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77–376—PDF 2011

S. HRG. 112–657 

NOMINATIONS OF MARY JOHN MILLER, 

ALASTAIR M. FITZPAYNE, KATHLEEN KERRIGAN, 

AND HENRY J. AARON 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

ON THE

NOMINATIONS OF 

MARY JOHN MILLER, TO BE UNDER SECRETARY FOR DOMESTIC FINANCE, DEPARTMENT OF THE TREASURY; ALASTAIR M. FITZPAYNE, 

TO BE ASSISTANT SECRETARY FOR LEGISLATIVE AFFAIRS, DEPARTMENT OF THE TREASURY; KATHLEEN KERRIGAN, TO BE A JUDGE OF 

THE UNITED STATES TAX COURT; AND HENRY J. AARON, TO BE A 

MEMBER OF THE SOCIAL SECURITY ADVISORY BOARD 

NOVEMBER 17, 2011 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

RUSSELL SULLIVAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 1 

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 3 

Kerry, Hon. John F., a U.S. Senator from Massachusetts ................................... 4 

Cardin, Hon. Benjamin L., a U.S. Senator from Maryland ................................. 5 

ADMINISTRATION NOMINEES 

Miller, Mary John, nominated to be Under Secretary for Domestic Finance, 

Department of the Treasury, Washington, DC .................................................. 8 

Fitzpayne, Alastair M., nominated to be Assistant Secretary for Legislative 

Affairs, Department of the Treasury, Washington, DC .................................... 9 

Kerrigan, Kathleen, nominated to be a judge of the United States Tax Court, 

Washington, DC ................................................................................................... 10 

Aaron, Dr. Henry J., nominated to be a member of the Social Security Advisory Board, Social Security Administration, Baltimore, MD ............................ 11 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Aaron, Dr. Henry J.: 

Testimony .......................................................................................................... 11 

Prepared statement .......................................................................................... 27 

Biographical information ................................................................................. 28 

Responses to questions from committee members ......................................... 41 

Baucus, Hon. Max: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 51 

Cardin, Hon. Benjamin L.: 

Opening statement ........................................................................................... 5 

Coburn, Hon. Tom: 

Statistics on waste in the health care system ................................................ 53 

Fitzpayne, Alastair M.: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 55 

Biographical information ................................................................................. 56 

Responses to questions from Senator Hatch .................................................. 63 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 3 

Prepared statement .......................................................................................... 64 

Kerrigan, Kathleen: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 66 

Biographical information ................................................................................. 68 

Responses to questions from Senator Hatch .................................................. 75 

Kerry, Hon. John F.: 

Opening statement ........................................................................................... 4 

Prepared statement .......................................................................................... 76 

Miller, Mary John: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 78 

Biographical information ................................................................................. 80 

Responses to questions from Senator Hatch .................................................. 90 

(1) 

NOMINATIONS OF MARY JOHN MILLER, 

TO BE UNDER SECRETARY FOR DOMESTIC 

FINANCE, DEPARTMENT OF THE TREASURY; 

ALASTAIR M. FITZPAYNE, TO BE ASSISTANT 

SECRETARY FOR LEGISLATIVE AFFAIRS, 

DEPARTMENT OF THE TREASURY; 

KATHLEEN KERRIGAN, TO BE A JUDGE OF 

THE UNITED STATES TAX COURT; AND 

HENRY J. AARON, TO BE A MEMBER OF THE 

SOCIAL SECURITY ADVISORY BOARD 

THURSDAY, NOVEMBER 17, 2011 

U.S. SENATE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 10:16 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus 

(chairman of the committee) presiding. 

Present: Senators Kerry, Cardin, Hatch, Grassley, Coburn, and 

Thune. 

Also present: Democratic Staff: Alan Cohen, Senior Budget Analyst; John Angell, Senior Advisor; Gabriel Adler, Senior International Trade and Economic Advisor; David Schwartz, Chief 

Health Counsel; Tom Reeder, Senior Benefits Counsel; Tiffany 

Smith, Tax Counsel; Rory Murphy, International Trade Analyst; 

Tom Klouda, Professional Staff Member, Social Security; Deidra 

Henry-Spires, Professional Staff; Stephen McGraw, Detailee, 

Health; Joe Scovitch, Detailee, Miscellaneous; and Claire Green, 

Detailee, Social Security. Republican Staff: Chris Campbell, Staff 

Director; Jeff Wrase, Chief Economist; and Nick Wyatt, Tax and 

Nomination Professional Staff Member. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The hearing will come to order. 

‘‘The ultimate measure of a man,’’ and by extrapolation woman, 

according to Martin Luther King, Jr., ‘‘is not where he stands in 

moments of comfort, but where he stands in times of challenge and 

controversy.’’ 

As we consider the men and women before us today, our country 

is facing serious challenges. America’s economic recovery is still 

fragile, unemployment is stubbornly high at 9 percent, and the 

2 

debt is burdensome. But our history proves that when we meet 

challenges head on we are usually able to rise above them and succeed. It is in this spirit of optimism that I welcome four dedicated 

public servants to the Finance Committee today. All of you have 

been nominated to positions of great responsibility. You are certain 

to face hurdles, but I am confident you will rise to the challenge. 

Ms. Miller, the President has nominated you to be Under Secretary of the Treasury for Domestic Finance. In this role, you will 

help oversee our domestic financial system and fiscal policy. You 

are no stranger to this committee. In February 2010, you were confirmed as Assistant Secretary for Financial Markets. Your fine performance in that position led the President to nominate you to take 

on even more responsibility. 

In your new position, you will help stoke job creation by our 

country’s entrepreneurs. To do so, you must ensure that financial 

markets are able to gauge risk appropriately so that the resources 

flow to the most promising and productive areas of our economy. 

I know you appreciate the magnitude of your mission, and you will 

face it with great determination. 

Mr. Fitzpayne, the President nominated you to be Assistant Secretary of Treasury for Legislative Affairs. In this role, you will 

serve as the bridge between Congress and the Treasury Department. You must ensure that Treasury maintains a high level of 

transparency with Congress, and by extension with the American 

people. In these challenging economic times this will not be an easy 

task. I underline the importance of transparency: we do not like to 

be surprised. 

Mr. Fitzpayne, you spent nearly a decade working on the Hill, 

so you know what I just said is true. You therefore know how Congress works. You understand the timely and appropriate information flow that Congress needs from the executive branch, so I wish 

you every success. 

Ms. Kerrigan, the President has nominated you to be a judge on 

the U.S. Tax Court. You are a familiar face to this committee, as 

you have served with distinction as tax counsel to Senator Kerry. 

As a congressional staffer, you were highly regarded by your colleagues on both sides of the aisle. 

The Tax Court plays an essential role in ensuring that our tax 

laws are administered fairly. The integrity of our tax system hinges 

on the ability of Americans to have their day in court when they 

have a legitimate tax problem, and to have the tax law applied impartially. I know that you will do so carefully and faithfully. 

Dr. Aaron, the President has nominated you to be a member of 

the Social Security Advisory Board. In this climate of fiscal tightening, one of the most important issues facing our country is how 

to preserve, strengthen, and protect Social Security. I know that 

you have written extensively on this very issue and have a lengthy 

and distinguished academic background. You have also served on 

a number of other advisory bodies, and you have a reputation for 

providing thoughtful and candid advice. I urge you to provide nothing else than that to the Social Security Advisory Board. 

For all of you, there will be difficult moments ahead. The positions for which you have been nominated are not easy, and these 

3 

are challenging times for our country. But during times like these, 

we have the greatest opportunity to determine the future. 

So I urge all four of you to be mindful of Dr. King’s words, and 

with determination and courage you will rise to the occasion and 

help our country do great things. We in Congress should also be 

courageous and rise to the challenge too—not just you, but we— 

and I am sure that we will. 

[The prepared statement of Chairman Baucus appears in the appendix.] 

The CHAIRMAN. Senator Hatch? 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. Thank you, Mr. Chairman. 

My thanks also to the four nominees who are appearing before 

us today. 

Our first witness is Mary Miller, nominated to be Under Secretary for Domestic Finance at the Treasury Department. This position is especially important, given the need to protect and preserve the depth and liquidity of the global market for U.S. Treasury securities in the face of unsustainable deficits and debt over 

the past 3 years that have helped lead to the recent downgrade of 

our sovereign credit rating. 

It is essential that the Treasury Department have solid debt 

managers with intricate knowledge of international debt and international debt markets. Ms. Miller is currently the Assistant Secretary of the Treasury for Financial Markets and has a background 

working in markets for fixed income securities at the T. Rowe Price 

Group. Additionally, Ms. Miller’s responsibilities, if confirmed, will 

include the Office of Financial Stability, which manages the Troubled Asset Relief Program, or TARP. 

Earlier this week it was reported that the Treasury Department 

increased its estimated losses attributable to the auto industry 

bail-out by more than $9 billion. Although TARP is not able to 

make new commitments, there are still many billions of taxpayer 

dollars still outstanding. 

Our second witness, Mr. Alastair Fitzpayne, also is a current 

Treasury Department employee and is under consideration for the 

position of Deputy Under Secretary for Legislative Affairs at Treasury. If confirmed, he will serve as the principal point of contact for, 

and coordinator of, Treasury’s interaction with Congress. Now, I 

hope to learn how Mr. Fitzpayne envisions enhancing Treasury’s 

interaction with Congress. 

I have been unsatisfied with the speed of responses to some of 

my letters and the level of communication with the Treasury Department, so I look forward to working on enhancing that relationship. 

Our third witness, Ms. Kathleen Kerrigan, has been nominated 

to be a judge of the U.S. Tax Court in order to administer our tax 

laws fairly and impartially. Ms. Kerrigan has worked for both Congressman Neal and Senator Kerry on tax issues, and is well-known 

and very well thought of by both sides of the committee and by me. 

The integrity and intelligence she brings to our work have made 

4 

her a resource to the whole committee, and the tax code is better 

than it otherwise would have been as a result. 

I understand from my staff that a provision that Ms. Kerrigan 

worked on for Congressman Neal was a clarification of the employment tax status of certain fishermen that was enacted as part of 

the Small Business Job Protection Act of 1996. Kathy, we are going 

to miss having you here. So I hope taxpayers who will appear before you in your new role will appreciate how fortunate they are, 

and will be. 

Our fourth witness, Dr. Henry Aaron, currently at the Brookings 

Institution, has been nominated to be a member of the Social Security Advisory Board and, I understand also, to be designated by the 

President, if confirmed, to serve as the Board’s Chairman. 

Social Security’s Disability Insurance program faces trust fund 

exhaustion by as early as 2016, and Social Security as a whole 

faces significant financial challenges. Consequently, it will be important that we in Congress receive balanced and bipartisan input 

into the administration of Social Security programs and possible reforms from the Advisory Board. 

Now, Mr. Chairman, I want to thank you again for holding this 

hearing. I look forward to hearing from the nominees on today’s 

panel and appreciate the way you are running the committee. 

The CHAIRMAN. Thank you, Senator, very much. 

[The prepared statement of Senator Hatch appears in the appendix.] 

The CHAIRMAN. I think we have Senators here who would like to 

introduce panelists. Senator Kerry, do you want to introduce your 

constituent? 

Senator KERRY. Mr. Chairman, thank you very, very much. I will 

not take long. 

OPENING STATEMENT OF HON. JOHN F. KERRY, 

A U.S. SENATOR FROM MASSACHUSETTS 

Senator KERRY. Mr. Chairman, you and the ranking member 

could not have been more generous in your comments. I just ask 

unanimous consent that my comments be placed in the record in 

full. 

[The prepared statement of Senator Kerry appears in the appendix.] 

Senator KERRY. I will just say very quickly that—Senator Hatch 

just said it—her expertise is very, very well-known to the committee. She has been a remarkable resource for all of us. She 

worked for me for a while as the Counsel, Tax Counsel to the Small 

Business Committee, when I was chairman of that, and most recently obviously working on the Deficit Reduction Committee. She 

has been our go-to person on my staff with respect to that and is 

still deeply immersed in that today as the hours tick off. 

But I would just say that, in the 14 years that she has worked 

on these issues, she has proven herself to majority and minority 

alike, Republicans and Democrats, to be somebody who does not 

bring any politics to the table, but brings a really high level of integrity, as Senator Hatch said, and a high level of intelligence and 

creativity, which is what you need to find your way through some 

of these issues. 

5 

I congratulate all of the nominees. If I knew them all personally 

as well I know Kathy, I would love to comment on each of you. I 

know that Mr. Fitzpayne was raised partially in Massachusetts, 

and so we hope the best parts of that, obviously, come out here. 

[Laughter.] 

But Kathy has public service in her DNA: her father was Mayor 

of the city of Springfield. She worked for a brief period of time at 

a private law firm, Baker and Hostetler, but mostly her heart and 

head are in public service. And while she could easily leave this 

committee, as sometimes people do, and find a very lucrative position, she wants to dedicate herself further to public service. 

So I am very proud that the President has chosen to nominate 

her to be a judge on the Tax Court. She will bring fairness and 

toughness. She is a tough negotiator, as everybody here has 

learned. But she knows her facts, and she does ultimately what is 

in the best interests of the broader public interest of the country 

and the people she is trying to serve. 

So, Mr. Chairman, I am delighted that she is a nominee whose 

moment has come. It is very bittersweet for me because there is a 

huge part of me that does not want to see her go and lose that expertise, but the one solace is, she will be serving the country and 

our broader interests, and we will know that the laws we pass here 

will be well-interpreted. So, I welcome her to this new mission and 

thank her for extraordinary service to all of us. Thank you. 

The CHAIRMAN. Thank you, Senator, very much. 

Senator Cardin, I believe you have witnesses whom you would 

like to introduce. 

OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 

A U.S. SENATOR FROM MARYLAND 

Senator CARDIN. Well, thank you, Mr. Chairman. I have two 

nominees who are from Maryland, and it gives me great pleasure 

to introduce both. 

But I just want to follow up on Senator Kerry quickly and hope 

we can move this hearing promptly so that Kathy can get back to 

work on that Joint Committee and get things moving. [Laughter.] 

So I will not take too much time, but I do want to point out 

that—— 

The CHAIRMAN. There is a part of me that wants to stay here a 

long time. [Laughter.] 

Senator CARDIN. I understand. I mentioned that to Senator 

Kerry, whether this was a safe haven or not in this committee 

room. He assured me it is not, that they can find you. 

But let me first thank all four of the nominees for being willing 

to serve in this public capacity, continue to serve in public capacity. 

I want to thank all the family members who are here, because this 

is a family effort, and we know that. We very much appreciate your 

willingness to share your loved one with us and with the American 

people. 

Kathy, I got to know you when you were staffing Richard Neal 

when I was in the Ways and Means Committee. I am going to be 

interested to watch your decisions in the Tax Court and how they 

compare to the complaints that you were making when you were 

6 

staffing on these issues, some of the decisions that came out of the 

Tax Court. But I wish you well. 

And to Henry Aaron, I have known him for over 2 decades. He 

has been a friend, advisor, and he is a person whom I think gives 

candid advice in regards to Social Security. So I want you to know, 

the two nominees who are not from Maryland, I know you wish you 

were from Maryland. Quite frankly, Senator Kerry, Al is from 

Maryland, not from Massachusetts, but we have all spent part of 

our time in Massachusetts. 

Let me, if I might, first comment about Mary Miller, who has 

been nominated to be the Under Secretary of the Treasury at the 

U.S. Department of Treasury. Mary Miller spent most of her professional life working in the bond market. She has 26 years of experience working at T. Rowe Price, rising from a researcher to a 

trader and a portfolio manager, and finally as the director of the 

Global Fixed Income investment. 

For the past 2 years, Ms. Miller has served as the Assistant Secretary for Financial Markets at Treasury. To leave the private sector and to take on the responsibility of overseeing our financial 

markets and national debt, especially as the country faces significant challenges in both areas, is very, very impressive, and we 

thank her for that. 

But, Mr. Chairman, I think the greatest compliment that I can 

pay Ms. Miller is that the person who proceeded me in the U.S. 

Senate, Senator Paul Sarbanes, thinks the world of Ms. Miller and 

thinks that she is one of the most talented people whom he has 

ever worked with. He wanted me to mention to the committee his 

strong support of Mary Miller for this position. 

Ms. Miller, if confirmed, will be at Treasury to oversee our fiscal 

policies and ensure that the United States remains one of the 

strongest economies in the world. I think that will give all of us 

comfort. 

My other constituent, Mr. Alastair Fitzpayne, is probably not 

used to sitting on that side of the witness table, having spent 8 

years as a congressional staffer, most of that time in the Senate for 

Senator Evan Bayh. In addition to working for the Senate, Mr. 

Fitzpayne has devoted his career to public service, working as an 

intern at OMB, a policy advisor for then-Congressman Rahm 

Emanuel, and since 2009 as the Deputy Chief of Staff at the Treasury Department. 

I just really want to underscore what the chairman said. The relationship between Congress and Treasury is a difficult challenge, 

but it gives us comfort to know that someone who understands 

those issues, coming from the congressional side, will fill that position. Al, your background and your work here give us great confidence that you will do that with great distinction. 

So, Mr. Chairman, I welcome again all four of our nominees and 

thank them for their willingness to serve. I am proud of the two 

who come from Maryland, but I am proud of all four of the witnesses today. 

The CHAIRMAN. Thank you, Senator. 

Our final nominee is Dr. Aaron. You were all introduced, right? 

Good. Great. All right. 

7 

Let us hear first from you, Ms. Miller. You know our customary 

procedure here. Your statement will be included in the record, and 

I would ask you to summarize. 

But before we begin, I think it would be a good idea if we are 

introduced to your family, friends, relatives, associates, whomever. 

So why don’t you begin, Ms. Miller? If you have any family here 

you would like to introduce, we would be very honored. 

Ms. MILLER. Thank you very much, Chairman Baucus. I would 

like to recognize three members of my family who are here today: 

my father, James John, who, among his many accomplishments, 

taught history for 37 years at Cornell University; my husband of 

31 years, James Miller; and my brother, James John, one of my 

five siblings. 

I would also like to recognize my two sons, Thomas and James, 

who are away at graduate school in college and could not be here 

today. Thank you. 

The CHAIRMAN. Well, could you who are here please stand and 

be recognized, your father and others? That is wonderful. Ms. Miller, you just confirmed one of my theories, which is, you show me 

an achiever, and I will show you that there is a person in that 

achiever’s family who is a teacher. [Laughter.] 

Mr. Fitzpayne, any relatives? 

Mr. FITZPAYNE. Thank you, Senator. I am happy to introduce the 

two members of my family who are here today. I am joined by my 

wife of over 10 years, Jill Morningstar, who, like me, had the privilege of working in the U.S. Senate. She worked for Senator Wellstone as his legislative assistant up until his tragic death in 2002. 

I am also joined by my mother, Elizabeth Fitzpayne. She is now 

retired but also had a stint in public service. She worked for the 

Bureau of the Budget, which is now the Office of Management and 

Budget, and they are right behind me. 

The CHAIRMAN. Great. Would you all please stand so we can recognize you? That is great. Thank you very much for being part of 

the team here. 

Ms. Kerrigan? 

Ms. KERRIGAN. I would like to thank my husband, Pat Kerrigan, 

who is here with me today. He has been very patient, especially the 

last couple of months. And I would like to mention my stepchildren, Mike and Shannon Kerrigan, who are not here today because they are students at the University of Virginia. 

The CHAIRMAN. Well, super. Do you want to stand, Mr. Kerrigan? 

Thank you very much. 

And Dr. Aaron? 

Dr. AARON. I do not know if this microphone is going on. 

The CHAIRMAN. It is. 

Dr. AARON. But thank you very much. I am joined this morning 

by my wife of 48 years, Ruth Kotell Aaron, who is sitting over here. 

She is a retired psychoanalyst. My two children, Jeffrey and my 

daughter Melissa Aaron, are both some miles away, the former in 

Charlottesville where he is a clinical psychologist, and my daughter 

Melissa in Seattle who is teaching secondary school English. I am 

sure they would have liked to have been here, but there are a few 

miles that make that rather impractical. 

The CHAIRMAN. Right. 

8 

Dr. AARON. Thank you. 

The CHAIRMAN. Dr. Aaron, thank you very much. 

Ms. Miller, you are on. 

STATEMENT OF MARY JOHN MILLER, NOMINATED TO BE 

UNDER SECRETARY FOR DOMESTIC FINANCE, DEPARTMENT 

OF THE TREASURY, WASHINGTON, DC 

Ms. MILLER. Thank you to Senator Cardin for that kind introduction. Thank you, Chairman Baucus, Ranking Member Hatch, and 

members of the Senate Finance Committee, for the opportunity to 

be here today. I am honored that President Obama and Secretary 

Geithner have asked me to continue my service to the Treasury Department and to have the opportunity, if confirmed, to serve as the 

Under Secretary for Domestic Finance. 

I have already recognized my family members. I just would like 

to add that words cannot express the important ways that my family and friends have supported me and contributed to the opportunity to be here today. 

Two years ago, this committee considered me for the role of Assistant Secretary for Financial Markets at the Treasury, a position 

for which I was later confirmed. At that time I discussed my experience in the private sector and the 26 years I spent at T. Rowe 

Price, an investment management company in Baltimore, which remains my home. 

I joined T. Rowe Price in 1983 as a municipal bond credit analyst 

after answering an ad in the Wall Street Journal. Over the years 

I worked in credit research, bond trading, and portfolio management. During those decades, I worked through many market and 

economic cycles, and I witnessed both the benefits of financial market innovation as well as periods of severe market stress. 

Ultimately I served as the director of Global Fixed Income for the 

firm and was a member of the management committee that oversaw all of the firm’s business. I mention this progression because 

I think that experience, rooted in the practical aspects of every step 

of the investment process, is relevant to the position for which I 

have been nominated. 

The past 21 months at the Treasury Department have been instructive. My colleagues and I have worked diligently on some of 

the more challenging issues facing the country. I am constantly impressed by the thoughtful and dedicated public servants with whom 

I work every day. 

As head of the Office of Financial Markets, I am responsible for 

managing our country’s debt, including our Treasury auctions. I 

also have responsibilities for financial market reform and government policies for extending credit. I advise Secretary Geithner on 

developments in financial markets, and I try to use my experience 

to develop useful policy positions. 

In many ways, my work at Treasury and the potential assignment to serve as Under Secretary for Domestic Finance parallel my 

experience in the private sector. At T. Rowe Price I moved from a 

position of hands-on execution to one where I oversaw the people 

and the processes that affected our business. At the Treasury, I 

have worked on very specific assignments that require engagement 

9 

with a wide variety of constituencies, both inside and outside the 

government. 

Should I be confirmed to lead the Office of Domestic Finance, my 

portfolio of responsibilities would be broader, my role in policy development greater, and the need for managing people and process 

even more important. The challenges we face today are no less important than the ones I discussed here 2 years ago. While much 

has been accomplished, much remains to be done. 

Most importantly, too many Americans are still struggling to find 

jobs, and our housing market remains weak. The urgency and importance of restoring confidence in our economy and our financial 

markets is clear. This cannot be accomplished overnight, and that 

is why I appreciate the opportunity to serve in this new role at the 

Treasury. If confirmed, I would look forward to working with members of this committee and Congress. I will work hard and do my 

best to carry out my oath of office. 

Thank you. 

[The prepared statement of Ms. Miller appears in the appendix.] 

Senator HATCH. Mr. Fitzpayne? 

STATEMENT OF ALASTAIR M. FITZPAYNE, NOMINATED TO BE 

ASSISTANT SECRETARY FOR LEGISLATIVE AFFAIRS, DEPARTMENT OF THE TREASURY, WASHINGTON, DC 

Mr. FITZPAYNE. I would also like to thank Senator Cardin for his 

kind introduction. Chairman Baucus, Senator Hatch, members of 

the Senate Finance Committee, I appreciate the opportunity to appear before the committee today on such a distinguished panel of 

nominees. It is an honor. 

I want to thank you and your staff for considering my nomination to be the Treasury’s Assistant Secretary for Legislative Affairs 

and for all the work that has gone into scheduling this hearing. I 

also want to express my deep appreciation to President Obama for 

nominating me, and to Secretary Geithner for recommending me 

for this position. 

In addition to my wife and mother, whom I introduced earlier, 

I would also like to briefly recognize some family members who are 

not here, including my two children Leah and Ben, my brother 

David, and my father- and mother-in-law, Richard and Faith Morningstar. I am eternally grateful for everything they have done for 

me, and they all, in different ways, are responsible for me being 

here today. 

I currently serve as the Deputy Chief of Staff and Executive Secretary at the Treasury Department, which I joined in January of 

2009. It has been the opportunity of a lifetime to work with Secretary Geithner and the rest of the amazingly talented Treasury 

team during these historic and challenging times. I am deeply honored to have the opportunity to continue my service to the country 

and the Department, if confirmed for this new position. 

Briefly, I began my career working for the Federal Government 

13 years ago as a Presidential Management Intern in the Office of 

Management and Budget. I spent over 2 years at OMB, helping to 

put together the President’s budget and working closely with the 

Social Security Administration on ways to improve their performance at least cost to the taxpayer. 

10 

In 2001, I began working for Senator Evan Bayh as his tax and 

budget legislative assistant, which gave me an opportunity to work 

closely with this committee on many issues. In 2007, I left the Senate and began working for then-House Democratic Caucus Chair 

Rahm Emanuel as his senior policy advisor. In this capacity I continued to work on tax issues, as he was a member of the Ways and 

Means Committee, and also had responsibility for financial services 

issues and staffed him during the consideration and passage of the 

Troubled Asset Relief Program. 

I am indebted to both Senator Bayh and Mayor Emanuel for the 

trust they placed in me and for the opportunity to work with them 

in their efforts to help their constituents and the country. 

If confirmed, I look forward to having the opportunity to again 

work closely with members and congressional staff to facilitate an 

open line of communication between the Treasury and Congress. I 

will faithfully represent the policies and views of the Department 

and administration before this committee and others in Congress. 

Most importantly, I will ensure that the views of Congress are 

accurately conveyed and fully understood within the Department 

and the administration, and will strive to see that questions and 

concerns from members of Congress receive timely and substantive 

responses. 

Chairman Baucus, Senator Hatch, members of this committee, 

thank you again for your consideration. I look forward to responding to any questions you may have. 

Senator HATCH. Thank you. 

[The prepared statement of Mr. Fitzpayne appears in the appendix.] 

Senator HATCH. Ms. Kerrigan? 

STATEMENT OF KATHLEEN KERRIGAN, NOMINATED TO BE A 

JUDGE OF THE UNITED STATES TAX COURT, WASHINGTON, DC 

Ms. KERRIGAN. Mr. Chairman, Ranking Member Hatch, and distinguished members of the committee, it is a privilege to be here 

today, and I want to thank you for scheduling this hearing to consider my nomination to be a judge on the U.S. Tax Court. I am 

honored to have been nominated by President Obama and grateful 

to the committee for your consideration of my nomination. 

I have spent countless hours in this room over the years, but 

never from this vantage point. I believe the first time that I was 

in this room was to attend a briefing for Ways and Means Committee and Senate Finance tax legislative assistants. At that time 

I never envisioned that I would appear in this room as a nominee 

to the U.S. Tax Court. 

I grew up in Springfield, MA and, upon graduation from law 

school, I joined the staff of Congressman Richard E. Neal. During 

my tenure with Congressman Neal, he became a member of the 

Ways and Means Committee. I was fortunate to be given the role 

of handling tax issues for the committee. Congressman Neal and I 

began our journey together on understanding the ins and outs of 

tax policy. 

Under the tutelage of Janice Mays and John Buckley, I became 

a student of tax policy and decided that it would be the focus of 

my professional career. After working 8 years for Congressman 

11 

Neal, I moved to the private sector to approach tax policy from a 

different perspective. 

While in private practice, I was offered what I view as a unique 

and special opportunity to serve as tax counsel for Senator Kerry. 

It has been an amazing opportunity from both a professional and 

personal perspective. Working for Senator Kerry has been challenging and rewarding. Over the past 6 years, I have worked on 

a variety of issues, including energy taxes, corporate taxes, and individual taxes, and have worked on many pieces of legislation, from 

drafting to enactment. 

This set of experiences, many of which occurred in this very 

room, has strongly prepared me to serve as a Tax Court judge. As 

we all know, Congress writes the tax laws, the Internal Revenue 

Service administers them, and the Tax Court assures that taxpayers can challenge the determinations of the Internal Revenue 

Service before an independent and impartial decision-maker. If I 

am given the opportunity to serve, it will be my responsibility to 

help make determinations of consistency and clarification. 

I would like to thank my parents, Bill and Betty Sullivan, who 

are watching today. From them I learned the importance of public 

service. Throughout my career, I have been fortunate to have several mentors, and some are in the room today. I would like to specifically mention three of my mentors from my time in private practice who are no longer with us today: Henry Zapruder, Ken Snyder, 

and Congressman Guy Vander Jagt. When I heard the news that 

I was going to be nominated, I wished that I could have seen their 

reaction. 

In closing, I would like to thank Senator Kerry for the opportunity to serve as his tax counsel. I always thought that some day 

I would like to work with the Finance Committee because of its 

reputation for bipartisanship. Senator Kerry provided me with that 

opportunity. I have been fortunate to work for one of the most committed and hardest-working members of the Senate, and I have 

learned a tremendous amount from him. 

I also have had the pleasure to work with so many past and current Finance Committee staff, many who have become close 

friends. I truly appreciate this experience, and this moment is bittersweet. If confirmed, I look forward to the next chapter of my 

professional career as a Tax Court judge, but I will always have 

fond memories of this room, this institution, and this group of people. 

Thank you for the opportunity to testify. 

Senator HATCH. Well, thank you, Ms. Kerrigan. 

[The prepared statement of Ms. Kerrigan appears in the appendix.] 

Senator HATCH. Dr. Aaron? 

STATEMENT OF DR. HENRY J. AARON, NOMINATED TO BE A 

MEMBER OF THE SOCIAL SECURITY ADVISORY BOARD, SOCIAL SECURITY ADMINISTRATION, BALTIMORE, MD 

Dr. AARON. Thank you very much. I want to thank Senator Baucus and all members of the Senate Finance Committee for taking 

the time to consider my nomination for membership on the Social 

12 

Security Advisory Board during what I realize is a particularly hectic period for this committee. 

I was honored and pleased when President Obama nominated me 

for this position. I have worked on Social Security as a researcher 

and in government for 50 years. My doctoral dissertation, begun in 

1961, dealt with Social Security. During the administration of 

President Johnson, I staffed an Income Maintenance Task Force 

that dealt primarily with Social Security. 

During the administration of President Carter, I headed the Office for Planning and Evaluation at the former Department of 

Health, Education, and Welfare, when Social Security was still a 

part of that Department. I chaired the Advisory Council on Social 

Security that reported in 1979. Alone, and with colleagues, I have 

written extensively on the subject over the years. 

I mention this background for two reasons. First, I am really devoted to the program as one of the landmark achievements of U.S. 

social policy. Second, I find the issues raised in debates about Social Security policy genuinely fascinating. 

So, the opportunity to serve on the Social Security Advisory 

Board just now is particularly attractive. The reason is that major 

issues in program design and administration are going to have to 

be addressed in the next few years. The most obvious is the projected imbalance between revenues and expenditures. 

While there is not any crisis, action to close that anticipated 

funding gap as soon as possible would be desirable. Doing so will 

contribute modestly to closing the overall budget deficits, and it 

will help restore public confidence in the Nation’s largest program 

of retirement pensions, life insurance, and disability protection. 

Perhaps, I would hope, the Social Security Advisory Board can help 

improve the quality of debate on that important topic, at least that 

is why I hope to serve on the board. 

The Disability Insurance program is also an area of profound 

concern. The objective should be, in my view, to make sure that 

persons with disabilities receive authorized benefits quickly, that 

those without such disabilities are kept off the rolls, and that those 

now on the rolls are helped whenever possible to be restored to 

gainful activity. 

There is a widespread sense, which I happen to share, that we 

are not doing a very good job in any of those three dimensions. 

Here, too, I would hope that the Social Security Advisory Board can 

help provide information to Congress and to the public that will 

help us to improve on past performance. If confirmed, I look forward to working with you on these and other topics. 

So once again, I want to thank you for considering my nomination. I will be pleased to answer to the best of my ability any questions you may wish to put to me. Thank you very much. 

The CHAIRMAN. Thank you, Dr. Aaron. 

[The prepared statement of Dr. Aaron appears in the appendix.] 

The CHAIRMAN. Ms. Miller, I would just like you to talk a little 

bit about S&P and other rating agencies’ roles in actions this country takes with respect to its financing. I know it is a little bit hard 

to talk publicly about some of this, but it was a bit eyebrow-raising, 

to say the least, when S&P downgraded us to AA-plus and made 

13 

a $2-trillion error, then changed its methodology, then changed its 

rating while the other agencies did not. 

Now they are also involved with Europe’s sovereign debt, and 

private debt, bank debt assessments. Just your thoughts on the 

roles of the rating agencies. It is a broad question, but just the degree to which you think they help. I say all this at a time when, 

even after the downgrade, borrowing costs fell and people invested 

in U.S. Treasuries, believing that that is a safe haven. Your 

thoughts? 

Ms. MILLER. Thank you for the question. The rating agencies are 

private firms. They offer independent opinions on the credit quality 

of sovereign debt, both U.S. and international, as you have pointed 

out. We were disappointed in the step that S&P took in August regarding the U.S. credit rating. We thought they should have taken 

more time, more care with that exercise, but I am not going to 

speculate on their reasons for doing that. 

I do think that it is a good time—and we have some authorities 

under Dodd-Frank—to take a look at the role of credit rating agencies in rating sovereign debt, and thinking about the role they play 

in the markets. But as you have pointed out, post the downgrade, 

the U.S. market has rallied. Participation at our auctions has not 

changed at all. So, we have benefitted enormously from the support 

we have from our investors, both domestically and internationally. 

Thank you. 

The CHAIRMAN. You have a very interesting job. A dumb question: what do you do in that job? 

Ms. MILLER. What do I do? 

The CHAIRMAN. What do you do? 

Ms. MILLER. Thank you for that question. [Laughter.] 

The Office of Financial Markets does a number of things. First 

of all, I provide a daily briefing to the senior staff at the Treasury 

about financial market conditions, and I broadly think my role is 

to face the markets every day and to translate what I am seeing 

and what I am hearing to government officials and make sure that 

we have a clear insight into the performance of markets. 

Within my office, we have the Office of Debt Management, which 

is running the Treasury auctions and raising funds to finance the 

government. There is also an Office of Capital Markets that is looking at everything away from the Treasury market and looking at 

how other markets are performing. I also have an office that looks 

at government credit policy and how we extend credit through all 

of the government agencies. So it is a fairly broad charge, but principally I am looking at financial markets and thinking about how 

those market factors affect government policy. 

The CHAIRMAN. Is there enough transparency for you in making 

your assessments? I saw somewhere, for example, I think it was 

yesterday, it might have been Moody’s or Fitch—but I have forgotten which agencies—warned the world that major U.S. banks 

might be loaded up with European debt in selling a lot of their insurance contracts. The question comes to my mind, well, gee, how 

exposed are the banks, et cetera? My question is, do you feel there 

is sufficient transparency? If not, where is it insufficient? 

Ms. MILLER. I think there is a great deal of transparency in the 

public markets, in the financial reporting of public companies. 

14 

There is more that we can learn, though, about parts of the market. For example, under the Dodd-Frank legislation there is much 

more requirement for trade repositories, more daylight, if you will, 

shed on parts of the market where we have not seen enough in 

terms of pricing and exposures to different entities. 

So I think that we have the opportunity here to build something 

that is quite meaningful in terms of providing policymakers, Congress, and the government much more insight into the pricing and 

exposures within the financial markets. 

The CHAIRMAN. So you are basically saying, follow and pursue 

Dodd-Frank, make Dodd-Frank work better. Thank you. 

I have mandatory questions I have to ask all of you guys, which 

I will now ask all four of you, beginning with you, Ms. Miller. 

Is there anything that you are aware of in your background that 

might present a conflict of interest with the duties of the office to 

which you have been nominated? 

Ms. MILLER. No. 

The CHAIRMAN. I will go down the line. Mr. Fitzpayne, the same 

question to you. 

Mr. FITZPAYNE. No, Mr. Chairman. 

The CHAIRMAN. Ms. Kerrigan? 

Ms. KERRIGAN. No, Mr. Chairman. 

The CHAIRMAN. Dr. Aaron? 

Dr. AARON. No, sir. 

The CHAIRMAN. Thank you. 

The second question: do you know of any reason, personal or otherwise, that would in any way prevent you from fully and honorably discharging the responsibilities of the office to which you have 

been nominated? 

Ms. MILLER. No, I do not, Mr. Chairman. 

Mr. FITZPAYNE. No, Mr. Chairman. 

Ms. KERRIGAN. No, Mr. Chairman. 

Dr. AARON. None. 

The CHAIRMAN. Thank you. 

The final question: 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? 

Ms. MILLER. Yes, I do. 

Mr. FITZPAYNE. Yes, I do. 

Ms. KERRIGAN. Yes, I do. 

Dr. AARON. Yes. 

The CHAIRMAN. Thank you. 

Senator Hatch? 

Senator HATCH. Thank you, Mr. Chairman. 

Ms. Miller, during the recent debt limit impasse, I asked the Financial Stability Oversight Council, or FSOC as it is nicknamed, 

and the Treasury Secretary questions about Treasury’s cash and 

liquid assets, about Treasury’s short-term cash projections, and 

about any contingency plans of Treasury and other FSOC members 

in the event that Treasury ran out of cash or in the event of a sovereign rating downgrade. 

Now, Congress was making decisions with trillions of dollars at 

stake, but was relying on estimates of Treasury’s cash from local 

think tanks and Wall Street. We were operating in a setting in 

15 

which the administration indicated that it could not assure Social 

Security benefit payments or salary payments even to our troops 

in battle. I asked questions to determine how to assure those payments, but have not, even as of this date, received a meaningful 

response. 

I asked on July 27 about whether Treasury thought it would run 

out of cash on that day, or any day thereafter. I received no meaningful response, even though a Federal default was at stake. I 

asked FSOC members about what their contingency plans were, 

and, despite reports that plans existed and may even have been 

discussed between the Treasury Secretary and representatives of 

the large Wall Street firms, I received no meaningful response. 

Ms. Miller, given your role in overseeing the liquidity, stability, 

and depth of the market for Treasuries, I wonder if you can answer 

three related questions. First, why will FSOC members, including 

Treasury, not provide meaningful responses to my inquiries, even 

after the fact? 

Second, why will Treasury and FSOC members not reveal their 

contingency plans for events that could threaten the stability of the 

market for Treasuries, such as Treasury running out of cash, or a 

sovereign credit rating downgrade on the U.S., or stresses in the 

tri-party repo market where Treasuries are traded daily? 

Third, if Treasury has such plans, can you provide them to me? 

If you cannot, why not? You can see why I am a little upset about 

it, because we should have had absolute information at that time 

because it was very important for us to have something to rely on. 

Ms. MILLER. Thank you very much, Senator Hatch, for the question. I agree with you that it was a critically important time for 

information. Let me try to address your questions. First, I would 

want to say that the Treasury is committed to a high degree of 

transparency. I work to provide a monthly statement to Congress 

so we could update you on our forecasts and projections. There was 

no information that was provided to Wall Street that was not made 

available to Congress and the public. 

In terms of cash projections, let me take just a moment with 

that, if I can. These are inherently volatile. We were providing cash 

projections monthly and looking at what our forecasts were for 

reaching the debt ceiling using extraordinary measures. We are 

surprised every day with inflows and outflows. Providing cash 

flows other than the daily cash position we have provided on our 

website, I believe might raise more questions than answers. 

In particular, the week of August 2, what I was most concerned 

about was our ability to access the market if the debt ceiling was 

not raised. In the month of August, we had over $500 billion of securities that were maturing. On August 2, we had a little over $50 

billion of cash. On August 4, we had an $87 billion Treasury bill 

maturing. 

So we were very, very conscious of the insufficiency of our cash, 

not just to meet our obligations as a country, the daily checks and 

expenditures that we make, but also whether we would be able to 

honor the maturity of a security even 2 days past that date. 

So, in terms of contingency plans, we looked at everything. We 

looked at things that prior administrations had considered, we 

looked at ideas that Congress was providing, we looked at asset 

16 

sales, prioritization, delayed payments. None of these was a good 

option. We were up against the wall in terms of being able to finance the government. Thankfully, Congress acted in time, and we 

did not have to explore any of these options. 

But I would like to personally commit to work with you, to work 

with your staff to make sure that you get the information that you 

need, and that we are explaining things well so that we can be in 

a good place with this issue. 

Senator HATCH. Well, thank you. I think that would be a breath 

of fresh air, because I really felt like they let us down. And then 

to scare people, especially soldiers in the field and senior citizens, 

I thought, was hitting below the belt. Frankly, they knew better 

than that what was happening and just did not give us the knowledge that we needed to have. 

We will now turn to Senator Coburn. 

Senator COBURN. Thank you, Mr. Chairman, or Mr. Ranking 

Member. 

Welcome to all of you. You all have stellar backgrounds. I really 

want to spend a few minutes with Dr. Aaron. It is my understanding you are going to be named as Chairman, if you are confirmed. The Chairman has significant power to set the agenda for 

the Advisory Board. 

Have you thought about what your priorities will be as Chairman in terms of areas that you either write on or publish on as 

a group? 

Dr. AARON. Over the course of my career, I have spent most of 

my time working on the retirement side of Social Security. I, like 

many others today, am concerned about what has been happening 

with respect to Disability Insurance. So I view the opportunity to 

serve on the board, whether as a member or as chair, as an opportunity to learn a good deal more about Disability Insurance. The 

board contains members with diverse points of view, and I would 

hope that we could bring those diverse points of view to bear on 

Disability Insurance, and provide constructive advice to Congress, 

and information to the general public. 

I would also hope that, in the course of that work, we would have 

the benefit of consultation with members of this committee and 

other members of Congress. 

Senator COBURN. Let us talk about disability for a minute, if we 

might. Recently, the Social Security administrative law judges have 

come under significant fire for vast discrepancies in, not only the 

number of decisions they issue each year, but for the differences in 

the percentage of applicants that each ALJ approves for disability 

benefits. 

The oversight committee, the Permanent Subcommittee on Investigations, is now carrying out a thorough and comprehensive review of that and has sent some chairman’s letters to do that because of the lack of cooperation from the Social Security Administration. 

Do you have any suggestions on how we could increase the consistency among the administrative law judge decisions? 

Dr. AARON. At this point, I have to say I do not. I am aware of 

the fraught politics of dealing with the ALJs. They enjoy, for historical reasons of some weight, considerable independence under 

17 

statute, and therefore there are limits on what can be done to influence the nature of their decisions. Indeed, there are not many 

ways of actually doing so. 

I am a strong believer in the power of fresh air and light in 

bringing about changes in behavior, so I view the release of the information on these discrepancies to which you draw reference as a 

good first step. I think the entire set of arrangements under which 

we determine initial eligibility, and under which continuing eligibility is redetermined over time, merits very close scrutiny. It is an 

area in which I hope that the Advisory Board can provide helpful 

advice. 

But I have to say that, given the fact that I focused most on the 

retirement side of the program, and my awareness of the difficulties in determining disability eligibility, I view this as an area 

where I think all of us need to put in some time and effort in order 

to—— 

Senator COBURN. Well, do you think it is strange that, when Social Security has denied somebody twice and they go before an administrative law judge, there is usually legal counsel representing 

the claimant before the ALJ, but there is nobody representing the 

U.S. taxpayer before the ALJ? Do you find that strange at all, that 

we have determined through our bureaucracy that somebody is not 

eligible—and we have done it twice—and then we are at an ALJ 

hearing and nobody is there to represent the government’s position 

that they are not eligible? 

Dr. AARON. I believe that the ALJ would have available to him 

or her the record of the preceding hearings and their disposition. 

The nature of the hearing, as I understand it, is for the person who 

was denied coverage to appeal that set of rulings. Whether it would 

be desirable to have somebody representing the previous decisions 

in other than written form is something that I think merits serious 

consideration. 

Senator COBURN. Well, my time is up. I would like to come back, 

if I might, at a future time. I will tell you, we have so far discovered a number of ALJs who rarely or never deny anybody. 

Senator HATCH. Thank you, Senator. 

Senator Grassley is next. 

Senator GRASSLEY. I was not going to ask any questions, so it 

will just take me 30 seconds. But I was reminded by Senator 

Hatch’s question that I have a letter before Treasury that has not 

been answered yet about a whistleblower issue that I keep bringing 

up to you, and I want an answer to that letter. So, I hope you will 

go back and dig it out and get me an answer. 

Mr. FITZPAYNE. Thanks, Senator. We will go back and get you a 

response as quickly as we can. 

Senator GRASSLEY. All right. Thank you very much. 

Senator HATCH. I allowed Senator Grassley to go first because he 

only had 1 minute he wanted to take. Senator Thune really was 

next, so we will turn to you, Senator Thune. 

Senator THUNE. Thank you, Mr. Chairman. Thank you, panel, for 

being here today. 

Dr. Aaron, I want to follow up. The SSDI program is experiencing significant problems, both fiscally and administratively. You 

have a whole bunch of people, baby boomers, and that generation 

18 

has caused SSDI administrative costs to nearly double since the 

year 2000. According to a CBO report, SSDI will become insolvent 

in the year 2017. 

In addition, you have the Social Security Administration anticipating nearly 3.2 million new applicants for disability benefits in 

the year 2012. Even without those new applicants, SSDI has a 

huge backlog of appeal cases in which benefits have been denied. 

Conditions are so unstable that the Government Accountability Office has placed Federal disability programs on a high-risk watch 

list. 

Since 2003, according to GAO, the largest disability programs, 

including the programs managed by the Social Security Administration, are experiencing growing workloads, creating challenges to 

making timely and accurate decisions. What needs to be done to remove SSDI from GAO’s high-risk watch list, and what needs to be 

done to deal with the looming insolvency of SSDI? 

Dr. AARON. There are really two parts to your question, one is 

the financial, and the other is the administrative and procedural. 

With respect to the financial, the problems with DI have occurred 

in the past. The projected dates of insolvency have differed between 

Old-Age and Survivors Insurance and DI many times in the past. 

When one or another of those two trust funds has been fast approaching the exhaustion of reserves, Congress, on a number of occasions, has simply reallocated payroll taxes between the two programs. What really counts with respect to the whole system is the 

projected insolvency of the entire system taken as a whole. But 

that is a mechanical issue. 

The other part of your question, I think, is really much more important and much more difficult. Disability Insurance, for a very 

long time, has experienced lengthy processes of appeal and reappeal. In my opening comments, I tried to allude to why I thought 

that was a serious problem because, it seems to me, if a person 

does have disabilities, then good administration should promptly 

determine that and they should receive benefits quickly. If they do 

not, they should receive a definitive denial promptly. 

The entire ALJ process and appeals process in Disability Insurance does not exist in isolation from other ways in which administrative law judges deal with Federal policy. So dealing with Disability Insurance is wrapped up in a much larger set of legal and 

political issues, but I have to say I agree with you that I find extremely disturbing the length of the processes involved in determination, whether approval or denial, and that trying to redesign 

that system so that the determinations, affirmative or negative, 

occur quickly should occupy a high priority. I would look forward 

to your advice and counsel on that very question. 

Senator THUNE. Coming back to the question that was asked by 

the Senator from Oklahoma, the whole process involved with appeals and administrative law judges strikes me—you read these 

stories, and they just completely take away any credibility in that 

process, when people go through the process, get denied, and find 

judges that, in how many cases did you say, what percentage of the 

cases—— 

Senator COBURN. The average is about 60 percent. 

19 

Senator THUNE [continuing]. Are getting approved. The objectivity of this process seems really suspect, and I think it is very 

hard to defend to the taxpayers of this country. So I guess, in my 

view, there are a couple of issues here. One is, you get the explosion in costs associated with the number of people coming into the 

program. The administrative side of it, I understand as well. 

But clearly, the way that this program is administered today, 

and the way in which people are getting approved through this 

process, is making it more and more difficult—as you see these stories coming out about how you get that degree, that number, that 

percentage of approvals—I think it is hard to explain to the American taxpayers. I know you are going to be going into this job, and 

I hope that you will focus like a laser on trying to correct and fix 

these problems. It is just very, very difficult to explain. 

Dr. AARON. I do not think anybody—not many people, anyway— 

who look closely at the Disability Insurance program today are entirely satisfied with the way in which it is operating. 

Senator THUNE. Well, it just seems like there is a lot of abuse 

in the system because of the subjectivity that is associated with the 

process, and the administrative law judge process, and trying to ensure some level of consistency there. I would just make that observation. 

Thank you, Mr. Chairman. 

Senator HATCH. Thank you, Senator Thune. 

Let us start the second round. I am going to also address this 

to you, Ms. Miller, and I am doing it because I trust you and believe that you will always answer honestly. 

In early October, prior to a Senate vote on one of the iterations 

of the President’s so called ‘‘jobs bill’’ Secretary Geithner said on 

Bloomberg Television that, ‘‘If Congress doesn’t act, it’s because Republicans decided they didn’t want to do anything to help the economy.’’ 

Now, he also answered in the affirmative to a question of whether failure to pass the President’s stimulus proposal would raise the 

risk of recession. Of course, he failed to mention that there was a 

bipartisan lack of support for the President’s latest stimulus proposals called the ‘‘jobs bill,’’ which was, in our opinion, filled with 

plans to tax more and spend more. 

Now, Ms. Miller, do you and others at Treasury share the Secretary’s view that those from both sides of the aisle who do not 

support the President’s so-called ‘‘jobs bill’’ do not want to do anything to help the economy and raise the risk of a recession? I know 

that that is a question nobody likes to answer, but I think it needs 

to be answered. I have supported the Secretary. I would like this 

position to not be as political as it is being made, but down the 

line, giving us the best information. But do you support that position? 

Ms. MILLER. I am sorry. Do I support—— 

Senator HATCH. Do you support that position? 

Ms. MILLER. Well, I support a position that we need to do things 

to secure growth for the economy in the short term. 

Senator HATCH. All right. That is different. I think Secretary 

Geithner supports that, and so does Orrin Hatch, and I think most 

members of our committee. But it is the position that we were not 

20 

acting in the best interests of the country by being against the jobs 

bill, even when Harry Reid added the so-called ‘‘millionaires’ tax’’ 

to it—they did not have the votes, and they knew they did not have 

the votes. Now, why would we have that kind of language coming 

from a Secretary of the Treasury, whom we all hope we can rely 

on? 

Ms. MILLER. Well, I think the Secretary shares everyone’s concern about job creation in America, and we need to do everything 

we can—— 

Senator HATCH. Then he ought to come up with a jobs bill and 

not some phony thing like that. 

Ms. MILLER. Well, we are trying to balance a number of things 

here. 

Senator HATCH. Well, I will tell you, I would be willing to sit 

down and help you to come up with a jobs bill, because that is certainly not a jobs bill. It is proven by the bipartisan lack of support 

for it. 

Ms. MILLER. All right. 

Senator HATCH. Now, I do not mean to pick on you, but you are 

the only one here. You are the only one I can address this question 

to. 

Ms. MILLER. Well, I take your point. We are in a very fragile position with the economy. We know there are many vulnerabilities. 

We are looking at all kinds of things every day that concern us. I 

think that we are trying to do the best job we can, to think about 

how we can secure growth, and most importantly bring down unemployment in this country, which is far too high. 

Senator HATCH. All right. Well, I would like you to take back to 

the Secretary that I personally like him, and I think he is a brilliant man in many ways, and a hard worker—I know that. But he 

ought to be less partisan and really help us up here to come up 

with real jobs, and to really help this President, because he certainly did not come up with a jobs bill. 

Now, Dr. Aaron, the Social Security Advisory Board’s working 

groups are intended to be bipartisan in nature. It would be useful 

to have a board chair that can manage alternative views and gather bipartisan consensus. What experience can you point to that I 

would be able to review where you have managed a group to gather 

bipartisan consensus? 

Dr. AARON. I cannot do it in a political context, but I can tell you 

about one—— 

Senator HATCH. I am not asking you in a political context. 

Dr. AARON. I meant, I can tell you about one activity in which 

I was part of a group that had widely differing points of views and 

backgrounds, and that functioned extremely well over many years 

with mutual respect. I was the director of a company located in 

Cambridge, MA, Abt Associates, from, I think it was 1979 until 

June of this year. 

That group included—the directors included business people and 

academics with widely varying backgrounds and widely varying 

points of view about what the objective of the company should be. 

We disagreed sharply, really sharply, within that setting. We did 

so with mutual respect, and we continued to have that respect and 

resolved those disagreements in an effective way. 

21 

It is not an area where there were differences between Republicans and Democrats, at least that was not the axis along which 

disagreements occurred, but I think it testified to the fact that I 

was able to function with a temperament in a group where people 

frequently disagreed with me and I with them, and we continued 

to work together effectively over an extended period of time. 

Senator HATCH. All right. Thank you. 

Senator Coburn, could I ask one more question? 

Senator COBURN. Sure. 

Senator HATCH. Then I would be glad to give you more time, too. 

Dr. Aaron, members of the Social Security Advisory Board are, 

by statute, to be chosen partly on the basis of their impartiality. 

Based on your writings and public statements, I am not entirely 

sure that I can regard you as impartial with respect to Federal tax 

policy and health care policy. With respect to Social Security and 

the projected funding gap that it faces, you have written that ‘‘most 

of the projected funding gap should be closed principally by increasing revenues.’’ Now, Dr. Aaron, how could you assure me that you 

would manage the Advisory Board in the interest of gaining bipartisan consensus on issues analyzed by the Board itself? 

Dr. AARON. There is a difference between writing for an academic 

audience or writing for newspapers through op-eds in which the 

coin of the realm is analysis and frequently the expression of one’s 

own point of view. There is a big difference between that and functioning in a setting where, as you note correctly, there are people 

with diverse political backgrounds and different points of view. I 

see those two environments as quite different. 

I recognize that there are other members of the Advisory Board 

who hold views different from my own. If the board is to function 

effectively, we have to try to find positions in common or express 

differing positions in ways that give a fair hearing to differing 

points of view. I can assure you that that is going to be my intent 

and purpose. No single person on that board is going to make all 

of the decisions, or have all of the reports necessarily fully represent his or her point of view. That is the way the thing is constructed. 

Senator HATCH. Well, thank you. 

I just have one more question, and then I am going to turn to 

Senator Coburn. 

According to Social Security actuaries, the Disability Insurance 

component, as you have indicated here today, of the Social Security 

system will exhaust its trust fund as early as 2016, I believe you 

have indicated. 

Dr. AARON. Yes. 

Senator HATCH. The Disability Insurance program continues to 

be the Social Security Agency’s largest challenge. Workloads have 

grown rapidly over the past few years, while the Disability Insurance Trust Fund has declined. Now, Dr. Aaron, do you have ideas 

for fruitful areas of inquiry in working groups for the Advisory 

Board to help inform Congress about options available to reform 

Disability Insurance, or to address the looming shortfall in the 

trust fund itself? 

Dr. AARON. I believe it is important to try to look into the process 

by which eligibility for the program is determined. It is important 

22 

to look at the appeals process to which Senator Coburn has drawn 

attention, and it is important to continue the efforts which the Social Security Administration has been pursuing for some time to accelerate and increase the probability that people will be able to return to gainful activity. 

I say this in full recognition of the fact that it is easy to point 

to these problems and extremely difficult to point to specific policy 

changes that would affect those improvements. I think it is going 

to be necessary for us to look, in a serious way, into the laws that 

undergird the determination process, to look at the incentive structure that exists to encourage people, once on the rolls, to try to regain gainful economic activity. If these problems were easy, they 

would have been solved a very long time ago. 

I think some fairly basic research is going to be necessary on 

them. I do not have a research program now to lay before you, but 

I can assure you that it is an area that I regard as one of the more 

important ones that the Advisory Board should focus on, and I 

would hope that, in that work, we would have the benefit of the 

consultation with members of this committee. 

Senator HATCH. Well, thank you. 

Senator Coburn? 

Senator COBURN. Just continuing along that line for a minute, it 

is staggering and defies common sense that 1 in 18 people in this 

country presently is disabled. Anecdotally, when you go throughout 

the country and ask this question of people, do you know somebody 

on disability whom you know is not disabled, three quarters of the 

people in the room raise their hand. So besides what we are doing 

in Social Security, the ALJs find—— 

And let me correct the record. I misspoke a moment ago. The 

overall ALJ average is 60-percent approval. So that means, 60 percent of the time, what the ALJs are saying is, Social Security got 

it wrong. Well, one of two people is right: either the person who 

is there making the determination or the administrative law judge 

is right. We end up saying the ALJs are. 

So I think you are right, we have to structurally look at this, because there is no way we can afford the continuing expansion and 

growth in this. It defies logic that 1 in 18 people in this country 

cannot perform any work in the economy, and that is what it says 

in the law: ‘‘any work in the economy.’’ 

So we have a large portion of people coming to the other end. 

How would you adjust? We have Ticket to Work, which is not being 

utilized by Social Security. We have continuing disability reviews, 

which are just simply a letter, are you disabled, and that is sent 

to a very small portion of the people. So we have no continuing disability review. How would you handle that? 

Dr. AARON. The answer is, I do not know at this point. I do not 

pretend to have an answer to that question. You posed a difficult 

question. I want to inject one point, though, that I think is easy 

to forget. The most important thing—or let me amend that. A very 

important thing that could be done to slow the entrance of new 

people into disability would be to stimulate overall economic activity in this country. 

Senator COBURN. I agree. 

23 

Dr. AARON. Disability Insurance applications go up when job opportunities evaporate. That has been too true since the onset of 

this current recession. 

Senator COBURN. How do you square that, though, with what the 

law states: if there is any job in the economy you can do, you are 

not disabled? 

Dr. AARON. Well, actually there is a very refined grid for determining what constitutes disability that—— 

Senator COBURN. Yes. But Congress did not set that, the bureaucracy set that grid. 

Dr. AARON. Well, that may be the case, but that is the way in 

which the—— 

Senator COBURN. But you would agree that what the law says, 

what the statute says is, if there is any job in the economy you can 

fill, you are not disabled? 

Dr. AARON. I have no reason to challenge that. 

Senator COBURN. So there is no question we have a big problem. 

I would suggest to you, when you become Chairman, that the first 

thing you all work on is disability because, aside from transferring 

funds from the Retirement Trust Fund, we do not have any other 

ability. What is going to happen to us—and I will bet Treasury can 

back this up—if we do not fix our problems, if the super committee 

does not get us down that way is, we are going to run into what 

Chairman Bernanke said. There is going to be a point in time 

where people will not loan us money, and we will not have money 

to put into disability. 

So the people who are truly disabled, those who are really dependent, who really cannot work, will not be able to get a benefit 

equal to what their needs are. So I would just admonish you that 

the biggest priority ought to be coming with recommendations on 

what we do to make it accurate in terms of the determination of 

disability, to make sure we secure the trust fund, and that we have 

an ongoing ability, much as you said in your opening statement, to 

get people back to work. 

Because, in times of high unemployment, when somebody claims 

to be disabled because unemployment is high, that does not mean 

that their situation has changed other than they do not have a job, 

but it should not make any determination on their disability. Either they are disabled or they are not. So we see this rise, and then 

we also see this large increase, which tells us that it is totally out 

of control. We will be putting out a report probably in the next year 

that hopefully will help you with what the Permanent Subcommittee on Investigations is doing in terms of helping guide 

where to go. 

You brought up the question of Abt, or Abt Associates. 

Dr. AARON. Yes. 

Senator COBURN. You were a director there since 1979 until this 

summer. How involved were you in their work and oversight of 

what they were doing? 

Dr. AARON. The board, as is the case with most boards, did not, 

by and large, get into the detail of any particular study. We would 

occasionally hear reports about how different studies were going, 

and we would ask questions of those who were carrying them out. 

For the most part, we were involved in financial matters, whether 

24 

to sell the real estate on which the company’s offices were located. 

I headed at one point the search committee for a new CEO. That 

took a great deal of time. 

We would hear progress reports on the general financial situation and internal management problems. But the board did not in 

any case, as a board, get into specific studies. The exception to that 

is that one or more of the board members had particular expertise 

in certain research areas, and they might be involved as consultants, independently of their board activity, with a particular 

project. During my tenure, I do not recall being in that position at 

all. 

Senator COBURN. Do you recall the fact that the U.S. AID Inspector General commented on one of their contracts concerning disastrous non-performance of a contract that cost the lives of Iraqi civilians? 

Dr. AARON. I do remember the discussion about whether the company should bid on contracts in Iraq and the problems that arose 

thereafter. The board was divided on the decision about whether to 

bid in the first place. The company found considerable operating 

difficulties as a result of conflicts between U.S. AID and the Department of Defense. I am aware of the findings, and the company 

greatly regretted those findings. We have done our best on other 

projects not to allow similar negative reports to emerge. 

Senator COBURN. In 2007, the Defense Contract Auditing Agency questioned over $2 million in costs because the firm charged the 

government for legal expenses incurred by Abt, had dinner, printed 

all sorts of things outside the Federal regulations on contracting. 

Were you aware of that? 

Dr. AARON. I was very much aware of the problem that arose. If 

you want, I could explain what happened and what the board did. 

As a result of that complaint, the company undertook a large number of internal reforms under, I have to say, a deferred prosecution 

agreement. The U.S. Attorney who was part of that operation and 

had brought the case was, to the best of my knowledge, entirely 

satisfied in the end with the procedural changes that the company 

had brought about. 

I think there is probably no topic in the last several years that 

has occupied the board more than repeated exchanges between 

them and the management of the company to make sure that every 

regulation with respect to foreign exchange, which was the subject 

of this matter, has been scrupulously followed. I, up to the time I 

left the board, was persuaded that the company had learned its lesson and was performing well above any minimum standards for 

this area. 

Senator COBURN. Thank you for clarifying that. 

I just have one other area I would like to spend time with you 

on. Your personal positions and your writings do not disqualify you 

from this at all, so I do not mean to suggest that by asking the 

questions. But you and I have a completely different perspective on 

health care, and your writings on rationing are extremely concerning to me. 

So, as the Chairman of the Board, you are going to set the priorities on what you all write and what the topics will be. Having first 

outlined the difficulties we have with disability, and knowing what 

25 

is coming on Social Security, and the unfunded liabilities that we 

have associated with it, how much will health security be a part 

of the agenda that you set for the Board? 

Dr. AARON. There is something called MedPAC that deals with 

Medicare and provides advice to Congress. I think the Social Security Advisory Board is going to have its platter full with issues relating to Social Security. I do not see any direct involvement in 

overall health care policy. 

Senator COBURN. As you know, the Board has put out reports, 

in recent years, on the unsustainable cost of health care, which to 

me is fine, but they were not looking at disability when they were 

doing that. I agree with you, we have a lot of other people looking 

at health care today. 

Dr. AARON. Yes. 

Senator COBURN. So you would agree that the problems are big 

enough that you all will stick with Social Security in terms of—— 

Dr. AARON. That is my expectation. I am not going to make flatout promises about what the Board will do because, in the end, although I hope to have some influence on the Board’s agenda, I will 

be one of what I hope will be seven members of the Board, and others will weigh in as well. 

The Executive Director of the Board has just taken on a new position, so one of the first challenges is going to be to identify who 

should succeed her. Whoever fills that job is going to have a voice 

as well in how the—— 

Senator COBURN. But the ultimate agenda is set by the Chairman. 

Dr. AARON. Absolutely. If I am fortunate enough to win approval 

and be designated as chair, I am looking forward to that with great 

anticipation. 

Senator COBURN. Thank you. 

Mr. Chairman, I would like to enter into the record a compilation 

of the studies that have been done throughout the country by qualified experts on the amount of waste in health care, fully one-third 

of the dollars we spend on health care today. It does not help anybody get well and does not keep them from getting sick, so the disagreement that I might have with Dr. Aaron on health care has no 

application at all to his qualifications for being on this board. 

But I would note that there is an extreme difference in philosophy. I believe we can allocate that without rationing. When we 

have that much waste, there are ways to do it without rationing 

somebody’s dialysis or somebody’s treatment for cancer. 

With that, I would ask permission to submit this for the record. 

Senator HATCH. Without objection, it will be placed in the record. 

[The information appears in the appendix on p. 53.] 

Senator HATCH. Well, we are grateful that you are willing to 

serve. We did not mean to just ignore the two of you in the middle. 

[Laughter.] 

Mr. FITZPAYNE. No problem at all. [Laughter.] 

Senator HATCH. That is what I figured. 

Senator COBURN. I do have one other question. 

Senator HATCH. Uh-oh. I should have—— 

Senator COBURN. Actually, it is for Secretary Miller. 

Senator HATCH. Sure. 

26 

Senator COBURN. About your statements on rating agencies—can 

you put yourself in their shoes, given what a poor job they did in 

terms of mortgage instruments that we saw, their case for liability, 

that, if in fact they are not accurate in terms of their assessment 

of rating U.S. Government debt, they can be held accountable in a 

court of law? Can you get over there to see that? Even though you 

might disagree with them, can you see that? They obviously did not 

do a good job. 

Part of the report Senator Levin and I put out from the Permanent Subcommittee showed their failure in terms of rating stuff 

that was AAA rated that obviously was not. Can you identify that 

they might be much more cautious now and in the future because 

of the poor job that they had done in the past? 

Ms. MILLER. Well, first of all, I am not an attorney, so I am not 

sure I can weigh in on the legal question that you perhaps are raising there. But I think the rating agencies have a lot to answer for. 

I think that they are under a period of great self-investigation and 

market review, and even Congress, through some of the parts of 

the Dodd-Frank legislation, has to study their role. 

Senator COBURN. All right. Good enough. 

Thank you. 

Senator HATCH. Well, thanks to all of you. We will end the hearing at this point. Thanks so much. We will just close the hearing 

until further notice. Thanks so much. 

[Whereupon, at 11:38 a.m., the hearing was concluded.] 

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