NASA from 1969 on had stressed that the overriding objective of the shuttle program was to lower the cost of space launch and operations. By emphasizing the lower cost aspect of shuttle use rather than the new capabilities it would provide and its role in maintaining a human presence in space, NASA left itself open to having the shuttle evaluated on economic grounds. Indeed, the Bureau of the Budget (BOB) in March 1970 had asked: “Is full scale development of a new launch system to reduce the cost of payload in orbit economically justifiable?” That question set in motion a process of economic analysis that would parallel shuttle technical studies throughout 1970 and 1971. The impact of the economic analyses would come to be seen, in George Low’s words, as “important and unfortunate.”34
In his cover letter transmitting this question, BOB Director Robert Mayo told NASA to use a 10 percent “discount rate” in comparing future benefits of the shuttle program with the current investment required to obtain them and with other uses of that amount of funds.35 One way of looking at the discount rate is as representing the equivalent for a government program of the interest that a private investment would have to earn in order to be justified. The discount rate used determined how much in future benefits was required to justify a current investment. A 10 percent discount rate was associated with a particularly risky government program, one with uncertain future benefits; this was the category in which BOB placed the space shuttle program.
Critical to showing a high level of future benefits from the space shuttle was a high flight rate, since each shuttle flight would save money compared to the use of an expendable launch vehicle to launch the same mission. Additional savings would also come from the reduced costs of payloads for many missions. Thus it soon became evident that to justify the shuttle in economic terms, there had to be very active U. S. civilian and national security space programs in the 1980s, and the shuttle would have to launch essentially all flights in those programs. The shuttle would also have to be complemented by a space tug so that the combination could carry out the many missions to geosynchronous and other high orbits. Thus developing a plausible “mission model” for future space activities was a key starting point for an economic analysis; the benefits from flying the missions in that model, when compared with a forecast of the one-time costs required to develop a shuttle and the anticipated lower costs of operating it, would allow a judgment of whether the shuttle was a justifiable investment at the 10-percent discount rate.