even smaller than currently anticipated because of spending cuts and higher tax rates. On the face of it, this sounds like something to applaud: The growing economy is bolstering tax revenue and reducing the need for spending on programs like unemployment insurance. Washington has gotten its act together. The budget is finally coming back into balance. Indeed, Goldman now expects the budget deficit to fall to just 2.7 percent of economic output by the 2015 fiscal year. Many economists consider budget deficits that small to be sustainable â particularly if the federal government is investing in public goods like schools and roads â with the accrued debt paid off by later yearsâ economic growth.