GNP counts all production as valuable to welfare. This may not be true of some goods such as military goods. Differences in climate may mean that people have different needs. See class notes and pp. Deficits must be financed by either borrowing or money creation.
Borrowing increases the country's debt and interest payments.
Deficits are a particular problem for developing countries because such countries are less likely to be able to borrow enough money to cover the deficit. Government that cannot borrow enough from the open market turn to the central bank and finance their deficits through money creation. Expansion of the money supply causes inflation. High rates of inflation cause negative real interest rates and discourage savings and investment. Also, government deficit take money away from private investment.