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<br />A controlled and sufficient supply of water of good qual- <br /> <br />ity is essential in the foundation of a viable economy and rea- <br /> <br />, <br />sonable recreation opportuni cy .in each region of the United States. <br /> <br /> <br />Historically, the federal government has recognized its responsi- <br /> <br /> <br />bility to assist in the creation of such foundations and, until <br /> <br />1969, when the Water Resources Council altered the formula for <br /> <br />the determination of the discount rate to be used in formulating <br /> <br />and evaluating water projects, used for water project evaluation <br /> <br />a discount rate more nearly reflecting the social time preference. <br /> <br />The social discount rate is longheaded and is appropriate <br /> <br />for the evaluation of federal investment in water projects. Use <br />of the social discount rate recognizes that the objectives of the <br />federal government should not be equated to the objectives of <br /> <br />private enterprise and recognizes that society has an obligation <br /> <br />to future generations. A current example of the use of the social <br />discount rate to achieve society's objectives is the 2% rate <br /> <br />established by law for REA loans. <br /> <br />Review of the Water Resources Council proposal invites <br />the inference that a benefit cost ratio of one with respect to <br /> <br />national economic efficiency will remain the "go-no go" signal <br /> <br />for federal project authorization with a steeply increased dis- <br /> <br />count rate. <br /> <br />Federal participation in water resource projects will be <br />reduced well below appropriate levels by a discount rate of 7% <br /> <br />and very likely will be nearly precluded at a discount rate of <br /> <br />10%. The increased discount rate would have serious adverse <br /> <br />-3- <br />