WASHINGTON (AP) — Congressional budget analysts said Wednesday that the federal government ran a deficit of $435 billion in the just-completed budget year, the smallest deficit since 2007 and well below the record shortfalls of President Barack Obama's first term.

The Congressional Budget Office report says it's the sixth consecutive drop in a row for the deficit, when measured against the size of the economy, since the $1.4 trillion deficit of Obama's first term.

The improved deficit figures come as Washington is grappling with the need to increase the government's borrowing cap in early November. The White House and lawmakers on Capitol Hill are also seeking a separate agreement on a budget to keep the government open past a Dec. 11 deadline.

During Obama's first term, the deficit was greater than $1 trillion for four years in a row in the wake of the Wall Street bailout, a huge stock market drop and a major recession.

The budget office does nonpartisan analysis for Congress; the official government estimate from the White House budget office and Treasury Department typically is released in mid-October.

The stronger figures represent 8 percent growth in tax revenues, led by 10 percent growth in individual income taxes. Spending grew more slowly, though the cost of health insurance subsidies through exchanges established by the Affordable Care Act almost doubled, to $27 billion.

CBO expects the deficit's downward trend to continue for a couple of more years but says long-term trends, driven by the continuing retirement of the baby Boom generation and its effect on benefit programs like Medicare and Social Security, will likely cause an eventual fiscal crisis.

Two attempts by Obama and House Speaker John Boehner, R-Ohio, to negotiate a sweeping deficit-cutting package ended in failure after Boehner pulled out of the talks. Now, Obama is refusing to offer concessions in exchange for increasing the government's $18.1 trillion borrowing cap. Treasury Secretary Jacob Lew has warned Congress to act by Nov. 5 to avoid a first-ever default, though an analysis by the Bipartisan Policy Center think tank in Washington says the absolute latest deadline will fall between Nov. 10-19.

In 2011, after Republicans reclaimed the House — and before his re-election — Obama conceded $2.1 trillion in spending cuts over 10 years as part of a deal with Boehner to lift the debt cap and avert a financial crisis. Since then, he's refused to offer more cuts as a condition for increasing the debt limit and Republicans have reluctantly gone along.

Talks on a spending package that would ease automatic cuts to agency budgets, known as sequestration, imposed by the 2011 deal and replace them with savings elsewhere in the budget have just started. Obama has vowed to veto legislation that doesn't lift those spending "caps" but many House GOP conservatives are insisting on retaining them and being more confrontational with Obama under the incoming House leadership team. Boehner announced his resignation at month's end under pressure from tea party hardliners.

"Long term demographic trends and compounding interest on the debt demand that Congress work together to place America on a more fiscally sustainable path forward,' said House Democratic Whip Steny Hoyer of Maryland. "This begins with reaching a budget agreement this month to replace the harmful sequester with a more responsible strategy for deficit reduction."