A balanced federal budget by 2016 is quite conceivable, thanks to the inability of a lame duck President Obama to achieve any major part of his activist liberal agenda, Potomac Research Group's Greg Valliere told RIAs attending this year's Schwab Impact conference in Washington, D.C. on November 10. Valliere believes that gridlock in the nation's capital will quash any serious new government spending initiatives between now and the next presidential election cycle.

All that could change if the Democrats regain control of the House of Representatives, which would require them to only take over another 17 seats. But given the complexion of House districts, or "gerrymandering" as Valliere called it, that is very unlikely, particularly in light of the disastrous roll-out of the new health care plan.

"Health care is an albatross for the Democrats," Valliere noted. Democrats in swing election districts are racing to distance themselves from the plan.

Moreover, GOP leaders are openly saying they won't permit another government shutdown or debt ceiling crisis. Republicans indicate "it's the last thing they want," said Valliere, adding they would rather sit back and watch Democrats squirm as the health care stumbles out of the gate.

However, total repeal of Obamacare is unlikely unless Republicans gain control of the White House, Senate and House in 2016.

In the meantime, there are other positive developments emerging from Washington. The most dovish Federal Reserve Board in history is likely to remain in place after Janet Yellen is confirmed to succeed Ben Bernanke as chairman. Even the hawks on the Fed are turning into doves, Valliere said.

Last year, the federal budget deficit fell by $400 billion. Next year it could fall to 3 percent or less of GDP, and Valliere predicted it could even tumble to less than 2 percent of total GDP by 2015. That creates the possibility of a surplus by 2016.