Economic Q; Why %GDP over %Budget?

In looking at government budget expenditures over time, most of the information found has been expressed in %GDP. I’m wondering why not as %Budget or %Income. Does it balance outliers better?

Could you explain this? In my experience budget expenditures are expressed as numbers, not percentages. Percentages are useful only in certain circumstances.

Putting expenditures as a percent of GDP is helpful at times when comparing the true size of an expenditure over time. Looking at the military as a percent of GDP in 1950 vs 2010 might give you a better idea of how much the military was drawing than just straight expenditures, even in constant dollars. However, you could - and people often do - use a percent of the federal budget instead. It depends what you’re looking for and what case you’re trying to make.

That’s just it, not looking to make a case, just understand the benefits and flaws of each method. My first thought was to just dive into the data and see how each method just “felt” I guess.

It’s easy to compare different countries when you use the government spending as a percent of what the country makes/earns. If a country is spending less and less of its GDP on government spending each fiscal year, the Chancellor will either win the Noble Prize or be put in jail.

I’m not quite sure when “%budget” means, but let me take a shot.

US defense spending generally is between 3.5 and 5 percent of GDP over the last several decades. With that figure, we can make comparisons between countries: North Korea is something like 25%, and European countries are closer to 2.5%. Okay, we understand how each country uses its nation wealth.

But the percent of the U.S. budget devoted to defense has declined from something like 60% of all government spending to closer to 22%. That implies that US defense spending has been cut, when in reality it is just that other parts of the budget have grown. So it not only doesn’t give one a very good picture of what defense spending has been, it is actually misleading because that statistic, by itself, implies that the U.S. has shrunk defense spending pretty dramatically since the Cold War began.

Even if you ignore that, I just don’t see how that percentage is useful information in any way.

Statistics is the art of torturing numbers until they tell you what you want them to say.

Each number tells a different story. %GDP, for example, gives you a rough indication of the level of taxation. For the budget as a whole, that would be a quality of life issue; are taxes too high, is the government spending enough on helping its citizens? For individual expenditure groups - X% of GDP on infrastructure, Y% on welfare and medicare, Z% on military - it gives a rough idea how much is taken from each person’s earnings to support that particular government task, so where the government’s priorities lie.

Of course, without knowing income levels, it’s hard to say whether this is a rich or poor country from simply that.

Percent of budget gives a much more limited amount of information. It can show where the demands and priorities of a government lie, but without more context for total budget, it’s difficult to say whether a large slice if the government pie is a substantial meal or just a bigger snack than the others.

The %GDP statistic can to some extent indicate how heavily it burdens the citizens, while %budget shows how important the government thinks that particular task is relative to its others.

Nonsense. Unless it is also your view that journalism is the art of deceit, or cuisine the art of food poisoning.

Instead, per capita, and per GDP are very appropriate ways to present information. Who was the recent Doper who objected to per capita data? :smack:

Spin much? U.S. corporate profits as a share of GDP have risen from 4% in the 1980’s to over 11% today. Is that a measure of how heavily corporations “burden” our citizens?

I see % of budget occasionally. It can be illuminating if you are having a guns vs. butter discussion.

For countries with a debt sustainability problem that have reasonable fears of a sudden spike in interest rates, the percentage of the budget allocated to different services is an extremely important political consideration.

This is what Measure for Measure is referring to in the guns vs butter problem. Some countries simply cannot afford both, and must consciously consider the exact trade-off.

And percent of GDP for social services vs percent of GDP for defense are not used for those calculations? Because that would provide one with not only a comparison of spending relative to national wealth, but also implicitly spending relative to the budget.

If I tell you that defense is 3.5% of GDP, social services are 7%, and interest payments are 2%, you know that guns are half as purchased as butter, and you also know that 12.5% of the economy is government spending. That seems a way more useful measure than defense being 30% of the budget, social services being 60%, and the rest being interest. Those measures don’t provide much context.

No one said percentage of GDP are never used for those calculations. No one said anything close to that.

The question was whether percentage of budget was ever useful. “I just don’t see how that percentage is useful information in any way.” Well, those numbers actually are sometimes useful. But that doesn’t mean they’re the only figures bandied about in those cases.

For a country that is already hard up against its spending constraints, the extra context often isn’t necessary. Your own numbers are telling. You’re talking about 3% and 7% and 2% of GDP, but a country like Greece spends more than half its GDP on government spending. The question is not whether they can squeeze extra government spending out of the economy as a whole, but which parts of the budget must be shrunk.

It can be pleasant to have more easily digestible numbers, where all the percentages add up nicely to 100. That’s not always the case, and I wouldn’t even argue it is normally the case, but every once in a while it’s nice to have numbers that fit into a pie chart. People get a better intuitive feel for the comparative sizes.