Laserfiche WebLink
<br />impact that it is difficult to visualize what <br />a 1 or 2 percent increase in a project may mean <br />when figured over the life of a project. Take <br />a project that costs $500,000,000 - when you <br />apply the 7 percent rate, then you are talking I <br />about an increase in cost of several billion <br />dollars by this simple expediency of raising <br />the discount rate, say 1 1/2 to 2 percent. The <br />impact is staggering, and deliberately so. In <br />effect, it wipes out the great majority of the <br />projects that are now in the planning stage <br />and would have killed roost of the projects <br />which have been planned and constructed in the <br />past. This discount rate is based upon the <br />opportunity cost of borrowing to the federal <br />grovernment. It is essential to have some <br />understanding of what these economists are <br />talking about in this field: I only had one <br />year of economics in college and I didn't <br />understand what I got in that year, and I don't <br />understand it any better now. But I did pub- <br />lish a couple of abstracts from these planning <br />principles to give you an example of what they <br />are talking about. I just want to quote from <br />that: 'Abstracting from income distribution <br />considerations, the total value of the Nation's <br />resources is maximized by expanding or con- <br />tracting any specific activity to a level such <br />that the marginal value of resources in that <br />activity is equal to their marginal value in <br />other feasible uses. Alternatively, the mar- <br />ginal cost of resources in any activity is <br />equated with the marginal cost of that activity, <br />where cost represents the highest value fore- <br />gone use of those resources and alternative <br />activities.' This general principle also applies <br />to the federal government as folloWS: 'For <br />given total Federal outlays, the net benefit I <br />generated by the Federal government is maxim- <br />ized by expanding or contracting individual <br />Federal activities to a level for which the <br />marginal value of resources is equal to the mar- <br />ginal cost of resources in all activities.' <br /> <br />I didn't quote anymore because from there <br /> <br />-54- <br />