Prison terms for all federal drug dealing offences could be cut under a sweeping sentencing review expected to be announced on Thursday that may go much further than the tentative steps toward ending America's "war on drugs", begun this week by attorney general Eric Holder.

The US Sentencing Commission, the independent government agency responsible for setting guidelines for judges, will meet in Washington to consider amending the "drug quantity table" – the grid that determines prison lengths for dozens of different categories of offence.

Currently it recommends that a first-time dealer caught with more than 30kg of heroin, 150kg of cocaine, 8.4kg of crack cocaine or 1.5kg of pure methamphetamine can face between 19 and 24 years in federal prison with no parole.

But a commission source has told the Guardian that commissioners are minded to make a review of the entire drug quantity table a top policy priority when they meet this week.

If, as expected, the review goes ahead and recommends lower sentences, the commission could theoretically be overruled by Congress. But the move coincides with a sea change in attitudes among lawmakers and the administration that many see as a turning point in the "war on drugs" begun by President Nixon in 1971 and accelerated during the 1980s crack epidemic.

Officials at the Department of Justice have already welcomed the proposed review, calling for "reform [of] federal sentencing policy in the months ahead" in their response to the commission.

Republicans such as Rand Paul have recently joined forces with Democrats to propose national legislation aimed at emulating similar reform in states such as Texas, Arkansas and Kentucky.

On Monday, Holder, the attorney general, also urged such a rethink, saying current drug sentencing was unsustainable.

"As the so-called war on drugs enters its fifth decade, we need to ask whether it has been fully effective and [whether to] usher in a new approach," he told the American Bar Association. "Too many Americans go to too many prisons for far too long and for no truly good law enforcement reason."

Holder announced new measures to limit the use of mandatory minimum sentences for drug offenders by urging prosecutors not to necessarily list the quantity of drugs seized when drawing up federal charges, so as to avoid triggering automatic prison terms.

However, experts who have studied the DoJ policy sent to US attorneys say the measure remains quite narrow, applying only to a smaller category of offenders with no history of violence or links to drug gangs. Judges also already have some discretion to ignore the mandatory minimums under a so-called "safety valve" scheme.

"The policy doesn't actually go as far as Holder said he wanted to go," said the commission source. "A review of the drug quantity table would have a much wider effect, although in the long run it would probably take new legislation to have lasting impact".

It is possible that commissioners may change their minds when they meet on Thursday and decide not to proceed with the review, but this is thought unlikely – especially since Holder's speech was well-received in Washington.

"There are three new commissioners joining, so you never know for sure, but there is very strong feeling on this," added the source.

Since the introduction of tougher sentencing guidelines and mandatory minimums in the 1980s and 1990s, more and more routine drug offences have been heard in federal courts, particularly as prosecutors seek maximum penalties to encourage lower-level drug dealers and mules to strike plea bargains.

Under the federal system, there is also no longer any parole arrangement, meaning that a first-time offence for dealing 100g of cocaine will see prisoners serve between 27 and 33 months, with only limited time off for good behaviour.

This has helped prison numbers to soar in 2010 from a historical average of 150 people per 100,000 population to more than 700, leaving a quarter of the world's prisoners now incarcerated in the US.

Federal and state prisoner totals dipped slightly in the past three years to 1.57 million amid falling crime rates, but when county jails are included, there are still 2.24 million people incarcerated at any given time and nearly 5 million on probation or parole.

Although Holder and civil liberty advocates argue lengthy sentences for minor offences can be counter-productive and lead to overcrowding, the impetus for the new push to cut sentences appears to have been driven primarily by a need to cut soaring government costs.

The recent DOJ response to the Sentencing Commission's proposed review says the US faces a stark choice between cutting prison number or cutting law enforcement.

"Now with the sequester, the challenges for federal criminal justice have increased dramatically," it says. "If the current spending trajectory continues and we do not reduce the prison population and prison spending, there will continue to be fewer and fewer prosecutors to bring charges, fewer agents to investigate federal crimes … and cuts along a range of other criminal justice priorities." © Guardian News and Media 2013