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30–092 PDF 2007

S. Hrg. 109–908

NOMINATION OF STEPHEN S. McMILLIN

HEARING

BEFORE THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

ON THE

NOMINATION OF STEPHEN S. McMILLIN TO BE DEPUTY DIRECTOR OF 

THE OFFICE OF MANAGEMENT AND BUDGET

JULY 13, 2006

Available via http://www.access.gpo.gov/congress/senate

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs

(

(II)

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

JENNIFER A. HEMINGWAY, Professional Staff Member 

MICHAEL L. ALEXANDER, Minority Staff Director 

ADAM R. SEDGEWICK, Minority Professional Staff Member 

TRINA DRIESSNACK TYRER, Chief Clerk 

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C O N T E N T S 

Opening statements: Page 

Senator Collins ................................................................................................. 1

Senator Bennett ................................................................................................ 7

Prepared statements: 

Senator Lieberman ........................................................................................... 11

Senator Stevens ................................................................................................ 12

WITNESS 

THURSDAY, JULY 13, 2006

Stephen S. McMillin to be Deputy Director, Office of Management and 

Budget: 

Testimony .......................................................................................................... 3

Prepared statement .......................................................................................... 13

Biographical and professional information ..................................................... 15

Responses to pre-hearing questions ................................................................ 20

Letter from U.S. Office of Government Ethics ............................................... 49

Responses to post-hearing questions from Senator Collins .......................... 50

Responses to post-hearing questions from Senator Lieberman .................... 54

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NOMINATION OF STEPHEN S. MCMILLIN 

THURSDAY, JULY 13, 2006

U.S. SENATE, COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Committee met, pursuant to notice, at 4:18 p.m., in room 

342, Dirksen Senate Office Building, Hon. Susan M. Collins, Chairman of the Committee, presiding. 

Present: Senators Collins and Bennett. 

OPENING STATEMENT OF CHAIRMAN COLLINS 

Chairman COLLINS. The Committee will come to order. 

First, let me apologize to the nominee and those present today 

for the long delay in convening this hearing. Just as we were about 

to begin the hearing, the Senate began a series of roll call votes. 

The fourth one is underway right now and that is the cause of the 

delay. But rather than postpone the hearing to next week, I 

thought it was important that we try to complete it today, so my 

apologies to the nominee. 

Today, the Committee will consider the nomination of Steve 

McMillin to be the Deputy Director of the Office of Management 

and Budget (OMB). A key mission of the OMB is to assist the 

President in preparing the Federal budget and to oversee its execution by Executive Branch agencies. In carrying out this mission, 

OMB evaluates the effectiveness of the Agency programs, assesses 

competing funding demands, and sets priorities. The Deputy Director plays a central role in carrying out these missions. 

This is a demanding job at any time. It is especially demanding 

in a time of spending imperatives and revenue constraints. Despite 

the strong growth in Federal revenues this year, the Federal budget remains under considerable pressure. Some of this pressure can 

be attributed to the war on terrorism and to unprecedented natural 

disasters, like Hurricane Katrina. But even without these factors, 

our Nation faces an ongoing structural deficit that will become an 

increasing challenge in the coming years. 

While the Administration’s latest estimates are that the Federal 

deficit will decline to $127 billion by the year 2011, total debt is 

expected to increase to more than $11 trillion that same year. As 

alarming as this figure is, this level of debt will be reached even 

before the retirement of much of the baby-boom generation, which 

will present our Nation with its most serious challenge yet in funding Social Security, Medicare, and other entitlement programs. 

2

Our Nation’s economy has always shown a remarkable ability to 

absorb shocks and to overcome even the gravest of challenges. The 

growth we have seen since the attacks on our country on September 11 is a striking demonstration of this resiliency. That attack deepened the economic downturn we were experiencing at the 

time, but since the recovery began, our economy has added 5.3 million jobs, 2 million in the past year alone. 

The strong growth we are now experiencing is yet another sign 

of the fundamental health of our economy. Earlier this week, the 

Administration predicted that by the end of 2006, the GDP will expand by 3.5 percent, above the historical average, and unemployment will fall to 4.7 percent, below the historical average. This 

growth has boosted tax revenues by nearly $250 billion above last 

year’s levels, helping to produce a deficit considerably smaller than 

the Administration projected just 6 months ago—good news indeed. 

While this is excellent news, our long-term forecasts remain 

clouded by the implications of the retirement of the baby-boom generation. We must be mindful that the slightest slowdown in our 

economic growth rate can present us with an even greater budget 

challenge than we are predicting today. 

Given all the extraordinary budget issues we face, never before 

has it been more important to have experienced, competent, dedicated leadership at OMB. OMB has able leaders in Rob Portman 

and Clay Johnson. It is important that this Deputy Director position is filled with a similarly strong candidate. 

Our nominee, I am pleased to say, appears to have the experience and qualifications to be an effective deputy. Since November 

2005, Steve McMillin has served as the Deputy Assistant to the 

President and Advisor to the Chief of Staff. Before joining the 

White House, he served as Associate Director for General Government Programs for OMB. Prior to joining the Administration, Mr. 

McMillin served on the staff of the Senate Committee on Banking, 

Housing, and Urban Affairs for 3 years and on the staff of Senator 

Phil Gramm for 9 years. 

I should add that Senator Gramm called me personally to indicate his support for this nominee, describing him as ‘‘brilliant and 

principled,’’ high praise, indeed. 

I welcome Mr. McMillin to the Committee, and I look forward to 

his testimony and answers to the questions today. 

I know that Senator Hutchison hoped to be here to introduce the 

nominee. Because of the unexpected votes this afternoon, she is unable to join us at this time, but her endorsement does carry great 

weight with the Committee. 

Mr. McMillin has filed the responses to a biographical and financial questionnaire, answered pre-hearing questions submitted by 

the Committee, and has had his financial statements reviewed by 

the Office of Government Ethics. 

Without objection, this information will be made part of the hearing record, with the exception of the financial data, which are on 

file and available for public inspection in the Committee’s offices. 

Our Committee rules require that all witnesses at nomination 

hearings give their testimony under oath, so Mr. McMillin, if you 

will please stand and raise your right hand so I can administer the 

oath. Do you swear that the testimony you are about to give will 

3

1The prepared statement of Mr. McMillin appears in the Appendix on page 13. 

be the truth, the whole truth, and nothing but the truth, so help 

you, God? 

Mr. MCMILLIN. I do. 

Chairman COLLINS. Please be seated. 

Mr. McMillin, it looks to me as if you have family members 

present, and I would invite you to introduce them to the Committee 

at this time. 

TESTIMONY OF STEPHEN S. McMILLIN,1 TO BE DEPUTY 

DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET 

Mr. MCMILLIN. Thank you, Madam Chairman. First, my wife, 

Dawn McMillin. 

Chairman COLLINS. Hello. 

Mr. MCMILLIN. And then our two sons, Spencer and Christian. 

Chairman COLLINS. We want to particularly thank the boys for 

their patience. I am sure it was hard waiting almost 2 hours to see 

your father, but this is a very important position that the President 

has selected him for, so that is a pretty big deal, and we are glad 

to have you here. We welcome your wife, as well. 

Mr. MCMILLIN. We made quite a few paper airplanes downstairs. 

[Laughter.] 

Chairman COLLINS. Mr. McMillin, I would invite you to proceed 

with your statement. 

Mr. MCMILLIN. Thank you, Madam Chairman, and thank you for 

recognizing my family. Obviously, those of us in public service 

couldn’t do the things we do without their help, love, and support. 

I am forever in their debt for all they have done for me in the past 

and all they will do for me during my time at OMB. 

I am also grateful that Senator Hutchison was willing to come 

and introduce me before the Committee. Unfortunately, she 

couldn’t make it, but I spent enough time here in the Senate to 

know that predicting votes and keeping a schedule in the afternoon 

is sometimes a bit of a challenge, but I thank you for pressing 

ahead with the hearing nevertheless. 

Chairman Collins, I want to thank you, Senator Lieberman, who 

also could not attend, and the Members of the Committee for the 

opportunity to appear today. If I am confirmed as Deputy Director 

of OMB, I will be assisting Director Portman in dealing with many 

challenging issues facing the Administration and the Congress. 

OMB has a unique role in American Government, with responsibilities that cover a broad range of policy, fiscal, and management 

issues. OMB’s most visible role is the preparation of the President’s 

annual budget request, but throughout the year, OMB supports the 

President and his Administration in a variety of ways. If confirmed, I will work closely with Members of Congress and this 

Committee from both parties to ensure that we are addressing the 

tough issues on behalf of the American people and to ensure that 

their tax dollars are spent wisely. 

As you are aware, Madam Chairman, I began my government 

service here in the Senate many years ago, serving as an aide to 

Senator Phil Gramm and to the Senate Banking Committee. In my 

nearly 12 years of service, I developed a deep love and respect for 

4

the history, traditions, and principles embodied in this great institution. In the Senate, everyone’s opinion counts. Everyone has a 

right to be heard, sometimes to be heard at great length. And everyone has a right to put forward their ideas and have them considered by their colleagues. This is a reflection of the fact that no 

one person, Administration, Committee, or party has a monopoly 

on wisdom or good ideas, and it is through dialogue and working 

together that truly great achievements are often possible. 

I know this Committee is particularly concerned with many of 

the management issues faced by OMB. In my view, good management and responsible budgeting are inseparable. When I first 

joined OMB in late 2001 as an Associate Director, I was struck by 

the strong concern and emphasis placed on management issues 

throughout the Administration. If confirmed, I look forward to 

working with the Members of this Committee to ensure continued 

progress on the President’s management agenda and the execution 

of OMB’s important management responsibilities. 

Madam Chairman, you made reference to the new figures released earlier this week through the mid-session review, some of 

the strong economic performance we have seen lately. I won’t repeat all of those facts. I will observe, as you have, that to make 

continued progress on this deficit, we need to continue the policies 

that helped create the strong economic performance and we need 

to continue our combined efforts to restrain spending. Working together, Congress and the President have reduced the growth of 

non-discretionary spending every year the President has been in office, and last year, Congress passed bills that actually cut this type 

of spending. And earlier this year, Congress passed the first spending reconciliation bill in nearly a decade. 

In the near term, budget process reforms and tools like the lineitem veto can help us control spending growth, eliminate wasteful 

spending items, and improve accountability. I am encouraged that 

the House has already passed the line-item veto with a strong bipartisan vote, and that the Senate is actively engaged in considering budget process reform, including the line-item veto. 

In the long term, as you mentioned, our major entitlement programs are projected to grow faster than inflation, faster than GDP, 

and faster than our economy’s ability to sustain them. Millions of 

our citizens rely on these important programs, and we have a responsibility to preserve them for future generations. To do so will 

require sound and innovative reforms, and if confirmed, I would 

welcome your input, that of your colleagues, and your advice on 

how we can best achieve them. 

Again, I appreciate the Committee’s consideration of my nomination. I look forward to answering any questions you may have. 

Chairman COLLINS. Thank you for your statement. 

I am going to begin my questioning this afternoon with three 

standard questions that we ask of all nominees. First, is there anything you are aware of in your background which might present a 

conflict of interest with the duties of the office for which you have 

been nominated? 

Mr. MCMILLIN. Madam Chairman, as I earlier informed the 

Committee in writing, due to my wife’s employment with American 

Airlines, if confirmed, I would recuse myself as appropriate from 

5

matters dealing with American. Other than that, there are no such 

issues. 

Chairman COLLINS. Thank you. Second, do you know of anything, personal or otherwise, that would in any way prevent you 

from fully and honorably discharging the responsibilities of this office? 

Mr. MCMILLIN. No. 

Chairman COLLINS. Third, do you agree without reservation to 

respond to any reasonable summons to appear and testify before 

any duly constituted Committee of Congress if you are confirmed? 

Mr. MCMILLIN. Yes. 

Chairman COLLINS. I would now like to turn to some policy 

issues. I have had the opportunity to meet with you previously. I 

will try not to duplicate all of those questions. 

I want to talk to you this afternoon about the role that OMB 

could play to help cut down on the incidence of waste, fraud, and 

abuse in the Federal Government. This Committee has held many 

oversight hearings that have documented hundreds of millions of 

dollars—in the case of Hurricane Katrina, over $2 billion in wasted 

funds, whether the waste was due to outright fraud or whether it 

was poor contracting decisions that caused the taxpayers to pay 

more than they should for goods and services. 

What do you see as OMB’s role in helping to curb the wasteful 

spending of taxpayer dollars? 

Mr. MCMILLIN. Madam Chairman, I believe one of OMB’s most 

critical functions is to be the watchdog of the Federal Government 

on those types of questions. I believe that one of the best things 

OMB can do in leading efforts to deal with waste, fraud, and abuse 

is to ensure that government-wide, we improve the quality and capability of the financial control systems we have at our agencies. 

Many times, and I think Hurricane Katrina is an excellent example, the relative lack of sophistication of those systems has made 

it difficult for CFOs and those responsible in the agencies to get a 

good feel for where the dollars are going and whether they are 

being obligated in an appropriate fashion until it is too late. 

Second, the Deputy Director of Management plays a critical role 

as the head of the IG community across the agencies. It is very 

easy, I have learned, in the Executive Branch to come to a view 

that an IG perhaps is not part of the team—someone who is perhaps antagonistic to the agency. 

I think it is a mistake to fall into that kind of trap. If you are 

going to have an independent IG community, clearly, they are 

going to need to be able to speak their minds freely on occasion, 

criticize the leadership of our agencies. We need to recognize that 

they have important duties to perform. They have a perspective 

and expertise that the folks charged with running the programs 

themselves don’t have. I have seen a number of examples in various agencies where the IG has been seen as a resource who can 

help the agency perform better, not just in terms of financial management and dealing with waste, fraud, and abuse, but also in exploring the effectiveness of programs and making sure that they 

can achieve better results on behalf of the American people. 

Chairman COLLINS. What do you see as the relationship between 

the Deputy Director and the Deputy Director for Management? Do 

6

you see your role as being exclusively on the budget side of OMB 

or also as having responsibility for some of the management of the 

Executive Branch—management policies, I should say? 

Mr. MCMILLIN. I view the role of the Deputy Director as a true 

deputy for the entire agency. That means that, if confirmed, I 

would need to be attuned to not just the budget and policy-related 

issues, but also the entire scope of OMB’s management responsibilities and how those are integrated with the budget and policy side. 

Obviously, the Congress in creating the Deputy Director for Management position wanted to have a senior person dedicated to those 

questions full time, and certainly Clay Johnson is a very effective 

and capable Deputy Director for Management, and like any manager in any organization, I think Director Portman and I, if confirmed, will continue to look to Mr. Johnson to provide the leadership in that area, but certainly not to simply cede responsibility or 

just leave him off unattended to the side. The issues that Clay is 

responsible for are very much the responsibility of the Deputy Director and the Director, as well. 

Chairman COLLINS. Every 2 years, the Government Accountability Office issues a list of programs or systems in the Federal 

Government that it views as being at high risk. By high risk, the 

GAO means that these programs or systems are either at high risk 

of failing or they are excessively vulnerable to waste, fraud, and 

abuse. Some of the systems, and programs have been on the list 

for a decade. What do you think OMB’s role ought to be when it 

comes to improving the performance and reducing the vulnerability 

of programs or systems on the high-risk list? 

Mr. MCMILLIN. I think there is an opportunity for OMB to form 

a partnership of sorts with the GAO on addressing programs on the 

high-risk list. GAO is another good example of an agency with a 

very important job to do, where it is important that we not view 

criticism as antagonism, but rather an opportunity to understand 

the challenges we face in some of these difficult programs and find 

some new ideas for solutions. 

I personally would hate to see an Executive Branch that was so 

timid that we didn’t take on a few high-risk projects from time to 

time. It is certainly helpful to ensure that both GAO and OMB provide a heightened level of focus on the implementation of those programs and systems and it requires the input of a variety of things 

that OMB can bring to the table. In some cases, that means using 

the statutory management offices as a resource to share best practices with some of the agencies that are working on these systems. 

In some cases, it means the budget side of the House has got to 

enforce some discipline when the planning or execution of a program is not proceeding as it should be. 

One of the worst things we can do, having identified a high-risk 

program, is to basically continue pouring money into it, hoping that 

will solve the problems when we may or may not have the right 

plans and management oversight in place to make sure that they 

are a success. 

Chairman COLLINS. I would really encourage you to tackle that 

list. It is unacceptable to have programs and systems listed year 

after year on the high-risk list, to have GAO point to these programs as being at risk of failure or excessively vulnerable to waste, 

7

fraud, and abuse, and yet no one does anything to improve the 

management of these programs. I think that is a really obvious list 

to start with. This Committee has held hearings on some of the 

programs to try to get the attention of agency leadership. But I 

really believe OMB could play a critical role in helping us to get 

programs off the high-risk list due to improved management. 

Mr. MCMILLIN. That is excellent advice. 

Chairman COLLINS. Senator Bennett. 

OPENING STATEMENT OF SENATOR BENNETT 

Senator BENNETT. Thank you very much, Madam Chairman. I 

thought we would have a bigger attendance after the vote. I came 

down before the vote and found out it was postponed. 

I am old enough, Mr. McMillin, to remember when it was the Bureau of the Budget, and it was during the Nixon Administration 

that it got renamed the Office of Management and Budget, but the 

‘‘M’’ has been honored in the breach and the ‘‘B’’ has continued to 

dominate. The change of name hasn’t changed the function nearly 

as much as perhaps it should. 

I simply add my voice to that of the Chairman to say the more 

attention we can pay to the management side, the ‘‘M’’ in OMB, 

and make that name change a reality—now I am overstating the 

case, but we always do that in Congress. We are in the business 

of overstating. I do recognize that there are a lot of good things 

that have gone on on the management side, but I think the Chairman’s emphasis on focusing on management and not just the creation of a budget is very well placed. I would encourage you in your 

position to do what you can to look at the management challenges. 

I have been a supporter of the idea that we have a 2-year budget, 

which would mean you would have more time. It would probably 

mean we would have a few more supplementals, but it would presumably mean you would have more time in a 2-year congressional 

cycle to focus on some of these management issues rather than 

being constantly consumed with having to put together next year’s 

budget. 

I congratulate you on your willingness to serve. These are not 

glamorous kinds of positions, but they are absolutely vital to the 

function of government, and we are grateful to you for your willingness to accept this assignment. 

Mr. MCMILLIN. Thank you, Senator. 

Senator BENNETT. Thank you. 

Chairman COLLINS. Thank you, Senator. 

As Senator Bennett was talking, I was thinking about how we 

often are penny-wise and pound-foolish in our approach to the 

budget. There are programs that would benefit from a greater upfront investment that would end up saving you a great deal of 

money in the long run. I want to give you three examples. 

One we discussed during your courtesy call and that is the LowIncome Heating Assistance Program, known as LIHEAP. If we 

were to fund this program so that the money were available in the 

Northeast in the summer months, you would be able to stretch the 

dollars further because the price of home heating oil is less in the 

summer months than at the height of the winter. Yet this funding 

8

is usually not released until there is an emergency situation at the 

height of the winter when prices are the highest. 

The second example is the Deepwater program, an ambitious and 

much-needed recapitalization of the Coast Guard’s assets. The 

Coast Guard has one of the oldest fleets in the world. Its cutters 

are aging. Its helicopters and planes are frequently down for maintenance. There is a commitment by the Administration to rebuild 

its assets, but it is a commitment that the Administration has proposed lengthening over a 20-year period. I have had studies done 

that indicate that if you were to recapitalize the Coast Guard over 

a 10-year period instead, not only would you give the Coast Guard 

the assets it desperately needs much sooner, but you would also literally save billions of dollars. 

The third example is in naval shipbuilding. In this case, we have 

uneconomical production rates. You see this with other defense systems, as well. There isn’t a question of not needing more ships, but 

for budget reasons, funding plans are stretched out, and as a result, we are underfunding shipbuilding. The end result is that the 

shipbuilding yards cannot plan their work effectively—and the Federal Government ends up paying far more per ship than it would 

if we had a more economical production line. 

What can we do to encourage a more long-term view to budgeting, realizing that in some cases, an investment up front can save 

you literally billions of dollars later? 

Mr. MCMILLIN. Well, Madam Chairman, it often strikes me that 

as we are budgeting, especially in the discretionary side of the account, there often is a tendency to basically look at last year’s level 

and do percentage adjustments to it. As you extend that sort of 

mathematical parsing of one big top-line allocation down into individual programs and accounts, it often can be hard for managers 

of a relatively small program to see how significant capital investments are possible, much less advisable, when they look at some 

of their near-term operational requirements. 

I think it is up to folks like OMB and the senior levels of agencies—you look at DOD in particular with an annual base budget 

of well over $400 billion now—and it should be possible as we are 

doing our long-term planning in the defense area and some other 

areas, as well, to be able to step back and say that this particular 

capital investment is in the Nation’s interest. It is appropriate for 

us to deviate from the everybody gets 3 percent, everybody gets 1 

percent type of approach that I believe budgeting can sometimes 

slip into. So identifying those opportunities up front, ensuring consistent top-level focus throughout OMB, and then working with the 

senior levels at the agencies, I think that is probably our best opportunity to prioritize those types of investments. 

Chairman COLLINS. You talked in your opening statement about 

the need for a line-item veto to give the President additional tools 

to control spending. Some of us are concerned about altering the 

balance of power, if you will, between the Executive and the Legislative Branches. What is your response to that concern? 

Mr. MCMILLIN. Well, Senator, the version of the line-item veto 

proposed by the President and under consideration in the Congress 

now is significantly different from the one given to President Clinton back in the 1990s. That version exercised by President Clinton 

9

did not require any further review by the Legislative Branch. It 

was simply a unilateral act by the Executive Branch. 

In this case, the line-item veto we are talking about would allow 

the President to send up a series of rescission proposals, which the 

Congress would consider under expedited procedures. While there 

is some diminution of the right of any individual member to 

amend, delay, or block that particular legislation, it is not a unique 

situation. There are a variety of situations, whether the Congressional Review Act or Trade Promotion Authority, things of that nature, where Congress has chosen to enact expedited procedures for 

the consideration of important matters. And so in this case, there 

is an opportunity for Congress to speak after the President has 

made a proposal and I think it represents an appropriate respect 

for Congress’ prerogatives. 

Chairman COLLINS. Senator Bennett. 

Senator BENNETT. Thank you, Madam Chairman. 

I supported the line-item veto that we gave to President Clinton, 

and he disillusioned me really fast. When I saw how it was used, 

I stood up on the floor of the Senate and said, ‘‘I hereby withdraw 

my support.’’ I was delighted when the Supreme Court struck it 

down. So I am willing to look at the details of this. I won’t say 

automatically no, but I remember the statement of Pat Moynihan, 

who probably served more Presidents than any Member of the Senate in history, starting with John F. Kennedy, Lyndon Johnson and 

Richard Nixon, Gerald Ford, and then he came to the Senate. He 

said if Lyndon Johnson had had the line-item veto, he would have 

been an emperor, and we don’t want to run that risk. 

I will look at the details of what you are presenting, but I think 

it is appropriate that you raise that, Madam Chairman. 

Chairman COLLINS. Thank you, Senator. 

Mr. McMillin, your family has had to wait a very long time today 

so I am going to ask you just one more question so that they can 

get home before it gets too late, and then I will be submitting the 

remainder of my questions for you to answer for the record. 

We have talked about the line-item veto as being a budget tool. 

Another budget tool that Congress had at one point was what is 

known as PAYGO rules, the pay-as-you-go rules. Those are budget 

enforcement policies. I know you are familiar with them from your 

time in the Senate. I also asked you a pre-hearing question about 

this. 

With respect to the application of PAYGO rules, I have consistently supported rules that would apply equally to new tax cuts and 

to new entitlement spending. The Administration, however, has a 

different view and contends that PAYGO rules should not apply to 

the tax side of the ledger. In your answers to the questions submitted to you prior to the hearing, you indicated agreement with 

the Administration’s position. 

If we are truly serious about regaining control of the budget, why 

wouldn’t we want to apply PAYGO rules to both sides of the ledger, 

both the spending and the revenue side? 

Mr. MCMILLIN. Well, Madam Chairman, as I understand the 

facts that informed the Administration’s position on this, we are in 

a situation where revenues are now and are projected to be going 

forward at approximately the historical level as a share of GDP, a 

10

little over 18 percent. As we look at the long-term projections going 

forward, we see that spending, in particular driven by entitlement 

growth, is projected to grow substantially as a share of the economy. In that sense, I think it is appropriate perhaps to apply further scrutiny on the spending side, but I agree with you, we should 

not ignore the revenue side of the equation. 

In my opinion, Section 311 of the Budget Act provides the Congress a good opportunity for exercising that kind of discipline. In 

the budget resolution, the Congress, a majority of the House and 

the Senate, can agree upon an aggregate level of revenues that legislation should not cause the Federal Government to go below. That 

decision can be made in the context of an overall budget so that 

we can decide what type of revenues we need consistent with our 

fiscal goals. Then as individual legislation is proposed, Section 311 

imposes that super-majority hurdle on proposals that would take 

our revenue below that level. 

So there is certainly a need for discipline on both sides of the 

equation. I think some of the reluctance on PAYGO also derives 

from the baseline rules, which in some cases treat taxes in particular, the 2001–2003 tax cuts that the President proposed and 

the Congress enacted, the baseline treats those a little bit differently than they do some spending programs. Many spending programs are assumed in the baseline to go on forever even if that is 

not current law. So then the question becomes in enforcing a 

PAYGO requirement, proposals need to be offset compared to 

what? So that is the basis of my view there. 

Chairman COLLINS. Thank you. I want to thank you for appearing before the Committee today and for your patience and that of 

your family. I will be submitting additional questions for the 

record. I don’t think that the absence of my colleagues indicates a 

lack of interest in your nomination but rather many competing demands this afternoon. I do expect that we may have some other 

questions submitted for the record. Without objection, the record 

will be kept open until 5 p.m. tomorrow for the submission of any 

written questions or statements for the record. 

Again, Mr. McMillin, I want to thank you for being here today, 

for your willingness to serve. It does require a great sacrifice on the 

part of your family, so I want to thank them, as well. 

This hearing is now adjourned. 

[Whereupon, at 4:57 p.m., the Committee was adjourned.] 

(11)

A P P E N D I X 

PREPARED STATEMENT OF SENATOR LIEBERMAN 

Thank you, Madam Chairman, and welcome, Mr. McMillin. I congratulate you on 

your nomination as Deputy Director of the Office of Management and Budget. 

Your previous experience at OMB as Associate Director for General Government 

Programs from 2001 to 2005 should help prepare you for your new post. 

Before his confirmation as head of OMB, your new boss Rob Portman promised 

‘‘to work closely with Congress on a bipartisan basis’’ as we try to get our exploding 

Federal deficit under control. 

As Deputy Director of OMB, I would hold you to the same promise. 

President Bush has said: ‘‘A budget is more than a collection of numbers. A budget is a reflection of a Nation’s priorities, its needs and its promise.’’

I agree, but would add: A budget must also be about delivering on those priorities 

. . . those needs . . . those promises, or else it really is just a collection of numbers 

without meaning or mission. 

Your job will be to assist Director Portman in helping the President prepare the 

budget and execute it across 14 cabinet agencies and more than 100 executive agencies, boards, and commissions. 

You will be part of the team that recommends where every dollar of our budget 

is spent, how each agency’s programs are managed, and that oversees the review 

of vital rules for public health and safety, worker safety, and environmental protection. 

I have concerns about how these responsibilities have been carried out for the last 

5 years. 

Let’s start with the budget. If we are going to get our fiscal house in order, everything has to be on the table, not just entitlement programs and discretionary spending, but our tax policies as well. 

We recently passed a $70 billion tax package that showers tax breaks on the Nation’s wealthiest, who don’t need the help, the oil industry, which is enjoying record 

profits, and increases the already enormous national debt, placing a hidden tax on 

our children and grandchildren. 

This also leads to a lack of resources to adequately fund vital programs most of 

us agree are essential to our Nation’s priorities, needs, and promise. 

For example, I supported No Child Left Behind because I want to ensure a highquality education for all of our students, regardless of income. I believed it was important to try new ideas. But these ideas demanded additional resources. 

We have not delivered those resources. Under the President’s budget, the NCLB 

shortfall will be $15.4 billion next year. As a result, the Title I budgets of most 

school districts across the country will be frozen or cut. 

In Connecticut, 122 out of 166 school districts will see Title I cuts this year. That 

is wrong. 

I fear we are about to repeat the underfunding mistake of No Child Left Behind 

with the President’s recently announced ‘‘National Strategy for Pandemic Influenza 

Implementation Plan.’’ That plan relies heavily on States and localities to carry the 

burden. But experts tell me these State and local programs are significantly underfunded. 

Second, Homeland Security also needs more help. Yet, whenever I challenged the 

Administration’s budget for homeland security, officials countered by citing how 

much spending has grown in recent years. 

Of course it has grown! We were caught unprepared on September 11, 2001. The 

question is not whether we are spending more, but whether we are spending enough

to meet the government’s fundamental obligation to protect its citizens. 

Too often, the answer is no. We are shortchanging port security, interoperable 

communications, bioterror preparedness, and more. 

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And as we have learned all too painfully with Hurricane Katrina, we are shortchanging preparedness for catastrophic natural disasters, as well as terrorist attacks. 

Finally, on an important matter of budget process, we are now more than 3 years 

into the wars in Iraq and Afghanistan. 

There is no good reason why the costs of these engagements are still being handled in separate supplemental budget requests. 

This approach harms us in two ways. 

First, it hides the true costs of our defense by putting a large part of the costs 

off budget. That reduces the scrutiny and discipline our defense budgeting needs 

and adds to the bill our children must pay. 

Second, it also encourages our military to put core programs into the supplemental. When—not if—the supplementals come to an end, those programs will be 

unsustainable. 

I do not agree that the costs of Iraq and Afghanistan are unknowable and that 

we can’t budget for them. 

I do agree that a budget is a statement of our priorities, needs, and promises. But 

without proper funding in the beginning—and good execution afterward—it is just 

numbers with no meaning or mission. 

And that means it fails the American people. 

Thank you, Madam Chairman. 

PREPARED STATEMENT OF SENATOR STEVENS 

Mr. McMillin, in FY 2003 and FY 2005, Congress—at my request—appropriated 

a total of $5 million to the Tribal Partnership Program. It was our intention that 

this funding would go to the Alaska Village Erosion Tribal Partnership. This partnership was set up to assist the U.S. Army Corps of Engineers in prioritizing the 

needs of 184 Alaska villages that have been severely damaged by coastal erosion. 

This joint effort—which is known as the erosion baseline study—is an essential part 

of our efforts to address the erosion crisis in our Alaska villages. 

In June, I learned that the Corps of Engineers had reprogrammed $2.168 million 

of this funding to projects outside of the Alaska District. I sent a letter to Secretary 

Woodley, Assistant Secretary for Public Works at the U.S. Department of the Army. 

I told Secretary Woodley that I believe it is improper for the Corps to take funding 

away from this vital project. I also told him it is unacceptable to continually expect 

me to restore funding to address this urgent situation. Reprogramming is an important tool which the Corps can use to move projects forward. However, in this case, 

their decision to reprogram has had the opposite effect—it has ground the erosion 

baseline study of our villages to a halt. 

One hundred eighty four of our State’s villages have been seriously impacted by 

coastal erosion and flooding. Four villages are in imminent danger and must relocate. The Corps and the Administration are well aware of this dire situation. Yet, 

the President’s budget this year did not include any funding to address coastal erosion in our State. 

The coastal erosion crisis in our villages warrants support from OMB. The citizens 

of rural Alaska deserve the same attention and concern as those impacted by Hurricanes Katrina and Rita. When entire communities are forced to relocate due to erosion, it should be a funding priority. 

I intend to oppose this nomination as a protest against OMB. OMB must recognize the plight of our villages, which have been severely damaged by storms and 

some of which have been declared national disaster areas by the President. It is my 

hope that by opposing this nomination, OMB will finally take the erosion crisis in 

our villages seriously and provide the funding needed.

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