Ellison, the first Muslim American congressman, said the House Homeland Security Committee hearing led by Rep. Peter King, R-N.Y., was "the very heart of stereotyping and scapegoating."
"Ascribing evil acts of a few individuals to an entire community is wrong. It is ineffective, and it risks making our country less safe," he said.
The hearing focused on whether terrorist groups, including al-Qaida, were recruiting or inspiring U.S. Muslims to carry out attacks.
"This committee cannot live in denial," King said in his opening statement.
He accused critics of trying to "dilute" the hearing's focus by turning attention to groups other than al-Qaida.
"There is no equivalency of threat between al-Qaida and neo-Nazis, environmental extremists or other isolated madmen," said King, who in the 1990s enjoyed a close relationship with the Muslim community in his Long Island congressional district. "Only al-Qaida and its Islamist affiliates in this country are part of an international threat to our nation."
Zuhdi Jasser, whose American Islamic Forum for Democracy advocates "separation of mosque and state," testified U.S. leaders were seized by a "paralysis" over the issue. He urged the Muslim community to confront an "exponential increase" in the number of Muslim radicals in the United States.
"The U.S. has a significant problem with Muslim radicalization," said Jasser, who is Muslim. "It is a problem that we can only solve."
Ellison said, "The best defense against extreme ideologies is social inclusion and civic engagement."
"We have seen the consequences of anti-Muslim sentiment, from backlash against Park51 Muslim Community Center (in New York) to the hostilities against the Islamic Center in Murfreesboro, Tenn., to a threatened Koran burning in Gainesville, Fla.," he said. "Zoning boards in communities like DuPage (County), Ill., are denying permits to build mosques."
Ellison broke down when he spoke about Mohammed Salman Hamdani, a 23-year-old Muslim-American ambulance driver who died while saving others during the Sept. 11, 2001, terrorist attacks.
"Mr. Hamdani bravely sacrificed his life to try to help others on 9/11," Ellison said. "After the tragedy, some people tried to smear his character solely because of his Islamic faith. Some people spread false rumors and speculated that he was in league with the attackers because he was a Muslim. But it was only when his remains were identified that these lies were exposed."
Hamdani's "life should not be identified as just a member of an ethic group or just a member of a religion, but as an American who gave everything for his fellow Americans," Ellison said.
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