The US budget deficit shrank to $319bn (£180bn) last year as better economic conditions boosted tax revenues.
Despite falling from 2004's record $412bn figure, the federal deficit for the fiscal year ending last month was still the third highest on record.
US Treasury Secretary John Snow hailed the fall, which was larger than had been projected, as "encouraging news".
However, this year's deficit is likely to be swelled by $30bn of spending on post-Hurricane Katrina reconstruction.
It was good while it lasted. Which wasn't long...