When businesses report their financial results, they organize them into “segments.” A segment is a portion of an organization that engages in activities from which it may earn revenue and incur expenses, has discrete financial information available, and whose results are regularly reviewed by the organization’s decision maker(s) for performance assessment and resource allocation decisions. This framework is what the business itself, investors, and the media use to explain in a common language the financial results and operations of the company. Adopting a similar framework, we have chosen to report our Government’s operations in four segments – Justice and Domestic Tranquility (JDT), Common Defense (CD), General Welfare (GW), and Blessings of Liberty (BL), aligned with the preamble to the US Constitution:
“We the People of the United States, in Order to form a more perfect Union, establish Justice, ensure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”
Federal, state, and local governments play a role in each of these segments. Some initiatives reported herein as state and local government activities and related expenditures were funded by transfers from the federal government. So, though the state and local governments fulfill them, they originate with the federal government.
We do not report revenues by segment but do report expenditures and key metrics on a segment basis. Certain expenditures, including 2% of total fiscal year 2018 expenditures, are not allocated to any segment and are categorized as general government support, outside of our reporting segments. These expenditures are for the costs of central government functions, including general property and records management, financial management, Congress, and general claims against our Government that our Government has not allocated to one agency.
This segment works to establish justice and ensure domestic tranquility among the US population, keeping citizens safe, alive, and living in peace with one another. To do this, our Government works to reduce crime, administer justice, mitigate and prevent disasters, help populations who cannot protect themselves (such as children), protect people from dangerous products, businesses, and commercial practices, and prevent accidents of all kinds. In 2018, 8% or $473 billion of our Government’s expenditures were made by this segment.
The Justice and Domestic Tranquility segment can be further divided into the following reporting units, with their associated key initiatives, departments, and metrics.
Crime and disaster ($361 billion in spending in 2018)
Safeguarding consumers and employees ($21 billion in spending in 2018)
Child safety and miscellaneous social services ($90 billion in spending in 2018)
State and local governments perform most Justice and Domestic Tranquility activities.
A little more than 76% of this segment’s expenditures are for crime and disaster. The key drivers of crime and disaster costs are costs of police protection operations and corrections, driven by the number of employees, facilities, and crimes committed. The drivers of the most significant fluctuations in annual crime and disaster costs are generally the occurrence and magnitude of natural disasters. Excluding costs of natural disasters, 36% of the segment’s expenditures are for payroll for current employees.
This segment works to provide for the common defense of the US population and citizens abroad by protecting them from external threats. To do so, our Government prevents conflict where possible, engages in conflict when threatened, manages relationships with other nations, and keeps the US borders secure. To achieve these goals, our Government operates a military and provides benefits to veterans. It also manages immigration, controls entrance to the country at the borders, and operates a diplomatic force around the world that promotes American ideals and values on behalf of its citizens. In 2018, 14% or $874 billion of our Government’s expenditures were made by this segment.
The Common Defense segment can be further divided into the following reporting units, with their associated key initiatives, departments, and metrics.
National defense and support for veterans ($809 billion in spending in 2018)
Immigration and border security ($16 billion in spending in 2018)
Foreign affairs and foreign aid ($49 billion in spending in 2018)
Nearly all Common Defense activities are performed by the federal government, though the states do provide certain veterans services.
More than 70% of the expenditures of this segment are for national defense activities and are driven mainly by investment in preparation for future military conflicts and the occurrence and magnitude of conflicts. The costs are largely for personnel, equipment procurement, operations and maintenance, and services. Federal military employee wages and salaries was $113 billion in 2018.
This segment works to promote the general welfare of the US population by maximizing the day-to-day experience of the population and enabling them to live happy, healthy, productive lives and contribute to society. To do this, our Government works to stimulate the economy through investment and business promotion with the ultimate goal that every American who wants a job has one that pays a livable wage. Our Government attempts to balance taxes with income so Americans can have the standard of living they desire, while also providing a minimum standard of living through welfare and transfer programs for those in need. Government promotes good health as the foundation of a good standard of living, and it manages the structure of the healthcare industry so that people who do get sick can afford care. Finally, our Government operates services as businesses where they otherwise may not exist, such as the post office and transit systems. In 2018, 23% or $1,447 billion of our Government’s expenditures were made by this segment, with a third spent by the federal government and the remainder by state and local governments.
The General Welfare segment can be further divided into the following reporting units, with their associated key initiatives, departments, and metrics.
Economy and infrastructure ($264 billion in spending in 2018)
Standard of living and aid to the disadvantaged ($1,019 billion in spending in 2018)
Health (excluding Medicaid and Medicare) ($164 billion in spending in 2018)
Approximately 70% of this segment’s expenditures are spent on standard of living and aid to the disadvantaged. These expenditures are driven primarily by macroeconomic conditions, including the health of the overall economy and costs of healthcare, housing, and food, which influence enrollment in, and program costs of, Medicaid and CHIP, SNAP, housing assistance, and other poverty-based programs.
This segment works to secure the blessings of liberty to the US population, which it does through investing in the future. Our Government invests in the future by providing educational opportunities and standards, promoting retirement savings and homeownership, and mandating savings through Social Security and Medicare. In order to prevent future conflict and destabilization, our Government manages its debt to limit the burden on future generations, protects the environment and manages natural resources, works to maintain a healthy democracy, and supports opportunity for economic mobility for each individual. In 2018, 53% or $3,355 billion of our Government’s expenditures were made by this segment.
The Blessings of Liberty segment can be further divided into the following reporting units, with their associated key initiatives, departments, and metrics.
Education ($921 billion in spending in 2018)
Wealth and savings ($2,324 billion in spending in 2018)
Sustainability and self-sufficiency ($110 billion in spending in 2018)
American Dream ($2 billion in spending in 2018, also included within other subsegments)
Over 60% of the segment’s expenditures are spent by the federal government, while the remainder is spent by state and local governments.
Nearly 50% of this segment’s expenditures are for Social Security and Medicare payments, which are driven primarily by the number and mix of beneficiaries and for Medicare, the costs of healthcare, and premiums paid by enrollees. Another nearly 30% of this segment’s expenditures are for education, which are driven primarily by the number of government employees in the education sector and their salaries and related benefits, and by student fees, including tuition, room, board, and event entrance fees.