Well, an intellegent GSD can discern a threat pretty well and that doggie in the window or a person gardening is no thread to anyone. ....This kind of misinformation about what is and is not protective abounds and dog breed restrictions occur more and more often with GSDs because of behavior like this which escalates into a bite then nobody knows why on earth the dog did it.
I have no issue with dogs that bite for real and those that bite for sport and train around them all the time. They do not behave like this on a walk.
I don't believe your dog does not see your wife as above him in the pack. I just don't think he feels safe.
unless you are there. Sorry.