[Congressional Record Volume 164, Number 85 (Wednesday, May 23, 2018)]
[Senate]
[Pages S2850-S2854]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
China
Mr. RUBIO. Madam President, there has been a lot of coverage over the
last couple of months and years really--but certainly in the last few
days--about the topic of China, ZTE, and trade. I have had a lot of
questions about it, both in the hallways from the press and
constituents back home and even from family and friends who have
inquired what all the ruckus is about. I thought this was a good
opportunity to lay out for my constituents and broadly for the American
people what is at stake.
The first thing I would encourage everyone to do is to separate the
two issues, the issue of trade with China and the issue of a specific
company called ZTE, which is a phone company--a telecommunications
company in the cell industry based in China. They were the fourth
largest cell phone company in America, up until very recently when they
struggled to stay in business. We will talk about that in a moment, but
let's talk about those two things separately. They are not necessarily
interrelated.
On the broader topic of trade and China, the United States has an
enormous imbalance in trade--as we do with other countries but none
like we do in China. A trade imbalance, by the way, in and of itself,
is not problematic. It really depends on what has caused it, but the
trade imbalance with China is problematic because of how it has
happened.
China was basically poor, underdeveloped, under a Communist
dictatorship, and decided it wanted to open up to the world and become
more economically prosperous many years ago.
The deal the world made with China is, we are going to help you
develop economically. You are going to open up. We are going to help
you invest. We are going to help you create opportunity. We are going
to let your companies invest in our economies.
There are rules in the world for trade. There are things that are
allowed and things that are not allowed. For example, you are not
allowed to steal another company's secrets. If another company has
figured out how to make something, that is proprietary. They own it,
they developed it, they spent money creating it, and you are not
allowed to go there and steal that from them and start making it
yourself.
You can't have rules that say your companies cannot sell in my
country, but our country can do whatever we want in your country. There
are rules. China has never played by those rules, and everybody knew
it. Nobody disputed it. Administrations from both parties, the
consensus politically in America was go ahead. Let's let China cheat.
Let them keep stealing things because once China becomes richer and
more prosperous, they will stop doing that stuff. As soon as China's
economy grows big enough, not only will they stop doing all that, but
they will become a democracy.
Everyone who said that was wrong. That is not what has happened. They
are less Democratic, less open today than they used to be, and they are
no longer just stealing little secrets to be in the same ballpark. They
are stealing $600 billion a year of intellectual property. Six hundred
billion dollars a year is equivalent to what we spend on the U.S.
military. They are stealing the equivalent of that every single year.
How do they do it? First of all, just straight-out espionage. Time
and again, they hack computers, they hack emails. They have spies
embedded inside companies. They straight-out steal it through
espionage.
The second thing they do to protect their industries and grow at our
expense is, they don't allow many of our companies to do business in
China--huge market. Their companies get to do business here, but they
don't allow our companies to do business there--some companies.
They do allow other companies to do business in China, but here is
the deal. If you do business in China, it has to be a joint venture
with a Chinese company--51 percent Chinese, 49 percent American
company. On top of that, there is another catch. If you want to do
business in China with a Chinese company, you have to transfer your
technology to them. If you want to build turbines, we will let you
build turbines in China, but you have to transfer to us the technology
of how you do it.
Do you know why they do that? Because once they figure out how to do
it themselves, they don't need their American partner anymore. They
kick you out, and now they are your competitor and may even put you out
of business. That has happened many times. If they don't achieve it by
forcing you to transfer, then they straight-out steal it from you.
They also buy up small companies. We have a law here that is called
CFIUS process. When a foreign company, especially from a country like
China, is buying in a key industry, it undergoes this review to make
sure it is not a deal where they could be taking secrets that are tied
to national security.
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They figured it out. They are just buying small American companies, a
bunch of them, in many cases, that are under the level that we look at,
these subcontractors, and finding their way in that way.
Suffice it to say that we have a very serious imbalance with China,
but the imbalance is not the dollars. The imbalance is in the structure
of trade between China and the United States. That is why we don't need
a short-term trade deal. This is not about saying: All right. Go ahead
and buy more of our agriculture. You guys go buy more of the stuff you
were going to buy more of anyway because you need to. In exchange, you
get to keep doing what you are doing now, and there will not be any
tariffs.
That is a short-term deal. It might be a good headline. You can claim
that you won, but in the end, it doesn't do anything to change it. In
fact, it leaves us worse off. You might as well have not even gotten
into this in the first place. You have actually strengthened them even
more.
Let me tell you how they win this fight. They go to all those
American multinational corporations, many of whom are just interested
in how their stock is performing from quarter to quarter, and say to
them: Lobby your Congressman, lobby your Senator, lobby the White
House, and convince them to drop all of this.
They do it because what these companies want is to have access to the
1.3 billion people. They don't care if they are only 49 percent of the
company in China. They don't care if they are stealing their
intellectual property. By the time that matters, the CEO and the people
making that decision will be long ago retired, with a huge golden
parachute bonus because they delivered a bunch of quarters of earnings.
That is so shortsighted.
They may not care about it, but those of us who work here have to
because we do not want to live in a world where China dominates
industry, not because they outinnovated us or worked harder, but
because they stole it from us.
By the way, the Chinese have figured all of this out. They have
figured out exactly how to get things done in American politics. They
don't lobby the government. They lobby the business sector. Then, all
these large corporations go marching onto Capitol Hill and into the
White House and scream and plead to drop all this. Of course they do
because they are going to make a lot of money in China over the next 5
or 6 years.
A lot of these companies are one day going to be out of business. It
is short-term thinking. Their obligations are to their shareholders.
Their shareholders are not all Americans. Our obligations are to the
American people and America's future.
This is disastrous. We need a structural rebalance, not just a dollar
rebalance. China is not a developing country. It is the second largest
economy in the world. It will soon be the largest economy in the world.
Yet we continue to let them cheat and steal. That is the trade issue.
ZTE is something completely different--related but completely
different. Let me tell you about ZTE. ZTE broke the law. ZTE sold goods
and services to Iran and to North Korea. They violated sanctions. They
tried to cover it up, and they got caught. When they got caught, they
got hit with a fine and were told they need to fire the people who
tried to cover it up and the people who did this. They paid the fine,
but they did not fire the people who did this. Do you know what they
did instead? They gave them bonuses, and they tried to cover that up.
The Commerce Department said: Fine. We caught you. We made a deal
with you. You broke that deal. Now the penalty is, you cannot buy
American semiconductors. That was the penalty. We are not going to
sell you any more semiconductors for 7 years. ZTE says it is going to
put them out of business because they do depend on us for
semiconductors.
Now we are reading there is a new deal in place, potentially. The new
deal is not official, but I have read it, and it has been reported. The
new deal is this. We are going to let you stay in business. Pay a fine,
$1 billion or this morning I heard $1.3 billion, and $1.3 billion is
nothing for a company backed by the Government of China. The Chinese
Government will pay it for them. Are you kidding me? Only $1.3 billion
to continue to stay in business and one day replace America in
telecommunications? That is nothing.
The other sanction--guess what it is. We are going to force you to
buy more things from America.
That is not a punishment. That is a reward. That is exactly what they
want. That was the sanction. The sanction was they couldn't buy more
from us because they can't stay in business unless they buy from us.
The punishment is going to be, instead of punishing you by denying you
semiconductors, we are going to really punish you by forcing you to buy
more semiconductors from America.
They were going to do that anyway. That is a reward, not a
punishment. That is a terrible deal. Some people say that is a deal
that is tied into the broader trade deal, another terrible deal.
If I were China, I would give us anything we want on ZTE in exchange
for being able to continue to undermine the American economy, but it
goes deeper than that. Here is the other problem with ZTE. If it is
just one company, it is one thing. China intends to dominate the world
in the key technologies of the 21st century--aerospace, biotech,
quantum computing, artificial intelligence, 5G, and telecommunications.
They are going to dominate the world.
Do you know why I know that? It isn't because I read some fancy
article. It isn't because I am on the Intel Committee. It isn't because
of a hearing. It isn't because of a meeting. Do you know how I know
that? Because China says it. They have a plan called China 2025, Made
in China 2025.
Here is what the plan basically means. By the year 2025, China will
be the dominant country in the world in these 10 to 12 industries,
which happen to be the 10 to 12 industries that are going to determine
the fate of the 21st century. Biotech basically means genetic medicine,
the ability to cure diseases like Alzheimer's disease and others that
are going to be a plague on the world in the years to come. Aerospace
means technology for space. It also means aircraft and the like. They
don't intend to be competitive in those fields. They intend to dominate
those fields.
You may say: Well, what is wrong with that? Countries can want to
dominate fields. It is fine.
If you are going to become the dominant power in the world in these
key technologies, you have every right to do so but not by breaking the
rules. That is how they are doing it.
What is China doing in order to dominate the world in 2025? To their
credit, they invest a lot of money in research and development. They
also invest a lot of money in stealing whatever we have already done.
Think about it. America invests taxpayer money. We innovate something.
We innovate it. After we spend all of your money innovating these
things, they take it from us and steal it. It costs them nothing to
start out exactly where we are after years and years of work.
Think about that for a moment. That is an enormous competitive
advantage. They have free research funding by the American taxpayer.
They steal it.
What else do they do? They do other things. How do they steal it, you
may ask. One of the ways they steal it is through telecommunications.
They are trying to embed themselves in our telecommunications system.
Here is how. They know, for example, the U.S. Government or a defense
contractor are not going to buy a ZTE phone, but they have a solution
for that. The solution is, they sell the ZTE phone, the exact same
phone with the exact same components inside of it--the things they can
turn on and off to listen to us or take emails or documents or whatever
they need, and they sell the exact same phone to an American
telecommunications provider. The American telecommunications provider
puts their sticker on it so you think you are buying not a ZTE phone
but a phone that belongs to an American company, and they sell it--it
is called white labeling--or a router. Huawei has a router. The
Department of Defense or the government is not going to put a Huawei
router in a sensitive place. That is fine. They will sell it to an
American company. That company will take off Huawei and put on their
sticker, and
[[Page S2852]]
you have a router controlled by a Chinese company that is beholden to
Chinese intelligence. Even if they wanted to not cooperate, they don't
have a choice.
When they tell them, we want you to go into that router and get the
secrets of this company or the secrets of the U.S. Government, not only
do they have to do it, they will do it, especially if it is in
telecommunications. That is happening right now. They embed themselves
in our telecommunications system that way through white labeling.
The other thing they do is they use their American subcontracting
unit. Again, they know no one is going to hire them to build a military
base and put the wire in it. You hire an American company. That is the
prime contractor. They come in as a subcontractor to the prime
contractor, and they are the ones doing the work. We think we hired an
American company, but the work is being done by a subcontractor
controlled by ZTE or Huawei or any of these other companies. That is
another way they do it.
I am telling you, we are going to wake up one day and realize that in
our own country, embedded in our telecommunications system--in our
cable, in our routers, in our internet--are a bunch of component pieces
that not only leave vulnerable our Department of Defense but our
business community. To what? To stealing corporate secrets and
commercial secrets that allow them to take the research America has
done and use it as their starting point free of cost. This is not
fantastic. This is why people are so fired up about ZTE. This is not a
game.
Somebody just sent me an article a few minutes ago. I don't know
which one of the publications it was. It was talking about me and
taking on the President on ZTE. This is not a political game. It has
nothing to do with that. This is not about politics. Do we not
understand where we are headed? You have a country that is actively
saying we are going to displace you. We are going to be the most
powerful country in the world, and we are going to do that at your
expense. We are here talking about all kinds of other crazy things or
political reporters cover this through a political lens. This is not a
game.
Do you know why China wins these negotiations? Because they don't
play these games. They know what this is about. They have a 10-year
plan, a 20-year plan, a 50-year plan. We can't even think 48 hours
ahead. Everything here is about a political issue. It is not a game.
Whether you want to believe it or not, every single one of us was
elected. We participated in politics. I think most of us, if not all of
us, do not want to live in a world in 10, 15, 20 years on our watch,
where some other country now dominates the world at our expense, where
we now work for them, we now are beholden to them for everything from
medicines to technologies, and we were here when it happened and didn't
do anything about it because we were loyal to our party or because we
were too busy focused on--well, just turn on the news when we have a
massive threat before us.
By the way, this is the stuff historians write about. A hundred years
from now, we will all look like fools because, if you are just watching
this on an hour-by-hour basis, it is not a big story. Yet, 100 years
from now, when someone writes the history of the 21st century and we
have let this happen, they are going to write about us. They are going
to say that we were fiddling while Rome was burning, that we were
allowing the Chinese to take over the world at our expense and displace
us because we were too busy doing all kinds of other things.
By the way, this is not just about business. When you turn on some of
the networks that cover the stock market, they cover this like a
casino. Oh, the trade thing is doing better today, so the stocks are up
or the stocks are down. Forget about that for a moment. You can make
all of the profits you want over the next 3 to 6 months. I promise you,
if this continues, in 10 or 15 years, you will not be watching the U.S.
stock market; you will be watching the Chinese market, and it will be
determining whether our companies survive. It will be we on the
outside, looking in.
Then Americans are going to wonder: Why do we no longer invent great
things? Why do we now have to do whatever China wants in the world in
order to get the medicines we need to cure my mom or my dad's
Alzheimer's?
The answer will be, when they were displacing us, your policymakers
were too busy arguing with each other and playing dumb, ridiculous
games on a regular basis. Meanwhile, China was focused like a laser on
a plan, and it executed it.
This is not a game. I can think of no more significant issue from the
perspective of history than what is happening now. Do not misunderstand
me. I do not come here to say that I want to be unnecessarily
aggressive with China or that I want there to be a confrontation. China
is going to be a rich and a powerful country, and we have no problem
with that--we can't have any problem with that--but there has to be a
balance. It cannot be a China that is rich and powerful and an America
that is weak and not prosperous.
Those imbalances are what create wars. Those imbalances are what
create misery. Those imbalances are what destabilize the planet. That
can't be. We need to recalibrate this relationship. It needs to be
rebalanced on the trade side. It needs to be protective on our national
security side. It needs to be equalized. If it is, China can still be
very successful. It is going to invent things. It is going to create
jobs. It is going to become more prosperous. That is fine. We have been
doing that for 100 years.
Every person who is sitting in the Gallery, every person here in the
well of the Senate and on the Senate floor--everyone you know--has a
product on him--a phone, a belt--that has been made in another country.
The issue is not that other countries make things and that we don't.
The issue is not about our dominating everything. It is about balance,
and this is not balanced. This is headed for a dramatic imbalance. The
imbalance used to be that they made cheap things and sent them back to
us so we had lower prices. That is what has happened for the last 30
years. They have made cheaper T-shirts; they have assembled the phones
more cheaply; and they have shipped them back to the United States,
which has led to lower prices. That is not the imbalance I am talking
about.
The imbalance we are headed for is that they will control state-of-
the-art artificial intelligence, that they will control state-of-the-
art quantum computing, which will mean that nothing will be encrypted
anymore, which will mean that there will be no such thing as secure
cars left. One day, the President of the United States will not be able
to talk to his national security officials anywhere in the world
without the Chinese hearing it. No matter what encryption you will put
in, they will break it with a quantum computer. That is the imbalance I
am talking about.
The imbalance I am talking about is when, one day, we will have a
dispute with China on something--on national security somewhere in the
world--and it will threaten to cut off our supply of biomedicines. In
essence, it will threaten the lives of Americans in their not getting
medicine unless we cave to China's desires. That is the imbalance I am
talking about.
The imbalance I am talking about is one where it dominates aerospace,
where it is the nation that controls satellites and satellite
communication, where it is the nation that controls 5G. We are headed
toward autonomous vehicles. Autonomous vehicles will depend on 5G
technology. China will dominate the world in 5G, and we will depend on
it. So we are going to build a fleet of autonomous trucks and
autonomous cars, and none of them will work if the Chinese decided to
shut it down because they will dominate that field. That is the
imbalance I am talking about.
If this all sounds fantastic or apocalyptic, look it up. Research it.
I promise you that you will not find a single person who is versed on
this topic who will disagree with what I am saying. This is the threat
that we face, and we are not facing it squarely.
I would advise those who cover this issue to stop covering it as a
political issue. There are some things that are so important to this
country that I don't care what the politics are, and most of my
colleagues don't either. These are definitional things that will define
the 21st century.
[[Page S2853]]
I would advise us not to cover this as a purely economic issue
because there is a way to grow the trade gap in the short term. We can
sell China a lot more of the things it is willing to buy anyway. It
doesn't intend to lead the world in those things in exchange for its
dominating us in the long run. Get rid of the short-term thinking, and
start thinking our competitor has a 50-, a 100-, a 20-, and a 5-year
plan, and we don't even know what we are going to be talking about next
week.
It is time to wake up to this threat because we have two ways
forward. There can be a balanced relationship between two great powers
that leads to a world that is stable and secure and prosperous or we
can have an imbalanced world in which the rising power of China is at
the direct expense of a falling status quo power in the United States.
That instability will lead to conflict and a way of life for Americans
that we will find unacceptable. Then it will be too late. Then we will
have to explain, maybe, to our children and, most certainly, to our
grandchildren why the America we grew up in--that led the world in all
of the great innovations and in all of the great ideas, that provided
prosperity to millions of people here and around the world--and the
America they get to grow up in is a second-tiered power while China
dominates everything that matters.
If you think that is not a big deal, one of the reasons democracy has
spread across the planet is that the world's most powerful country has
been a democracy. If the world's most powerful and dominant nation on
Earth is a dictatorship--a country that has no respect for privacy, a
country that has no respect for free speech, a country that has no
respect for religious liberty of its open people, a country that has no
regard for human rights anywhere in the world--what do you think the
world is going to look like in 20 or 30 years? It is not going to be a
better place.
Democracy is morally superior to autocratic regimes. We should not be
afraid to say that. If for no other reason--if you want to put aside
economics for a moment and confront it from that angle--we cannot allow
an autocratic dictatorship to dominate the global economy and global
technology by stealing from us at the expense of the democratic order
in the world. Democracies are morally superior to dictatorships. If we
allow China to cheat and steal its way into dominance, there will be
more dictatorships and fewer democracies on this planet, and we will
all pay a price for that.
I urge everyone to take this issue seriously. I urge the President to
listen carefully to those in his own administration who understand this
threat for what it is holistically, and I urge them to move in a
direction that recalibrates the structure of our relationship with
China economically and that does not allow not just ZTE but numerous
other telecom companies to continue to grow and spy at our expense.
That is what I encourage them to do, and that is the right thing to
do for the future of this country, not some short-term deal that makes
us feel good and potentially gets a positive headline in the short term
but what historians will condemn as the beginning of the end of
America's place in the world as its most influential Nation.
I yield the floor.
I suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Johnson). The clerk will call the roll.
The senior assistant legislative clerk proceeded to call the roll.
Mr. BROWN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BROWN. Mr. President, first, I want to add my comments to those
by my friend from Florida, Senator Rubio, about China.
I remember years ago, when I was helping to lead the opposition to
China's admission into the World Trade Organization, when American CEOs
came to this body and said one after another to Members of Congress
that they wanted access to billions of Chinese consumers when what they
really wanted was access to hundreds of millions of Chinese workers.
U.S. companies, as part of a business plan, consistently shut down
production, whether it was in the Florida Panhandle or whether it was
in Northeast Ohio, and moved those productions overseas. They enriched
that Communist government and gave China the wherewithal that Senator
Rubio talks about now.
That is the importance of the CFIUS legislation we did yesterday in
the Banking Committee that Senator Crapo, Senator Van Hollen, and I
worked on. It is the importance of many of the issues that Senator
Rubio raised, so I thank my colleague from Florida.
Mr. President, I rise to oppose the nomination of Brian Montgomery.
He has been nominated by the President to serve in the U.S. Department
of Housing and Urban Development as an Assistant Secretary of Housing
and as the Federal Housing Commissioner.
If confirmed, Mr. Montgomery would oversee the Federal Housing
Administration, the FHA, which insures loans for homeowners,
multifamily rental buildings, and healthcare facilities originated by
HUD-approved mortgage lenders; oversees HUD's Housing Counseling
Program; and provides rental assistance for over 1.2 million low-income
seniors, individuals with disabilities, and families.
We are considering this nomination at a time when the Nation faces
all kinds of housing challenges. Thanks to a deep shortage of
affordable rental housing--think about this--a quarter of all renters,
of all households, are paying more than half of their incomes for
housing. That means, if anything goes bad in their lives--if their cars
break down on the way to work or if their children are sick, and they
have to decide to send their children to school anyway or to stay home
and lose a day's pay and get behind on their rent--then everything will
go bad for them.
Far too many creditworthy borrowers still struggle to access
sustainable credit in the mortgage market, particularly in communities
of color. In February, the Center for Investigative Reporting released
data showing that people of color were far more likely--in some cases,
more than five times as likely--to be denied conventional mortgages.
They found this data in 61 metropolitan areas around the country. It is
not limited to only a few places.
Mr. Montgomery, in his having served previously in the position for
which he has been nominated, would bring both valuable experience and
an appreciation for the importance of the programs he would lead if he
is confirmed. He has spoken about the value of the FHA as both a
responsible engine of homeownership and a countercyclical tool to
ensure that mortgage credit remains available. He has also supported
the Office of Housing's affordable housing program. That is the good
news.
The bad news is that I am concerned that Mr. Montgomery, in the
interest of making the FHA a better partner to the mortgage industry
after having served in the industry as a board member or adviser, will
lose sight of the interests that FHA and consumers have. Following his
previous tenure at HUD, Mr. Montgomery cofounded a consulting firm that
provided a range of services to financial services companies, services
that included helping FHA participants minimize penalties from HUD
enforcement actions. He also sits on the boards of companies whose
businesses could be affected by FHA and Federal housing policies.
Perhaps more troubling is that Mr. Montgomery has stated concerns
about ``excessive'' Federal enforcement efforts against mortgage
lenders in the years following the mortgage crisis, including pursuing
claims under the False Claims Act.
In late last year, the Trump administration's Department of Justice
noted ``the False Claims Act serves as the government's primary civil
remedy to redress false claims for government funds and property'' and
further noted that recoveries under the act are ``a message to those
who do business with the government that fraud and dishonesty will not
be tolerated.''
The False Claims Act was cited in several post-crisis Federal
enforcement actions, including a $1.2 billion settlement with Wells
Fargo in 2016 and in a 2014 settlement with JPMorgan Chase for
``knowingly originating and underwriting noncompliant mortgage loans
submitted for insurance coverage and guarantees'' at the FHA.
Obviously, fraud has no place in FHA programs. However, without a
strong
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signal that fraud and dishonesty will not be tolerated, some lenders
who don't play by the rules will, once again, push the envelope with
damaging effects to families and taxpayers.
I hope that Mr. Montgomery proves me wrong and that under his
leadership, HUD will emerge as a strong advocate for consumers and
affordable housing and assisted families. It is hard for me to believe
that, though, when you look down the street at the White House, and the
White House, frankly, looks like a retreat for Wall Street executives
and those connected to those financial interests.
Consumers and families need an advocate at HUD. So far, the
administration's response to our rental housing shortage, unbelievably
enough, has been to propose the slashing of billions from housing
programs and the raising of rent on low-income, HUD-assisted families,
seniors, and people with disabilities. After all, as the HUD Secretary
said--after giving this tax cut where 80 percent of the tax cut, of the
$1-plus trillion, went to the richest 1 percent of people in this
country--they had to make cuts to the cleanup of Lake Erie, which
Senator Klobuchar and I care so much about; they had to make cuts in
Head Start; and they had to propose raising the eligibility age for
Social Security and Medicare. They had to make these cuts. That was
part of the deal of a tax cut for the rich. So it is just a little hard
for us to buy in to some of their reasoning.
The administration has been dismantling consumer protections and
eroding fair housing enforcement at HUD and the CFPB. Just yesterday,
Congress passed legislation making it harder to detect and protect
against violations of fair housing laws, particularly reverse
redlining, as if we didn't deal with that issue decades ago. We all
should come to agreement that redlining is wrong. It devastated
borrowers and communities during the crisis, and it hasn't gotten a
whole lot better.
I hope Mr. Montgomery, when he is confirmed, will use his office to
advocate for housing solutions that work for our families and our
communities. These matters are far too important for too many Americans
to do otherwise.
I oppose his nomination. I hope I am wrong. I hope he actually does
the things that someone in that position at HUD should do.
I yield the floor.
The PRESIDING OFFICER (Mrs. Hyde-Smith). The Senator from Minnesota.