39120_C4_1X 11/10/06 2:44 PM Page 1 2006 ANNUAL REPORT 1150 Seventeenth Street, NW AMERICAN ENTERPRISE INSTITUTE Washington, DC 20036 202.862.5800 www.aei.org for Public Policy Research Photography by David Berkwitz, Peter Holden, Sylvia Johnson, Elsa Ruiz, and Tyrone Turner Cover image © Murat Taner/zefa/Corbis 39120_C2_3.qxd 11/8/06 3:25 AM Page 2 BOARD OF TRUSTEES J. Joe Ricketts COUNCIL OF ACADEMIC Chairman and Founder ADVISERS Bruce Kovner, Chairman TD Ameritrade Holding Corporation FINANCES Chairman James Q. Wilson, Chairman Caxton Associates, LLC Kevin B. Rollins Pepperdine University President and CEO Lee R. Raymond, Vice Chairman Dell Inc. Chairman and CEO Eliot A. Cohen AEI’s finances are reported in accordance with Net Assets Exxon Mobil Corporation Edward B. Rust Jr. Professor and Director of Strategic GAAP accounting conventions. By those standards, 69.3 Chairman and CEO Studies the Institute had 2005 revenues of $37.9 million Tully M. Friedman, Treasurer State Farm Insurance Companies School of Advanced International 60.0 Chairman and CEO Studies and expenses of $21.5 million. Foundation revenues Friedman Fleischer & Lowe LLC Mel Sembler Johns Hopkins University increased 35 percent and corporate support was up 52.9 Founder and Chairman 22 percent over the previous year. The Sembler Company 50.0 Gordon M. Binder Gertrude Himmelfarb 48.2 Managing Director Distinguished Professor Coastview Capital, LLC William S. Stavropoulos GAAP requires the net present value of multiyear Chairman Emeritus of History Emeritus 41.4 commitments be recognized in the year the pledges 36.5 40.0 The Dow Chemical Company City University of New York Harlan Crow are made, even though some of those funds may be Chairman and CEO 34.3 Wilson H. Taylor Samuel P. Huntington received in the future. Roughly $10 million of the Crow Holdings Chairman Emeritus CIGNA Corporation Albert J. Weatherhead III individual revenue reported represents forward com- 30.0 Christopher DeMuth University Professor of Government mitments. Excluding these commitments, individual 26.4 $Millions President William H. Walton 23.4 Harvard University support increased by 3 percent. American Enterprise Institute Managing Member 21.8 Rockpoint Group, LLC 20.0 William M. Landes 17.5 Morton H. Fleischer James Q. Wilson Clifton R. Musser Professor A 20 percent increase in foreign policy and defense Chairman 13.2 Pepperdine University of Law and Economics research expenditures led a total expense increase Spirit Finance Corporation 10.0 University of Chicago Law School of 8 percent over the previous year. The share of 9.3 Christopher B. Galvin total Institute resources devoted directly to research Sam Peltzman Chairman remained stable at 82 percent. EMERITUS TRUSTEES Ralph and Dorothy Keller Harrison Street Capital, LLC 0.0 Distinguished Service Professor Willard C. Butcher 2001 1996 1997 1995 2002 2003 2005 2004 1998 1999 2000 Raymond V. Gilmartin of Economics 1994 Special Adviser to the Richard B. Madden Graduate School of Business Sources of Executive Committee University of Chicago 2005 AEI Revenue AEI’s investments are beginning to provide a degree Merck & Co., Inc. Robert H. Malott $37.9 million Nelson W. Polsby of stability the Institute has never enjoyed before. Harvey Golub Paul W. McCracken Heller Professor of Political Science For the last two years, investment income covered Chairman and CEO, Retired Institute of Government Studies American Express Company Paul F. Oreffice about 22 percent of AEI’s expenses. But that still University of California–Berkeley Individuals 54% leaves a significant requirement for annual fundrais- Henry Wendt Corporations 17% Robert F. Greenhill ing, so we are grateful to the many corporate, foun- Chairman and CEO George L. Priest Conferences, Sales, dation, and individual friends who provide the Greenhill & Co. John M. Olin Professor & Other Revenues 16% of Law and Economics support that makes our work possible. OFFICERS Roger Hertog Yale Law School Foundations 14% Christopher DeMuth AEI makes certain tax filings publicly available. It Martin M. Koffel Jeremy A. Rabkin President also supplements its required financial disclosure by Chairman and CEO Professor of Government URS Corporation providing copies of its audited financial statement David Gerson Cornell University 2005 AEI Expenses upon request. Executive Vice President $21.4 million John A. Luke Jr. Murray L. Weidenbaum Chairman and CEO Jason Bertsch Mallinckrodt Distinguished MeadWestvaco Corporation Vice President, Marketing University Professor Management & General Expenses 15% Washington University L. Ben Lytle Henry Olsen III The American Enterprise Magazine 7% Chairman and CEO Vice President, Director of the Richard J. Zeckhauser Economic Policy Studies 33% AXIA Health Management, LLC National Research Initiative Fundraising 4% Frank Plumpton Ramsey Professor Robert A. Pritzker Danielle Pletka of Political Economy Social & Political Studies 21% President and CEO Vice President, Foreign and Defense Kennedy School of Government Foreign & Defense Policy Studies 20% Colson Associates, Inc. Policy Studies Harvard University 39120_P01_13X.qxd 11/10/06 1:55 PM Page 1 THE AMERICAN ENTERPRISE INSTITUTE sponsors original research on the world economy, U.S. foreign policy and international security, and domestic political and social issues. AEI is dedicated to preserving and strengthening the foundations of a free society—limited government, competitive private enterprise, vital cultural and political institutions, and vigilant defense—through rigorous inquiry, debate, and writing. The Institute is home to some of America’s most renowned economists, legal scholars, political and social scientists, and foreign policy specialists. AEI is an independent, nonpartisan organization financed by tax-deductible contributions from corporations, foundations, and individuals. 1 39120_P01_13X.qxd 11/10/06 1:55 PM Page 2 M ESSAGE FROM THE C HAIRMAN AND P RESIDENT The AEI combination of intellectual purpose and practical engagement yielded impressive results in 2006. The Institute produced a profusion of books, reports, essays, conferences, and lectures—on subjects ranging from the war in the Middle East to school reform, from bioethics to liability reform, from the measurement of poverty to the develop- ment of information markets. AEI’s work was some- times contrarian and sometimes provoked spirited controversies—but always with the purpose of mak- ing political dialogue more open, robust, and fruit- Chairman Bruce Kovner and President Christopher DeMuth ful. It sometimes produced immediate results in the form of specific laws and policy decisions—and In the daily media, politics is about personalities, other times laid the groundwork for better decisions partisanship, and the struggle for power. In the light a year or decade hence. of history, however, politics is about something AEI scholars are published and cited in the more: powerful ideas about liberty, equality, and the national media more often than those of any other proper role of government—ideas that have shaped think tank, but we continue to invest in building America’s destiny from the beginning and are shap- our own publications arsenal. With the 2006 ing it today. additions of Development Policy Outlook, Liability Since its founding in the early 1940s, the Ameri- Outlook, Middle Eastern Outlook, and Tax Policy can Enterprise Institute has stood at the crossroads Outlook, we now produce thirteen issue-specific of politics and ideas. AEI’s purposes are practical periodicals that take full advantage of the power of and political: to defend the principles and improve the Internet. Each publication is distributed—by the institutions of American freedom—including mail, but increasingly by Internet PDF—to highly limited government, private enterprise, and a vigilant customized lists of policy specialists and profession- national defense. But AEI’s methods are intellectual als, bringing them fresh intelligence and insights and nonpartisan: rigorous research and scholarship, from AEI research. Our exceptionally rich website reasoned debate, and continuous efforts to evaluate, and eleven program subsites offer the texts of thou- criticize, and improve government policies. sands of AEI publications and videos of all of our Today, AEI is home to more than fifty scholars conferences and lectures. We email highlights of new and fellows, and sponsors and publishes the additions each day, and receive millions of web visits research of many more at leading universities across each year. the nation. These men and women are at the top The year also brought an important transition in of their academic and professional fields and are our flagship publication, The American Enterprise. determined to apply their work to making tangible Karl Zinsmeister, in his twelve years as editor in improvements in public policy. They are prominent chief of TAE, produced seventy issues of superlative in the debates of the day and are determined to quality and interest and made it by far the most advance innovative new ideas that will shape the widely read magazine in its league. When Karl debates of tomorrow. decided to step down for purposes of pursuing 2 39120_P01_13X.qxd 11/10/06 1:55 PM Page 3 Visiting Scholar R. Glenn Hubbard and Kevin Rollins, president and CEO of Dell, at AEI Trustee Martin M. Koffel the 2006 World Forum his own research and writing, we were elated to whose backgrounds and research are described else- find the perfect successor when James