Estimating the revenue sharing market

 Large states want sharing to favor districts, small states otherwise. There is a large middle where the ratio can shift back and forth. If the ratio seems unbalance, the senate solid for an advance, then the middle will drop the amount.   The distribution of grants across the small, large, medium and large approximating a gaussian.  The revenue sharing is partly paid for by double spending.  Treasury has an ex ante market price of the cost of imbalance at, say 2%. Treasury will double spend to cover the revenue sharing on the margin such that is is always a third of the budget. 

The inflation tax negotiated over longer intervals. The distribution of sharing payments looks gaussian over the period.  The theory is that these are necessarily unplanned losses, built into the Law. We are equally at fault. Not all of the ex ante is loss, some of it unexpected alignments.  If you look at one third of the budget as ex ante, then that is about 10 percent of the economy if total government is 30 percent. But only about 2% of the ex ante results in losses. What we have built is a short chain ledger with chain length about three. The pit boss error loss is 2% plus its variance, it is an NGDP pre-negotiated loss.   

So if the Senate and House agree to lower the total sharing, then inflation taxes continue at a stable rate. If they try to raise revenue sharing, inflation increases and is dispersionary on gains or losses across the value chain. So it really comes down to balancing the first three moments, and ignoring higher moments, a portfolio problem.  

The voter is stuck, he has to suffer a fair sales tax from all of government,the cost of the Law. 

Treasury gets the fewer coin tosses, it gets an update once per 15 trades, maybe, so it is accumulating imbalances. Then the states with more updates, then the House with the mostupdates. An update is a negotiated price, the trip to the trading pit.  The Senate less likely to go to market since they have lower resolution on prices.  House congestion builds up faster than state, and that shift the market to large states. The senate and house go to market, but this disperses the senate and they look for relief from the inflation tax.  The inflation tax favors a very narrow range in the state/house ratios, the ratio that maximizes liquidity.  When the senate disperses then senators want that tax renewed at market.