George Bush
President Bush says the federal budget deficit, which has ballooned to record highs in recent years, is now shrinking because of the growth of the U.S. economy.

Mr. Bush says the federal government's finances are improving.

"The 2005 deficit is $94 billion less than previously expected. In other words, revenues are coming in greater than anticipated. It is a sign that our economy is strong. And it is a sign that our tax relief plan, our pro-growth policies are working," he said.

Previous deficit estimates had put the revenue shortfall at $427 billion for the current year, or about 3.6 percent of U.S. gross domestic product. Deficits force the government to borrow money, which can cause interest rates to rise and stifle economic growth.

Speaking with reporters after a cabinet meeting, Mr. Bush said the numbers show his administration is ahead of schedule in fulfilling a campaign pledge to cut the deficit in half by 2009. He said the trend will continue as long as Congress, which appropriates federal funds, works to contain spending.

Overall, the president said economic conditions are robust.

"The unemployment rate is down to five percent. We have created more than two million jobs this year. More Americans are working today than ever before in our nation's history," he said.

Administration officials say the improved U.S. fiscal picture validates President Bush's policies of cutting taxes to stimulate the economy. They say the strong economic performance is all the more remarkable given skyrocketing oil prices and the financial burdens of the war in Iraq.

But critics argue that the long term fiscal picture remains bleak. Federal spending continues to rise at what they consider an unsustainable pace, about seven percent a year. And the cost of caring for the nation's elderly will increase markedly in coming years as large numbers of Americans born after World War II, the so-called "baby boomers", retire and start to collect benefits. President Bush has said that reforming the Social Security system is a top priority of his second term.

The U.S. national debt stands at nearly $8 trillion, and grows with each successive yearly budget deficit.