U.S. President Barack Obama meets with lead financial regulators to discuss the economy and to receive an update on implementation of Wall Street Reform at the White House in Washington October 6, 2014. Reuters

The federal government’s budget deficit has fallen to $486 billion, its smallest point during President Barack Obama’s presidency, according to a report released Wednesday from the Congressional Budget Office (CBO).

Obama inherited a trillion-dollar-plus deficit in 2008 after the financial crisis, but as the economy improved, more tax revenue and lower government spending has reduced the deficit, which peaked at $1.4 trillion in 2009. Last year’s deficit was $680 billion.

“We don’t have to pay back the debt, just be able to show the world we can live within our means,” said Greg McBride, chief financial analyst for Bankrate.com. “That would help us continue to finance the national debt at such low interest rates, saving billions in interest costs.”

Dean Baker, co-founder of the Center for Economic Policy Research, highlights three reasons for the deficit’s shrinkage.

First, said Baker, “tax collections have been somewhat higher, largely because of the run-up in the stock market generating capital gains tax revenue. Second, a more rapid drop in unemployment than expected has meant lower unemployment insurance benefits and other transfers, and third, health care costs keep coming in way below projections.”

The 2014 deficit, for the 12 months ending Sept. 30, is 3 percent of gross domestic product, which economists say is sustainable.

The numbers could give the Obama administration political leverage with Republicans who worry that government spending is unbridled.

“I think this makes those arguing for austerity look pretty foolish,” Baker said in an email to International Business Times. “We now have a very modest deficit (the debt to GDP ratio is falling) even when the economy is still below almost everyone's measure of potential. This means that we are needlessly keeping millions of people from having jobs.”

Even as the deficit shrinks, CBO warns that it could rise in the long-term without reform as increasing numbers of Baby Boomers claim Social Security and Medicare benefits.

The Treasury Department and the White House budget office will issue an official report on the budget later this month.