WASHINGTON -- The federal budget deficit for March showed a dramatic decline Monday because of a much lower estimate by the Obama administration of how much the financial bailout program will ultimately cost.

The Treasury Department said the March deficit totaled $65.4 billion. That compares with a $191.6 billion deficit a year ago. But $115 billion of the improvement was because of the administration's lower estimate of the cost of the Troubled Asset Relief Program.

The lower bailout estimate already had been included in the administration's budget, which it sent to Congress in February. It had not been included until March in the Treasury's monthly accounting of spending and revenue, however.

The deficit through the first six months of this budget year totals $716.99 billion. That's a drop of 8.2 percent from the same period a year ago. Still, the administration projects that the deficit for all of 2010 will hit an all-time high of $1.56 trillion -- up from last year's $1.4 trillion record.

The projected full-year deficit is being driven up by the impact of the recession, which has cut into government tax revenue while driving up spending.

Spending is higher because of the costs of the bailout to aid financial firms, auto companies and home- owners facing foreclosure. The spending also has soared because of the government's economic stimulus program, plus heavier burdens on such programs as unemployment benefits and food stamps.

Mark Zandi, chief economist of Moody's Analytics, said roughly one-third of the increase in the deficits over the past two years came from lost revenue. That reflected fewer people working and lower corporate profits.

He said another one-third came from the increased government spending that occurs automatically in a downturn. It includes higher payments for unemployment and food stamps.

The final one-third reflected the increased government spending from the economic stimulus bill and the $700 billion financial bailout fund.

Also on Monday, Democrats in the Senate won an initial skirmish to restore unemployment benefits to hundreds of thousands of jobless people despite Republican criticism that it would add $9 billion to the nation's debt.

The 60-34 vote killed a GOP filibuster against debating the measure, which would extend jobless benefits through May 5 along with short-term extensions of several other lapsed programs.

Senators in both parties blamed each other for allowing the programs to lapse last week, leaving several hundred thousand people who have been out of work for more than six months without federally financed benefits averaging $335 a week.

Republicans blocked the measure last month. Monday's vote buys time while House-Senate talks continue on a far larger measure to extend them through the end of the year.

At issue is unemployment compensation for more than 400,000 people whose benefits lapsed but who would have been eligible to reapply for additional weeks of compensation if the program's authority had not ended on April 5. More than 5 million people continue to receive the extended benefits, but 200,000 people each week stand to lose them if the impasse continues.

Monday's vote to begin debate on the bill was but a first step. Democrats continued to insist that the jobless benefits should be extended without cutting spending elsewhere in the government's $3.7 trillion budget to pay for them. But Republicans said the measure would have to be changed on the floor so that it is "paid for" and won't increase the deficit.

A long-term measure extending benefits through December would add another $50 billion to the deficit, regardless of whether Republicans find a way to prevail in the current showdown. But Republicans are likely to fight that measure, too.

Government outlays totaled $1.67 trillion through the first six months of the current budget year, 5.7 percent lower than the same period a year ago. That decline reflected, in part, the lower estimate for the cost of the financial bailout. The $114 billion reduction in the bailout costs left the cost for that program at $117 billion.

With the economy still weak, the interest rates the government must pay to finance the red ink have remained low. But economists fear that could change if investors start to worry about the government's ability to restrain future deficits. China is the largest foreign holder of U.S. Treasury securities.

The administration projects that the deficit will remain above $1 trillion next year, as well. That would give the country three straight years of $1 trillion-plus deficits. Under the administration's budget projections, the deficit will not drop below $706 billion for any year in the next decade.