The budget deficit for the current year will be $172 billion, according to new estimates by the Congressional Budget Office.

The latest CBO figures, disclosed by a congressional aide, also predict the budget could come back into surplus by 2012, although that would require President Bush's tax cuts to expire at the end of 2010.

The estimates also understate the ongoing cost of the war in Iraq, but provide a basis for majority Democrats on Capitol Hill to work to match Bush's vow to balance the federal budget in five years.

The improvement in the deficit figure comes as federal tax receipts have continued to grow above estimates. The deficit for the 2006 budget year registered $248 billion.

The CBO figures, to be officially released later Wednesday, show the budget registering a $12 billion surplus by 2012.

But the figures are, at best, a rough estimate since the agency follows strict conventions, including assuming that Bush's tax cuts expire as scheduled under current law. If they are extended, along with changes to the alternative minimum tax, the costs would swallow about $300 billion of the projected surplus for 2012, according to prior CBO estimates.

The nonpartisan agency, which provides lawmakers with estimates of the budget and the costs of legislation, sees a $98 billion deficit for the 2008 budget year beginning Oct. 1. That's the budget cycle Congress will begin work on shortly after Bush submits his budget Feb. 5.

Some Democrats are worried that Bush's budget will reach balance chiefly by forecasting far higher tax revenues than the White House has previously predicted. Lawmakers typically follow CBO's estimates, which are likely to be more conservative.

The deficit for the 2005 budget year was $319 billion.

Despite the improvements, the deficit picture remains worse than when Bush took office six years ago. Then, both White House and congressional forecasters projected cumulative surpluses of $5.6 trillion over the subsequent decade.

But a revenue bubble burst, a recession and the Sept. 11, 2001, terrorist attacks adversely affected the books. Several rounds of tax cuts, including Bush's signature $1.35 trillion 2001 tax cut, also contributed to the return to deficits in 2002 after four years of budget surpluses.