WASHINGTON — The federal deficit so far this budget year is running sharply lower, driven by record revenues pouring into government coffers.

The Treasury Department reported on Friday that the government produced a deficit of $157.3 billion for the budget year that began last Oct. 1. That's a substantial improvement from the red ink figure of $239.6 billion produced for the corresponding 10-month period last year.

The lower year-to-date deficit was the result of a record $2.12 trillion in revenues. Spending, however, was higher — $2.27 trillion, which also marked an all-time high.

The White House predicts that the deficit this year will drop to $205 billion.

But the nonpartisan Congressional Budget Office predicts the government will produce even less red ink this year. It recently said the deficit will be "toward the lower end" of a $150 billion to $200 billion range.

Democrats and the Bush administration have been at odds over the nation's fiscal situation. Democrats believe the shrinking deficits won't last. President Bush, meanwhile, has called on the Democratic-controlled Congress to show some restraint in its spending.

So far this budget year, the biggest spending categories are programs from the Health and Human Services Department, including Medicare and Medicaid, $560.2 billion; Social Security, $516.1 billion; military, $437.7 billion, and interest on the public debt, $385.1 billion.

For July, the government produced a deficit of $36.3 billion, up from $33.2 billion for the same month last year.

Revenues in July came to $170.4 billion, while spending outpaced that at $206.8 billion. Both revenue and spending were records for the month.

The total federal debt outstanding has soared to $8.8 trillion today from $5.8 trillion at the end of President Bush's first year in office — with the share held by foreign governments doubling.

Last week, Treasury Secretary Henry Paulson warned that the United States may be unable to pay its bills this fall unless Congress raises the government's borrowing authority, now capped at $8.965 trillion.