White House budget chief Jim Nussle said the federal deficit will fall to between $165 billion and $170 billion in the fiscal year that ended Sept. 30, as much as $40 billion less than the government predicted in July. It would be the smallest shortfall since 2002.

"The deficit is coming down — that's the good news," Nussle, director of the Office of Management and Budget, said in an interview. "If the economy continues to grow and we can hold the line on spending and taxes, you will continue to see that budget come down."

Nussle didn't provide details on revenue and spending estimates, saying more information would be available when the official deficit figure is released in about a week. The numbers cited by Nussle compare with the $158 billion deficit the nonpartisan Congressional Budget Office projected in August.

The deficit reached a record $413 billion in 2004.