Question

Suppose 80% of the $8 billion construction cost of the new urban transit system in Los Angeles is paid by the federal government. From the perspective of the state of California, what is the economic cost of construction? What is this cost from the perspective of the federal government? (California accounts for about 10% of the nation's income.)

Answer 1

The cost of construction are rising rapidly specially in California . The cost of construction continues to rise after recovering from recession California's average home price which is $440,000 is about two and half times higher than the national average .Such high costs are lowering economic productivity,increasing poverty,reducing ownership of homes ,leading to increase in crowding and making commute times long.

Federal government has implemented a variety of programs to help low income Californians afford housing.Federal government provide financial assistance like tax credit,grants or loans which cost less to developers of houses.Such financial assistance are provided to house developers to cover a part of housing cost.Expanding assistance program may be expensive for the Federal government and may require funding in tens of billions of dollars.This is the largest expenditure of the Federal government apart from education.