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House Budget Committee Chairman, Paul Ryan

Wednesday, January 5, 2011
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HH: Pleased to welcome for this hour’s conversation Paul Ryan, Congressman from Wisconsin’s 1st district. He is also one of the young guns, and the author of the book by the same name of that. And he is also now the chairman of the House Budget Committee. Congressman Ryan, welcome to the Hugh Hewitt Show.

PR: Hey, Hugh Hewitt, how are you doing today?

HH: Great. Good to have you back.

PR: Thanks for having me.

HH: You’re going to be the only Miami Red Hawk we talk to all week, actually. So…are there any other Miami Red Hawks in Congress?

PR: Yeah, Maria Cantwell up in Washington. She’s a Senator, a Democrat. And actually, we just defeated Steve Driehaus in the last election. He’s gone. I think she’s the only other one that I can think of.

HH: So you’re down to two. One on the left…

PR: Yeah, I think we’re down to two.

HH: Well, okay, we’ll ignore Maria for the moment being.

PR: Yeah.

HH: Congressman Ryan, Budget committee, let’s start by talking about the jurisdiction thereof this year. You’re now captaining this effort. What’s the committee’s scope?

PR: The federal budget.

HH: That’s easy. That’s big.

PR: That’s the scope. It’s the federal budget, and the rules and laws that police the budget process. So the Budget committee, the way I describe it is we’re the architects. It’s the architecture of the federal budget. And the other committees fill in the details. The other committees are the plumbers, the electricians, the pipe fitters, the carpenters. So the budget is the architecture of the federal budget for now and the next ten years. And then, the Budget committee is in charge of the budget process itself, and policing the process, and making sure that the process is being conformed with as the year goes on.

HH: All right, you’ve been in Congress eleven years. This is the first gavel you’ve got.

PR: Yeah.

HH: Are you daunted by this prospect?

PR: You know, no. I mean, I’ve been here twelve years, this is my seventh term. I’ve been the ranking member, meaning the top Republican in the minority for four years. So I’ve been around long enough. And I was in the majority as well, so I’ve watched these things. So it’s not really all that daunting to me. What’s more daunting to me is this fiscal cliff we’re facing as a country, is the choice of two futures we have in front of us. I think this is the most monumental time our country has faced, really, in history since its founding, because we have these tipping points we’re reaching. And it will define whether or not the American idea as we’ve all known it, as our founders created, is going to continue in the 21st Century or not. And the decisions we make in the next couple of years are just tremendously monumental. So that’s what is daunting to me. Getting a gavel, and being in charge of a committee, that’s is not that daunting to me. It’s the enormity of the task, and the tug of war of different philosophies up here. Which one wins out at the end of the day, we’re going to know the answer to that question fairly soon. That’s what’s daunting to me.

HH: Now Congressman Ryan, you’ve written in your road map, and you wrote in the book you co-authored, Young Guns, with Eric Cantor and with McCarthy, Congressman McCarthy from California, that there’s a way out of this mess.

PR: There is.

HH: But the Budget committee’s going to have to lead that, and it’s going to have to be brutal. Do you think it’s prepared to do that?

PR: Yeah, I mean, I personally don’t call this brutal. What’s brutal is doing nothing, and just watching us go off a cliff. What’s brutal is procrastinate budget reforms, entitlements reforms, and then to the painful European austerity, where we just manage our decline as a social welfare state for the rest of the century. That’s what’s brutal. What makes sense, but we’ve got to get the politics right to do this, is let’s do budget reform, fiscal reform on our own terms. Let’s do it our own way before we have a debt crisis, without tax increases, without slowing down our economy, and without giving pain and cuts to current seniors who’ve already retired. If you go now or in the near future, you can prevent severe disruptions in the lives of people who’ve already retired and organized their lives around these programs like Medicare and Social Security. If you delay, you can’t keep making that kind of a commitment. So if you go now, you can grandfather the grandparents, reform these programs for the future generations so they’re more sustainable, more solvent, so we can keep our government limited, so we can maximize economic growth, prosperity and free enterprise. You can maintain that, that limited government, free enterprise, free market democracy, which is what we’ve had in this country, if you fix this stuff fast. But again, if you procrastinate, you’re not going to have that. You’re going to have a government that will be twice as big as it is today when my kids are my age. You’ll have a tax burden that will be twice as large as it is, per person, per capita, as a percentage of our GDP, when my kids are our age. We will slow down the economy, and we will give the next generation a far lower standard of living. And the American exceptionalism will be a thing of the past.

HH: All right, I want to go through each of those areas with you. We’ve got 25 minutes to do that. But let’s start with the actual tall weeds of the process. What’s the Budget committee going to do to start moving toward, away from the cliff, not towards the cliff, but away from the cliff?

PR: So between now and the spring, which is when the budget is written, we plan to do a lot of things to start making a good dent on spending. We plan to rescind spending. That means going to current year spending, and cut it out, cut a lot of this stuff back to pre-binge spending levels. We want to do process reforms like putting caps on spending, a Constitutional version of a line item veto. We want to freeze pay for federal employees and hiring. And we want to cut budgets. So we want to start going after spending right now in this year today. What happens is the President gives us his budget in February. We go and have the CBO measure that budget. They give us that at the end of February, and in March, we begin writing our budget to pass typically in April. So April is when our budget blueprint comes out. Before that is when we are going to go into the floor, almost every week, and go in after spending in many different ways.

HH: Now when you say you’re going to write your budget so that it comes out in April, that means, I think, that you send it to the Senate in April?

PR: That’s right. So this is the way the budget law works. So we don’t get our baseline, which is really the measuring stick we use to measure budgets, until the end of February. So in April is when all of this stuff is supposed to occur. So somewhere at the end of March, Early April, the House should pass its budget. The Senate should be working on it same track. And then we will see whether or not the House and the Senate can come together on a budget agreement. You know, my guess is that’s going to be pretty tough to do, given that the Democrats control the Senate, and health care is really the big driver of our problem. We don’t want this Obamacare to occur. We want to repeal it. We want to replace it. That’s the centerpiece of any budget that makes any sense in my mind. And I have a hard time believing the Senate’s going to agree with us on this, since they muscled this thing into law, and they still control the Senate. So it’s hard to see a big agreement between the two. And so what might probably happen is that the House will govern itself with the budget we pass, the Senate will govern themselves with the budget they pass, which will delay a budget impasse until later in the fiscal year in the fall.

HH: Is that wise…

PR: That’s the most likely scenario that you could see happening.

HH: Is that wise to postpone it to the fall? Will we not end up with another continuing resolution?

PR: No, so that’s what…but that’s never really how it happens, because the first thing a budget does is it sets what we call discretionary spending. That’s government spending for current agencies’ budgets to start October 1st in the beginning of the next fiscal year. And so if this is not resolved until then, that’s where those sort of shutdown scenarios, or those continuing resolution scenarios, occur. But my guess is we’re going to cut spending so much that the Democrats probably aren’t going to like how low we go in the Senate. We’re not interested in compromising so we just end up raising taxes, that’s not where we’re going. We are going to be true to our principles, unlike the last time we were in the majority. We’re not going to make that mistake again. And so my guess is we will fight this thing out over the summer on discretionary spending, and then in the fall, you’ll have some kind of a, you know, a budget fight on discretionary spending. On the big ticket items, on Medicare and Medicaid, it is difficult for me to see the President and his party, you know, all of a sudden saying you know what? You Republicans are right. Obamacare was wrong, these things are getting out of control, we want to repeal this stuff. I have a hard time believing that’s going to happen. That should nevertheless not dissuade us from defining ourselves with our actions, telling the American people who we are, what we would do differently, and then giving them a very crystal clear choice in the 2012 election. We’re not going to settle every issue in this session of Congress. There are big philosophical disagreements. Basically, it’s individualism versus collectivism, is how I would generically describe the philosophical disagreements here. And we owe it to the country to give them alternatives.

HH: Now it seems to me that it’s going to be necessary to prepare the public for this confrontation which is going to come in the fall over discretionary spending, and maybe entitlement reform.

PR: Right.

HH: Do you expect, Paul Ryan, that there will be a shutdown of the government in the fall?

PR: I don’t expect that. We’ve all had that before. I don’t see…I don’t expect it, but I just don’t know. It’s tough to say where this goes. But I wouldn’t say that we’re assuming that’s going to be the case, or planning for that. It is just really, there is just too much information we just don’t know at this time to really tell you one way or the other.

HH: Now in this budget blueprint that you will be getting to work on as soon as the President’s blueprint comes up, you will have, like, line items for Social Security. You’ll have the Department of Education. You’ll have the Department of Defense.

PR: Right.

HH: All that will be laid out. And what you said, I want to make sure the public understands, is that then the House appropriators have to live within whatever the House Budget committee says?

PR: That’s exactly right. Yeah.

HH: I was unaware of that.

PR: I give them their instructions as to…the Budget committee tells them how much money they can spend.

HH: That’s fascinating. Have they ever denied the applicability of that? Have they blown those caps before?

PR: They sure have tried. There are a lot of little gimmicks that you can do to cook the books, to try and weasel out of those numbers. It’s the Budget committee’s job to police those gimmicks, and that’s exactly what I intend on doing.

HH: When we come back from break, I’m going to ask you how you do that, because that seems to me to be where the public enlists in Paul Ryan’s army, especially the Tea Party public, and enlists in the effort to make sure that there is honesty, transparency and accountability in the House Republican caucus before we worry about the Democrats in the Senate.

– – – –

HH: Congressman Ryan, let’s go to Obamacare now. Would you walk the audience through the Budget committee’s role in the rollback of Obamacare?

PR: So the Budget committee basically says here’s what’s going to happen with all these federal health care programs for the next ten years, and how we will budget for it. And here’s the budget we lay out, and the policies that support that. What do we do with Medicare? What do we do with Medicaid? What do we do with Class Act, which is one of the Obamacare creations? And what do we do with Obamacare itself? So that is where we literally put the numbers on paper and we say this is what we want the future to look like, and here are the policies that we want to pursue to get those numbers. That’s basically what the budget does. It’s the architecture going forward. So if you’re Obama, you’re going to give a budget to Congress that will enshrine Obamacare into law. It will assume Obamacare continues into law, and that it budgets for those things. If you’re a conservative like myself, then you will not accept that. And you will put out a budget that says we plan on getting rid of this law, and budgeting for that fact, and here’s what the world will look like under our vision of government going forward without Obamacare, and a replacement with a consumer-directed, market-based system, not a government-run rationing system in health care. Those are the kinds of things we’re going to have to do, and that basically is encapsulated within our budget.

HH: Now Paul Ryan, will it be transparent in the way that it has never been thus far? For example, this doctor fix that we’ve have three, four, five of them on Medicare.

PR: Right.

HH: Are you committed to having your committee honestly say here’s what we need to do about this?

PR: Yes, so I mean, personally, I would get rid of all that stuff. In the new Medicare that my roadmap goes to, we don’t have Medicare fee for service doing all of this stuff, all of these complicated formulas. We give the money to the people, to the individual, and they go into the marketplace with power to buy a plan that meets their needs, just like every federal worker and member of Congress does. So we change this thing, prospectively going forward, in many, many ways. But yes, you have to decide how you’re going to treat, say, the doc fix, that’s called the SGR, going forward. Yes, your budgets do have to reflect how that is dealt with, and yes, we will be doing that. Look, my goal is not just to give an honest budget and then police it, and make sure that there are no games played to kind of cook the books. But my goal is also to rewrite the way the budget process works itself, because the budget process, which was written in the mid-70s, was designed to grow government. It’s inherently biased in favor of keeping taxes high, and keeping spending high, and against limiting government. I want to rewrite the federal budget process. And Jeb Hensarling and I have put out legislation for years on this front to get the bias in favor of limiting government, keeping taxes low, getting spending under control.

HH: Okay, so tell me where I’m wrong. I’ve for years thought of the Budget committee as kind of the toothless giant of the process.

PR: Exactly.

HH: And so how do you change? I mean, how do you get people to pay attention and take it seriously?

PR: Because right now, the budget is just guidelines. The budget is here’s what we want to do, here’s how we’re going to budget. The only thing that has teeth to it is the discretionary number we give the appropriators I just mentioned to you a minute ago.

HH: Right.

PR: All the rest of it is just guidelines. And so the country doesn’t even have to follow the budget. The government doesn’t even have to follow the budget we lay out for it, other than just this one discretionary number. And what inevitably happens, whether Republicans or Democrats are running the joint, is you start breaking the budget, you know, a month or two down the road. So we want budgets that are binding. We want actually spending caps. I mean, we don’t have caps on spending. I mean, just think of this.

HH: Wow.

PR: There’s no limit to how much spending and borrowing can occur, even after you pass a budget. So that’s the kind of thing I’m talking about, is cap spending, and then enforce those caps. If Congress starts spending money that goes over the caps, then an across the board spending cut kicks in automatically, nothing you can do about it. So we need to have those kinds of artificial controls that puts spending in control. One of the things we’re doing right now in changing the House Rules is if you are a member of Congress, and you want to come to the floor when we’re spending appropriations, and you want to cut a program, right now, the rules require that that money gets spent somewhere else in government. That’s wrong. We want to make sure that if you come to cut a boondoggle out of spending, that that money goes to the deficit, that it actually gets saved, and not reinvested somewhere else.

HH: Now if you…

PR: That’s the system we have today, so we’ve got to change that.

HH: If your committee adopts these kinds of reforms to give teeth to the Budget committee, will they be binding on the Republican caucus before they clear the Senate? And do you expect the Republican Caucus, if that is the case, to adopt them?

PR: Yes and yes. So already we’ve put some things into House Rules to codify what I’ve just said. We’re doing Cut-Go, which is cut as you go. Pay-Go basically means, when you apply Pay-Go, it’s a justification to raise taxes. It’s just a justification to keep government where it is or grow it. Cut-Go means cut as you go. You want something? You better cut spending to get it at the very least. And so we want to put the bias in favor of cutting spending and limiting government, and we want the rules to reflect that. We want to encourage people to come to the floor of Congress with cutting amendments, to cut spending, go after boondoggles, go after waste, go after programs, and then save that money and lower the overall amount of government spending by the amount of your cutting amendment. That’s the kind of rule system we’re putting in place here in the House. Now obviously, the Senate, because we haven’t totally fixed this budget process, won’t govern themselves by that. And that will lead to the fact that we’ll have differences of numbers between the House and the Senate when it’s all said and done.

HH: Now my pal, John Campbell, has often said there are three parties in Congress.

PR: Yeah.

HH: Republicans, Democrats, and appropriators.

PR: And John’s a very good friend of mind.

HH: Okay.

PR: And he’s right about that.

HH: Yeah, you shouldn’t admit to that quickly. That’s really a bad thing to have done. But in any event…that means you may be committed to USC.

PR: I’m a Notre Dame fan, actually.

HH: All right, we’re together on that. Although Miami won the MAC.

PR: They did.

HH: They’re going to the…

PR: They did.

HH: …Little Caesar’s bowl. You know, hooray. Now in terms of this, though, can you control that third party, the appropriators?

PR: We can if we have the people with us. We can if their constituents are demanding more of them. If the appropriations culture takes over, which is what sunk our majority last time, then we’re done. So what’s great is we’re trying to get other people on these Appropriations committees who are real cutters. Typically in the past, people who have sought the Appropriations committees were people who kind of went native, and who saw the favor factory, the pork machine, as a way to a permanent majority, as a way to keeping yourself in Congress. That’s not that kind of person we want on the Appropriations committee. We want people like John Campbell on the Appropriations committee going after spending, going after cutting, changing the culture of the Appropriations committee. But we also have to change the rules around here so that the bias in appropriations is toward going after spending, not increasing it, not porking the place up. So this will hold as long as we put controls in place, and the quality of people in Congress serving in Congress, and the people holding them accountable. What makes me feel better this time around, Hugh, is people pay attention. People are actually paying attention to what Congress is doing. The internet has been a great equalizer. You can no longer go to Washington and do one thing, and then go home and say you’ve done another. Your words catch up with your actions, and that is a new day in Congress that a lot of people around here just don’t recognize. A lot of folks around here think they can go home and talk like a fiscal conservative, but then just go and pork everything in Washington and get away with it. You can’t do that anymore.

HH: Okay, last quick question before the break. In terms of the staff that you’ve got coming to Budget committee, out of the culture of Washington, they’re all kind of suspect. Where are you finding the people who are going to have sort of the immunity to the spending disease?

PR: Well, I just hired somebody from the National Review.

HH: Okay.

PR: A great guy. We basically, I have number crunchers, I have sort of technical people and analysts and myself. And those of us who are conservatives use the analysts on our staff to help guide us, help give us the information we need to go in the direction we want to go. So you don’t want…and typically, there’s something called budgeteers versus appropriators. Budgeteers are the people who fight the appropriators. Those are the kind of people we have, who are going after the appropriations and the big spending, and that’s the kind of people we hire.

– – – –

HH: Congressman, before the turn of the calendar, I sat down with Scott Walker, the governor of the great state of Wisconsin now.

PR: He’s a great guy.

HH: And we talked about his fiscal responsibility. And I talked to Kasich as well, and Mitch Daniels, and Rich Snyder, and all the good Republicans. But out in my neck of the world, Jerry Brown is already figuring out how to come with a tin cup to Washington, D.C. and beg for money. What’s the message to those governors in California, Illinois, New York, where they’re broke?

PR: Get a round-trip ticket.

HH: (laughing)

PR: (laughing)

HH: Well put.

PR: We don’t have any money, either. Look, and no offense to Californians, but those of us from more frugal states, we’re not interested in bailing out people from reckless states. You know, the moral hazard of bailing out states who fail to get their finances under control, why would we want to do that? Why would we want to subsidize bad behavior? States need to clean up their own messes, their own acts, in my opinion. It’s better off in the future. All we would do is just buy delay, which is painful for everybody. Plus, Washington’s out of money. I mean, 41 cents on the dollar is borrowed here. 47% of that 41 cents on the dollar comes from other countries like China and Japan. We just can’t keep going the way we are. We’ve been enjoying an unearned standard of living from government. We need to get back to prosperity. We need to get back to pro-growth. And let’s grow the private sector, and grow ourselves out of this problem, instead of just heading down this path of thinking that government can just create all these jobs.

HH: Are you ready for the media assault, and I use that term advisedly, when they show children without milk at school…

PR: Yes, that’s just going to happen. And look, I’ve been around these fights before, so it’s not as if this is the first rodeo for some of us. If we blink and fail, and we need to do this intelligently, it’s not like we enjoy these things. It’s just the entire system we have could go down in a debt crisis. You know, we really do have a fiscal disaster coming. And if we blink to these forces of status quo, then it’s over with. The worst painful thing to have occur is us not to do anything, and just go down this path, and watch this debt crisis eat us alive. And then, we’re going to do it with the bond markets. The bond markets will force us to fix our fiscal problem, and it will be very ugly and very painful for everybody, and we’ll keep doing it on their terms.

HH: Will you explain that to people what you mean by that?

PR: Well, what will ultimately happen if we don’t fix this is the bond markets will turn on us. The bond market vigilantes will turn on us, and we won’t be able to borrow this money without prohibitive rates. It’s just like Japan. You can get yourself into such a situation where your debt is so high, and the interest on your debt is so high, that even if you can grow your economy and get people back to work, interest rates go up to such a point where the interest on your debt overtakes your budget. The interest swallows you. So even if you get more revenues from more people going to work, and more economic growth, it’s not enough to keep in pace with the higher interest payments, and you basically have a death spiral. That’s an actuarial term I’m using.

HH: Right.

PR: And so here’s the problem. Right now, our interest on debt is $202 billion dollars this year. By the end of the decade, under the current estimates, it’s $1 trillion dollars.

HH: Gosh.

PR: If our interest rates go anywhere toward what the blue chip consensus forecasts, or believes, that’s another $1.5 trillion dollars. If they go toward where the 1980s where because of stagflation, and you could make a good argument with QE2 and all this Federal Reserve stuff, that we’re going to have much higher interest rates, mid and late part of this decade, then it’s about another $5.4 trillion dollars in interest payments alone. So the interest gets us. And so we can dodge this bullet of a debt crisis if we get on top of it fast. If we delay, then the bond markets take over, and there’s nothing we can do about it.

HH: Paul Ryan, how many of your colleagues across the aisle simply want to go the inflate our way out of this, just print dollars until we’re done?

PR: You know, I don’t know if people really understand monetary policy that much around here. It’s my first policy love. I was Jack Kemp’s staff economics guy, so I used to work on this stuff in the 90s quite a bit. There are a lot of people who do believe that you can just print your money, print your way out of this, monetize the debt, that they think they can just sort of drive the car between the pylons of inflation and hyper-inflation, and basically debase the currency out of it. Let me just say this. There is nothing more insidious that a government can do to its people than to debase its currency. We already have fiat money, which is a systematic replacement of the rule of law by the rule of man, meaning the Federal Reserve. Now I’ve got legislation putting the Federal Reserve back in its box, getting it focused on price stability, ending the dual mandate, and getting rid of all this Phillips curve dogma that has given us this kind of uber-discretion by the Federal Reserve. It’s a mistake. We’ve got to fix it. We need sound money. Go to the www.soundmoneyproject.org, and you can read a great thing by Judy Shelton that explains all of this.

– – – –

HH: Congressman Ryan, we were talking about the break very bluntly about the reserve, the Federal Reserve and the currency.

PR: Right.

HH: And I was thinking I was so disappointed at the end of last year when the House GOP leadership went behind closed doors and sprang out with this deal. And some people like the deal and some people hated the deal. I just hated the fact that it came out like the virgin birth. I believe in arguing this out in the public square like you just did on inflation. But I don’t know that the Republicans really trust the public to listen. Do they? Do they really not trust the public to get this?

PR: We don’t have a choice. We’d better. And I believe, look, I hope we get some good things done in this next year. I hope we can get the President to come more to the middle and get some things done that are good for the country, good for the economy. You know, preventing tax increases was one of those things. But ultimately, we’re going to have to go to the country in 2012 and say make a choice. Do you want the opportunity society with the safety net? Or do you want the welfare state? Do you want us to reclaim America with the founding principles, sound money, low taxes, predictable regulations, no crony capitalism, and get the spending under control, reform these entitlements? Or do you want to go all in with this path we are on, bring in Obamacare, and bring us to a cradle to grave society where the government has to be far bigger, and have it be the biggest determining force in many people’s lives? That’s the difference. That’s the choice of two futures we have. It’s being forced upon us because of the tipping points we have of this debt crisis, and with more and more people becoming more dependant upon the government than upon themselves. So we’re reaching that proverbial tipping point or fork in the road. Monetary policy, meaning the unsoundness of our money, simply exacerbates and accelerates this choice and trend. And we have to be as clear as possible to the country, because I would argue, in the center-right country we are today, and I think this last election sort of validated that claim, we will win that referendum. So let’s have it. If we delay, if we allow the demagoguery, if we allow the media intimidation to get us to get nervous, to back off of these things, and to back off of defending these founding principles, then we will muddle, we will split the difference, and we will not have given the country the choice that they deserve in 2012, and we will go down this path that we are already on, but only faster.

HH: I understand that two year strategy, but I also worry that Obamacare is a metastasizing agent in the body politic, that it’s destroying health care, and it will introduce all sorts of dysfunction.

PR: It is.

HH: Do we have to wait two years on that front?

PR: No, but we have to go at it in every angle. I mean, the best thing is if we get the silver bullet of an attorney general, you know, arguing successfully at the Supreme Court and knocking it out. I mean, that’s the best option. But we in the legislature can’t plan on that. We have to do oversight, we have to go after funding in everything we can. Lots of shoes are going to drop in this law. 15% of Medicare providers are going out of business in the next couple of years according to the actuary. Premiums are going to go up for most people. Firms are going to start announcing that they’re dumping people on the program. Insurance carriers are going out of business, and you’re just going to end up with a handful of really big insurers, where you have very little choices. So lots of ugly things are going to happen, attributed to Obamacare in 2011, in 2012, and 2013. So I don’t think this law is going to become more popular. It’s going to become less. And so the question is what things can we do in the intervening period while Obama’s still there to make it better? I don’t know the answer to that question. I’m really not sure. But we sure as heck better make the case so that in 2013, we can fully repeal and replace this thing. Look, health care was broken and needed fixing. It didn’t need a government takeover. It needed the liberty of market principles being reinjected back into this secotr of our economy.

HH: All right, Paul Ryan, I had one of our counterparts in the Senate, Bob Corker, on a few weeks, because he’s got the 19% solution, 19% of GDP. And I immediately said fine, that sounds good, provided you give me 4% on defense, because you’ve got a nation, as great as ours, has got to spend 4% of GDP on its defense, or it’s not a great nation. He rejected that. So now as the Budget chair incoming in the House…

PR: Yeah.

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