The United States dropped a record $220.9 billion further into the red in February, the Treasury Department reported Wednesday.

The shortfall was up from the previous record $193.9 billion shortfall in February last year.

It’s the 17th straight month that the U.S. government has posted deficits. The last time the government posted a monthly surplus was in September 2008, when the government reduced the deficit by $45.7 billion.

The cumulative deficit for fiscal 2010, which started in October, reached $651.6 billion, up from $589.8 billion in the same period the year before. The Obama administration is forecasting that the deficit will hit $1.56 trillion this year.

Spending increases overshadow revenue boost: Wednesday’s announcement came as little surprise to economists, who expected the deficit for February to total $222 billion, according to a consensus compiled by Briefing.com.

Receipts totaled $107.5 billion, up from $87 billion in February last year and outlays totaled $328.4 billion, up from $281 billion.

Despite the government’s record losses, the year-over-year boost in revenue during February is at least one hopeful sign that the economy is faring better, said Robert Bixby, executive director for the Concord Coalition, a federal budget watchdog group. It was the first time since April 2008 that the government posted higher revenue when comparing monthly data year-over-year.

The overall losses were most likely driven by the recession and tax refunds, said Nathan Topper, an associate economist with Moody’s Economy.com.

February is traditionally a big deficit month for the government, as Uncle Sam starts writing tax refund checks, he said. And because the recession dampens business profits and wages, refunds spike. There were $65 billion in tax refunds recorded in February this year, compared with $77 billion last year and an average of $49 billion for last decade, according to Moody’s Economy.com.

Spending up: The government shelled out $65 billion to Health and Human Services, $62 billion in Social Security expenses and $48.9 billion to the Department of Defense in February. Spending is up in all those departments for the first five months of the government’s fiscal year, over the same period last year.

Corporate income tax refunds were higher than usual because of legislation that allows them to apply current losses against prior profits to become eligle for refunds.

In February, the President Obama signed into a law a record $1.9 trillion increase to the government’s debt limit, bringing the new cap to about $14.3 trillion. To top of page

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AIG agreed Monday to sell its American Life Insurance Co. unit to MetLife Inc. for $15.5 billion in cash and stock, in beleaguered AIG’s second sale of an international unit in a week.

AIG said it will sell the unit, known as Alico, for $6.8 billion in cash and the remainder in MetLife equity. The deal leaves AIG as the second-largest shareholder of MetLife, with a stake of more than 20% in the company.

Selling Alico, one of its largest international life insurance businesses, will allow government-controlled AIG to take yet another step in repaying the nearly $132 billion it borrowed from the federal government beginning in 2008 to avoid collapse.

Expected to close by the end of the year, the companies said the acquisition will also help MetLife, the largest seller of life insurance in the United States, grow internationally and especially target Japan.

The deal came a week after AIG announced an agreement to sell its Asian life insurance business, American Insurance Assurance Ltd (AIA), to Britain’s Prudential PLC in a deal valued at $35.5 billion, including $25 billion in cash.

AIG said it expects to generate about $50.7 billion from these two transactions, including approximately $31.5 billion in cash to repay the New York Federal Reserve Bank and another $19.2 billion in securities that it will sell over time to repay the government.

“This sale is an important step toward repaying the government,” Harvey Golub, chairman of AIG, said in a statement. “Both sales give AIG greater flexibility to move forward with our restructuring and rebuilding efforts, and focus on enhancing the value of our key insurance businesses.”

At the end of February, AIG announced a loss of $8.9 billion in the fourth quarter of 2009, which it said was largely due to the costs associated with selling off large stakes in its insurance businesses to reduce the debt it owes to taxpayers.

In December, AIG sold stakes in AIA and Alico to the U.S. government. In exchange for those transactions, the Fed reduced the amount AIG has to repay taxpayers by $25 billion. AIG said it took a $5.2 billion charge for that agreement last quarter.

The deal for Alico has been approved by the boards of both AIG and MetLife, and is subject to regulatory approvals in the United States and overseas. To top of page

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Canada said Wednesday it will allow more foreign ownership in its telecommunications sector, a move that could mean more wireless players and lower rates for cell phone service.

In a speech outlining its priorities for the new session of Parliament, the Conservative government said it is opening some sectors, including the telecommunications industry, to investment from outside the country.

Rogers Communications, BCE and Telus, which together control 95 percent of the Canadian cell phone market, have lobbied in the past to prevent foreign ownership.

Industry analysts say the ramifications of the policy shift won’t be known until more details are revealed, possibly as early as Thursday.

Industry Minister Tony Clement recently overturned a ruling that disqualified a new entrant into the wireless market, Toronto-based Globalive Wireless, for having too much foreign participation.

Globalive chairman Anthony Lacavera said he isn’t sure whether the rejection of his company – in which Egyptian telecom giant Orascom has a 65 percent stake – played a role in the federal government move.

Critics of the current system say Canadians pay significantly more for wireless services than people in Europe in the U.S.

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