2005Annual Report American Enterprise Institute for Public Policy Research BOARD OF TRUSTEES J. Joe Ricketts COUNCIL OF ACADEMIC Chairman and Founder ADVISERS Bruce Kovner, Chairman Ameritrade Holding Corporation 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 Exxon Mobil Corporation John W. Rowe Professor and Director of Strategic Studies Tully M. Friedman, Treasurer Chairman, President, and CEO Chairman and CEO Exelon Corporation School of Advanced International Friedman Fleischer & Lowe LLC Studies Edward B. Rust Jr. Johns Hopkins University Gordon M. Binder Chairman and CEO Managing Director State Farm Insurance Companies Gertrude Himmelfarb Coastview Capital, LLC Distinguished Professor William S. Stavropoulos Harlan Crow Chairman of History Emeritus Chairman and CEO The Dow Chemical Company City University of New York Crow Holdings Wilson H. Taylor Samuel P. Huntington Christopher DeMuth Albert J. Weatherhead III President Chairman Emeritus American Enterprise Institute CIGNA Corporation University Professor of Government Harvard University Morton H. Fleischer Marilyn Ware Chairman Chairman Emerita William M. Landes Spirit Finance Corporation American Water Clifton R. Musser Professor of Law and Economics Christopher B. Galvin James Q. Wilson University of Chicago Law School Chairman Pepperdine University Harrison Street Capital, LLC Sam Peltzman Raymond V. Gilmartin Ralph and Dorothy Keller EMERITUS TRUSTEES Special Adviser to the Distinguished Service Professor Executive Committee Willard C. Butcher of Economics Merck & Co., Inc. Graduate School of Business Harvey Golub Richard B. Madden University of Chicago Chairman and CEO, Retired American Express Company Robert H. Malott Nelson W. Polsby Heller Professor of Political Science Paul W. McCracken Robert F. Greenhill Institute of Government Studies Chairman and CEO University of California–Berkeley Greenhill & Co. Paul F. Oreffice Roger Hertog Henry Wendt George L. Priest John M. Olin Professor Martin M. Koffel of Law and Economics Chairman and CEO OFFICERS Yale Law School URS Corporation Jeremy A. Rabkin John A. Luke Jr. Christopher DeMuth Chairman and CEO President Professor of Government MeadWestvaco Corporation Cornell University David Gerson L. Ben Lytle Executive Vice President Murray L. Weidenbaum Chairman and CEO Mallinckrodt Distinguished AXIA Health Management, LLC Jason Bertsch University Professor Vice President, Marketing Washington University Alex J. Mandl President and CEO Montgomery Brown Richard J. Zeckhauser Gemplus International SA Vice President, Publications Frank Plumpton Ramsey Professor Robert A. Pritzker Danielle Pletka of Political Economy President and CEO Vice President, Foreign and Defense Kennedy School of Government Colson Associates, Inc. Policy Studies Harvard University 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 corpora- tions, foundations, and individuals. 1 M ESSAGE FROM THE C HAIRMAN AND P RESIDENT Institution, advanced five concrete ideas to address the most serious problems in the U.S. health care system. Toward Fundamental Tax Reform anticipated the report of the President’s Advisory Panel on Fed- eral Tax Reform with analyses by tax authorities; the volume was dedicated to our friend David Bradford of Princeton University, the dean of tax economists who died early in the year. Joshua Muravchik’s The Future of the United Nations provided an unflinching examination of the UN’s sorry record and recom- mended deep structural changes. And Thomas Don- nelly’s The Military We Need documented the gap Chairman Bruce Kovner and President Christopher DeMuth between America’s security challenges and its military capabilities. Many other new AEI books and mono- In a year of bitter partisanship in Washington, the graphs are documented in this report. American Enterprise Institute set a high example of Over the past six decades, AEI scholars have serious, reasoned policy debate and found ever- pledged their allegiance to the idea of limited but expanding audiences for its work. AEI scholars energetic government. In the past year, Kevin A. produced a dazzling array of original research and Hassett, Newt Gingrich, Robert W. Hahn, Véronique writing, and the Institute continued to attract gifted de Rugy, and others have worked on many fronts younger policy experts to its research staff. to revitalize the idea as domestic spending, regula- AEI sponsored nearly 200 major conferences dur- tion, and legal activism surged. The Institute launched ing the year. C-SPAN and major television networks a year-long program to study the government’s covered many of them, and AEI posted most of them response to terrorist attacks and natural disasters in video and audio on our website, www.aei.org. after hurricanes Katrina and Rita produced a federal The website, which brought millions of viewers to spending splurge. AEI, features the texts of our essays, reports, and Thirty years ago, AEI scholars led the effort to congressional testimony. It now includes six subsites deregulate the nation’s transportation sector. Today devoted to specialized subjects from health policy to regulatory activity in corporate governance, commu- liability reform. nications, finance, pharmaceuticals, and biotechnology The Institute’s Outlook essays provided extended occupies our attention. The AEI-Brookings Joint Cen- analyses of current issues. The nine Outlook publica- ter for Regulatory Studies analyzed regulations and tions have proven to be a highly effective medium also published new research on intellectual prop- for injecting our ideas into practical policy debate. An erty in information technology and biotechnology. Outlook concerning developments in Asia debuted The Institute launched an eighteen-month project to this year, as did a periodic report on domestic politics investigate investment company regulation. Environ- and polls. The American Enterprise magazine, featur- mental, energy, and FDA regulation were the subjects ing compelling reporting from around the country, of probing conferences and studies. continued to grow in readership. The arrival of Ted Frank greatly bolstered our work Four new books from the AEI Press provide a on liability reform and permitted Michael S. Greve to sense of the range of Institute’s output: Healthy, turn his undivided attention to his influential work on Wealthy, and Wise, a joint project with the Hoover federalism and constitutional law. Frederick M. Hess 2 produced a cornucopia of original research on school performance, and AEI’s health policy scholars launched an important Medicare reform project. The W. H. Brady Program in Culture and Freedom kept the Institute in the news with a Camille Paglia lecture and a con- ference on the “intelligent design” debate. Leon R. Kass completed his distinguished tour as chairman of the President’s Council on Bioethics. Chris- tina Hoff Sommers and Sally Satel’s book, One Nation under Therapy, exam- ined the therapeutic culture with tren- Trustees (clockwise from top) Marilyn Ware; Martin M. Koffel; and Harlan Crow chancy and humor. with Federal Reserve Board of Governors chairman Alan Greenspan AEI’s work in international affairs grew mightily in 2005. The Institute hosted presentations by Iraqi and Afghan notables, to our ranks Phillip L. Swagel, formerly chief of staff and our scholars provided a steady stream of of the Council of Economic Advisers, whose portfolio in-depth analyses of developments in those nations includes global trade and labor market issues; and and throughout the Middle East. The voices of liberal Adam Lerrick, a professor of economics at Carnegie reformers will be especially important in the demo- Mellon University and pioneer in private-market cratic transformation of the Middle East, and AEI restructuring of sovereign debt, who will continue his launched a project on dissent and reform to provide efforts to improve the performance of international them venues for discussion and “networking.” financial institutions. China’s rise occupied other AEI scholars, as did Having welcomed so many new colleagues, we India’s promise, Japan’s political transformation, must conclude with three farewells. Radek Sikorski, and Russia’s increasingly authoritarian rule. Our who directed AEI’s New Atlantic Initiative with great research was enhanced by the appointment of conviction and verve, has returned to his native Roger F. Noriega, former assistant secretary of state Poland, where he was elected to the senate and for Western Hemisphere affairs, who is focusing on then appointed minister of defense. Scott Gottlieb, Latin America; Frederick W. Kagan, formerly a who brought stunning insight to AEI’s work on professor of military history at West Point, who is pharmaceutical policy, has been appointed deputy working on military restructuring;