Federal deficit falls to $42 billion in January

New York (CNNMoney.com) -- The U.S. government posted a $42.6 billion deficit in January, the Treasury Department reported Wednesday, marking the 16th month in a row that U.S. government operations have been in the red.

January's shortfall brings the total deficit for the first 4 months of fiscal year 2010 to $430.7 billion, up from $395.9 billion during the prior year period.

Last month's deficit was lower than the $91.9 billion shortfall reported in December, and came in below the $63.5 billion deficit reported in January 2009.

"[The deficit reflects] the cost of fighting the financial crisis and recession," said Gus Faucher, director of macroeconomics for Moody's Economy.com.

Driving the fiscal 2010 deficit is the fact that tax revenues have fallen faster than government spending. In the first four months of the fiscal year, government receipts fell by $80.5 billion compared to the year before, while outlays only decreased by $45.7 billion from the same period.

Interest paid on federal debt in January was $18.9 billion or 7.6% of federal outlays for the month.

The Treasury Department forecasts a deficit of over $1.56 trillion for the full fiscal year of 2010, up from $1.42 trillion in 2009.

Debt ceiling: In a sign of rising fiscal pressure, the House earlier this month approved a record $1.9 trillion increase in the cap on how much the government can borrow, bringing the new debt ceiling to approximately $14.3 trillion, which is expected to cover the Treasury's borrowing needs into 2011.

Debt held by the public neared $12.3 trillion as of Feb 12, the most recent date for which a figure is available, roughly $2 trillion below the legal debt limit.