During the housing bust, taxpayers were forced to bail out mortgage giants Fannie Mae and Freddie Mac. But thanks to the real estate recovery, Fannie Mae could end up paying tens of billions of dollars back to the Treasury this summer.
That's just one of the factors behind a better bottom line for the federal government. This week, the Treasury Department announced it will pay down some of its debt for the first time in six years.
Washington has been so preoccupied with warnings of exploding deficits in recent years that John Makin of the conservative American Enterprise Institute was caught off guard when he checked out the numbers.
"I'm surprised that more people who talk a lot about it haven't looked carefully at where we find ourselves," he says.
The federal deficit is shrinking rather quickly ? both in absolute dollars and as a share of the overall economy. The Congressional Budget Office projects the deficit will drop below 4 percent of GDP next year and below 2.5 percent in 2015.
Greg Valliere of Potomac Research says the improvement could come even faster, thanks to rising government tax receipts and shrinking government payouts.