The percent of GNP measure

Nearly all the measures of U.S. Government spending that you see are presented as a percentage of GNP.  That this measure is so commonplace is rather curious, because from a spending side it makes no sense.  The rationale for government spending is need, so why would spending track GNP?

Government is of course different from business, but in the business world if you are projecting growth in a budget or plan your expense target will almost always be at a lower percentage.  That is you expect your expenditures to go up but at a slower pace than revenues.  Government expenditures should follow a similar path, there being no reason why military, social security, the judicial system, etc. costs should go up at the same rate as GNP.

More directly, you would think that as a nation became wealthier the safety net would become proportionally smaller.  If say you had a decade where real income doubled you would still have people who would need assistance, but presumably you’d have many more that would move to a state of self-sufficiency. 

This may seem to be of no importance, but I don’t think it is.  The measures used tend to both reflect and shape thinking.  Until the current recession, we had a rather extraordinary economic run.  It seems reasonable to ask whether the standard view of looking at expenditures as a percent of GNP contributed to making commitments which are unsustainable when growth slowed significantly.  Measure expenditures on a percent of GNP basis concedes that spending is based on affordability rather than need.  That’s a big concession.