A critical question the country faces, especially if Obama wins, is whether Democrats’ aspirations for expanding the scope of government can be achieved given the grim realities of the federal budget.

   One would hope that the latter negates the former. If so, the election of a liberal Democrat to the office of president may well change nothing. Obama’s desire to find new roles for the government might remain safely unfulfilled if it becomes clear the country cannot afford these new roles.

   And the budget situation is dire. Jus this week, Acting Treasury Undersecretary for Domestic Finance Anthony Ryan made a series of startling admissions… startling because he admitted them, not because they could not be guessed.

   First: the government’s budget situation will face a supreme test in the coming year. In a speech in New York, he acknowledged that the government’s most recent estimate of a record-high $482 billion budget deficit for the current fiscal year is low.

   The reason the estimate is low is that it does not take into account any of the massive new programs the government has started to save the financial system as we know it. These programs include, according to Ryan:

   “TARP and related programs and purchases (this is the $700 billion Washington bailout program), FDIC bank resolution measures (a program under which the FDIC will buy bad bank loans), liquidity initiatives conducted by the Federal Reserve including the Supplementary Financing Program (a Treasury effort to raise money to help the Fed as it takes on financial assets from the private sector), the Agency MBS program (Treasury’s guarantee of Fannie and Freddie bonds), student loan program (backing of student loan programs), and the GSE Senior Preferred Stock Agreement (Treasury’s purchase of stock in Fannie and Freddie.”

   So aside from these massive new programs, the federal budget deficit should only be $482 billion in fiscal year 2009. Only, maybe a little more if tax receipts dry up, which they will because that’s what happens in a recession. Ryan has a rather soft way of putting this:

   “The potential for deterioration in economic conditions given the contraction in credit may also affect budget conditions this year.”

   It’s anyone guess how big the budget deficit gets this year. Some economists are already putting it at $1 trillion. For some perspective, a budget deficit of $800 billion would equal the entire size of the federal government in 1983. How we’ve grown.

   But the question remains: is this gigantic deficit a hurdle to more spending? Again, one would hope. But there may be very little reason to hope.

   The Bush administration never seemed interested in cutting back. Ryan’s answer to the budget problem was, predictably, issuing more government debt, and wider variety of debt. He said the government’s borrowing needs would be “unprecedented” this year. If the Republican answer is to borrow more, it’s hard to imagine why the Democrats should be expected to do any better.

   And apparently, no one is asking the Democrats to do any better. Today, one of the most in-demand experts is Teresa Ghilarducci, an economist at the New School for Social Research in New York who is getting noticed in Congress.

   Her idea is that the government should guarantee 401(k) performance, and it’s stated so simply a child could understand it. Employees would be “required” to put 5 percent of their earnings into the Social Security Administration, which would “manage” the money. Employees would be “guaranteed” a rate of return that exceeds the rate of inflation by 3 percent.

   How nice. But surely this simple plan could stand a little adult criticism, such as, exactly how would the government “guarantee” any return at all unless it’s through higher taxes? Is our government really in any position at all to promise guaranteed returns at a time when it may have to sell $1 trillion in debt this year alone just to stay afloat? Why should anyone be reassured that the government wouldn’t raid whatever money it has for other purposes?

   More broadly, is America now so beaten down that it should aspire to Ghilarducci’s paltry goals? Her own estimate is that her government-run 401(k) program were set up, it would “guarantee” incomes equal to only 25 percent of pre-retirement income.

   And yet this George Steinbrenner approach to government – drastically overpaying for poor results – may well be the next big thing. Or perhaps the same old thing, continued.