The US budget deficit shrank to $319 billion last year as better economic conditions boosted tax revenues. [...]2.6% of GDP also happens to be the average deficit since Reagan took office and I think deficits at that level are no problem - in fact that may be an optimal level (though I've recently revised my estimate of the optimal level down to between one and two percent of GDP). Recovery from the hurricanes may boost the 2006 deficit but it will also likely boost growth (deficits stimulate the economy). Then, assuming Bush doesn't get us into any more wars, the troops should start coming home from Iraq, and the deficit could drop quickly in 2007 and beyond. I think it's even possible that we'll go into the 2008 campaign season with a nearly balanced budget.
The 2005 fiscal year deficit amounted to 2.6% of GDP, below the 3.6% recorded in 2004 and the post World War Two high of 6% in 1983.