The largest type of spending in 2023 was transfers ($3.19 trillion), followed by aid to the states ($1.15 trillion), interest ($0.95 trillion), purchases ($0.84 trillion), and worker compensation ($0.56 trillion).⁴ The first two types—transfers and aid to the states—are the redistribution part of the budget. Redistribution grew
from 46 percent of noninterest spending in 1970 to 76 percent in 2023.

The latter two types of spending—purchases and compensation—are the production part of the budget. These activities declined from 54 percent of noninterest spending in 1970 to 24 percent in 2023. This spending includes the active services produced by the government, such as national defense and the national park system. Purchases include everything the government buys, from fighter jets to park ranger hats.

Transfers and aid to the states are the largest and fastest‐growing types of spending, and they should be targeted for large cuts. However, federal deficits are so huge that policymakers should find savings in all types of spending.