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2009 Annual Report 56747_C1_C4X.qxd 11/11/09 6:58 AM Page 2

Irving Kristol, AEI Friend and Mentor 1920–2009

The tombstone of the great British architect classes began! DeMuth took the advice. “I do not Christopher Wren bears this inscription: “Under- know of a man who changed more lives through neath lies buried Christopher Wren, the builder of personal example and intervention,” said DeMuth this church and city; who lived beyond the age of of Kristol. ninety years, not for himself, but for the public good. was a builder, too, of an enor- If you seek his memorial, look about you.” mously influential magazine and a movement that If you seek a memorial to Irving Kristol, who will outlast him. He cofounded passed away on September 18 in his eighty-ninth with in 1965. The first issue included year, look about you. His memorial is the people essays by AEI scholar , AEI contributor whose lives were influenced by him, many of whom Martin Diamond, and AEI’s great friend Daniel passed through the halls of AEI or work here or in Patrick Moynihan. The essays that appeared in The association with us today. As AEI Council of Public Interest over the next forty years helped to cre- Academic Advisers chairman James Q. Wilson said, ate an movement known as neoconser- Kristol “not only helped change the country, he vatism that, in DeMuth’s words, “transformed changed lives. He certainly changed mine.” AEI’s American and the Republican Party.” past president Christopher DeMuth describes one Charles Murray spoke for many of Irving of Kristol’s many “strategic interventions” in the lives Kristol’s intellectual heirs at AEI when he said, of young people when Kristol urged the young “His passing leaves a huge hole in American intellec- DeMuth to attend the Law tual life. But just as big a hole in the lives of School and not Harvard—only a few days before his friends.” 56747_p01_20.qxd 11/6/09 8:10 PM Page 1

Message from the Chairman and President

The American Enterprise Institute is a community of seamlessness of the leadership succession from scholars and supporters dedicated to three unchang- Christopher DeMuth and Bruce Kovner is all that ing values: expanding liberty, increasing individual we could have hoped for. And thanks to their wise, opportunity, and strengthening free enterprise. long-time guidance, coupled with the invaluable Today, these values are coming under unprec- continuity provided by the Board of Trustees, we found President Arthur C. Brooks and Chairman Kevin B. Rollins edented threat. AEI well-placed for the policy battles that have taken Our political leaders have responded to the place this year. ahead, showing even more clearly how investors can nation’s economic plight with measures that threaten Highlights of our 2009 scholarly achievements— turn their hard-earned resources into an expression of to change America forever: instead of promoting eco- detailed in this report—include AEI’s health policy their deeply held values. nomic reward, they encourage economic dependence; “surge” to provide market-oriented solutions to this The third goal (a direct result of our achievement in place of incentives for Americans to succeed, they most pressing area of public policy, our work to of the first two) was to use our resources—intellectual offer bailouts for those who fail. From taxation and explain the causes of the financial markets crisis and financial—to make the moral case for our work. spending to health care and the environment, our lead- and the best means of reform, and our proposals on The centerpiece of this endeavor has been our ers are relentlessly promoting government solutions to the way forward in . Campaign for the Culture of Free Enterprise. The the economic challenges that now confront America. In This year, we also accomplished three key insti- Campaign is now hitting its stride and is poised in foreign policy, they are abandoning American leadership tutional goals. 2010 to guide the policy and cultural debates. of the free world in favor of participation in an increas- The first was to improve AEI’s communications Everything we do at AEI comes back to the excel- ingly multilateral one, forsaking nations that share our capabilities. This we did by launching a number of new lence of our scholars’ work. The following pages values in order to accommodate those that do not. outreach initiatives—to policymakers through greater showcase that scholarship—the honest, fact-based Faced with government policies based in statism, numbers of briefings and more frequent congres- research that is made possible by the support of the redistribution, and appeasement, AEI is responding sional testimony (more than any other ), to AEI community. with those that rely on the strengths of the American opinion-makers through our series of scholar- Thank you for being a part of our community, for people and their enduring values—workable policies conference calls, and to the general public through our your encouragement and steadfastness this year, and that advance equality of opportunity over equality of new AEI website and popular Enterprise . for standing with us in defense of the free enterprise income, stimulate true and lasting prosperity, and The second was to increase AEI’s fundraising values that we share. stress principle over partisanship and expediency. efforts. This we accomplished with considerable suc- As the new president and chairman, we have cess, despite the difficult environment for nonprofits Kevin B. Rollins Arthur C. Brooks been at the helm of AEI since January 1, 2009. The in 2009. We will build on those efforts in the year Chairman President

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Defending Free Enterprise

Around the time AEI’s last Annual Report went to Institute. AEI came to in 1943 print, the U.S. and world economies were contract- in the midst of a fight over whether wartime eco- ing rapidly. The Troubled Asset Relief Program and nomic and industrial controls would be continued. other interventions of autumn 2008 represented AEI’s arguments tilted that fight in favor of private a new frontier, and no one knew the dimensions enterprise, just as they did time and again in subse- they would take (although AEI scholars provided quent years. In 2009, a banner year for government prescient warnings about the consequences of interventions in the private economy, AEI scholars bailouts and nationalization). Many and mounted a spirited defense of free enterprise. politicians blamed the financial crisis on a suppos- edly unfettered , a viewpoint Peter J. It’s Still the Economy. AEI scholars engaged in a Wallison, Vincent R. Reinhart, and John H. Makin vigorous debate about how best to stimulate the effectively rebutted in substantial essays exploring economy. Reviewing literature on countercyclical the policies that were the true cause of the crisis. economic policies, Kevin A. Hassett argued that By the time President because the impact of temporary fiscal stimulus took the oath measures is uncertain, the administration should of office, AEI’s and provide an immediate boost while working to scholars faced a full slate of improve the long-run budget outlook and to pro- challenges to free enterprise. vide greater economic efficiency. He recommended As the year progressed, even indexing Social Security to prices, not wages (while more issues called for their reducing the payroll tax accordingly), and reducing expert assessments: the stimu- the corporate income tax and moving toward lus bill, the burgeoning federal consumption taxation. Mr. Hassett followed the deficit, health care reform, cli- progress of the stimulus legislation after it became mate change legislation, mon- law, demonstrating that the U.S. economy com- etary policy, card check, and pared unfavorably to those economies that adopted the administration’s blueprint more sensible stimulus plans. Alex Brill discussed for financial reform. This is the policies contained in the stimulus that are not uncharted territory for the likely to become permanent and their substantial Visiting Scholar John H. Makin, Resident Fellow Desmond Lachman, University professor of Nouriel Roubini, and Resident Fellow Alex J. Pollock

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AEI Scholars Monitor the Fed’s Balance Sheet

Federal Reserve Balance Sheet

(Billions of Dollars) In an article on American.com, Vincent 2500 Reinhart called the Fed’s actions in the effect on the deficit. In his writings, Lawrence B. fall of 2008 “one of the great experi- 2000 Lindsey also made the case for payroll tax cuts ments in the history of monetary 1500 1000 as stimulus. In testimony before the House Ways economics” and urged the Fed to 500 and Means Committee, Alan D. Viard argued that explain its “radical new policy model.” 0 infrastructure spending was an ineffective way As the figure shows, the balance sheet Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09

to provide short-term stimulus. Martin Feldstein of the doubled in size Central Bank Swaps Direct Loans Asset Purchases Treasuries and Other Loans (a member of AEI’s Council of Academic Advisers over the past year. Previously, it took Source: Board of Governors of the Federal Reserve System, H4.1 Weekly Statistical Release: Factors Affecting Reserve Balances. who serves on President Obama’s Economic Recovery a decade for the Fed’s holdings to Advisory Board) and Thomas Donnelly advanced increase this much. Equally important, the Fed now holds a more complex mix of assets, some of which the case for stimulus through defense spending. will be difficult to unwind. In the past, the Fed held mostly Treasury securities, but in an effort to increase liquidity during the financial crisis, the Fed added to its balance sheet credit swaps with other banks, direct The Way Forward for the Fed. Mr. Reinhart, purchases of mortgage-backed assets, and targeted loans. In recent months, the activity has stabilized. whose long service at the Fed before joining But the Fed must still confront the difficult task of winding down its large portfolio of “toxic” targeted loans. AEI gave him special insight into current events, rejected the idea that a “perfect storm” caused the nation’s financial problems; Mr. Reinhart instead of making the mistakes that propelled Japan into Financial Crisis Inquiry Commission, a distin- pointed to a series of wrongheaded policy interven- its “lost decade.” A lively series of conferences, guished congressional panel charged with identify- tions by the Fed and Treasury. Allan H. Meltzer, including six sessions on “The Deflating Bubble: ing the causes of the meltdown and proposing monetary policy expert and esteemed historian of The Lessons of the Bubble and Crisis,” brought reforms. Mr. Wallison had become well known for the Fed, offered warnings about Fed policies AEI scholars together with leading financial figures his prophetic warnings about the financial risks and the increased inflation risk associated with to discuss the government’s response to the finan- posed by the government-sponsored enterprises deficit spending and the Fed’s loose monetary cial crisis. Fannie Mae and Freddie Mac. He and Alex J. policy. The second volume of his acclaimed Pollock have devoted several issues of their History of the Federal Reserve (University of Chicago Financial Regulation’s Future. AEI scholars have Financial Services Outlook series to the future of Press), covering 1970–86, will be published in been in the thick of the debate about the financial U.S. financial regulation. They argued firmly against January. Mr. Makin used several Economic Outlooks regulatory architecture proposed by the admin- employing the Federal Reserve as a “systemic risk” to argue that deflation is the major danger to the istration to address the financial crisis. In July, regulator, as Treasury Secretary Timothy Geithner economy and that policymakers should be wary Mr. Wallison and Bill Thomas were named to the proposed in the spring. In congressional testimony

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Defending Free Enterprise, continued

and additional articles, they Mr. Reinhart also focused on ways to approach new discussed the serious short- financial regulation. comings of the administration’s proposed Consumer Financial Spend and Tax, Spend and Tax. The Obama Protection Agency. “The estab- budget proposals—a massive increase in spend- lishment of a powerful regulator ing, even after excluding the stimulus and the with the authority to designate Bush bailouts—were staggering, as Philip I. Levy certain firms as systemically demonstrated on the Enterprise Blog. Mr. Hassett important and a system for estimated how much Americans would have to resolving or rescuing financial pay in future taxes as a result of deficit increases. institutions other than banks Mr. Viard contributed to that discussion with Tax will seriously impair competi- Policy Lessons from the 2000s (AEI Press, February tion in the financial sector and 2009), in which leading tax scholars examined

Alan Greenspan, former chairman of the Federal Reserve, and Peter J. Wallison, threaten to create large compa- how to move forward in a variety of tax policy Arthur F. Burns Fellow in Financial Policy Studies nies that are not significantly areas. Messrs. Hassett and Lindsey and Aparna different in their competitive Mathur coauthored a paper on simplifying taxes for effect from Fannie Mae and low-income Americans; they presented it at a May Freddie Mac,” Mr. Wallison conference that also featured Representative Tom wrote in April. Mr. Pollock Petri (R-Wisc.). On American.com, favors the creation of a systemic proposed repealing the capital gains tax, and in advisory body that would offer August, at an AEI seminar, he and former Indian- expert opinion about financial apolis mayor Stephen Goldsmith held a seminar cycles. In June, an AEI confer- at AEI that explored principles to guide budgeting ence on how to deal with at all levels of government. risks posed by systemically sig- nificant institutions featured a “Reforming” Health Care? AEI scholars have keynote address by former long embraced the need for health care reform— Fed chairman Alan Greenspan. just not the reforms envisioned by the Obama Representative Tom Petri (R-Wisc.) Kavita Patel, M.D., Office of Public Engagement

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“Peekaboo”: A Constitutional Monster

administration and the Democratic majorities in In testimony before the House Judiciary Committee In June, ’s Congress. This year, they produced incisive critiques in July, Ms. Mathur disputed the popular notion Jonathan Rauch devoted a of the leading health care proposals and offered that medical indebtedness is the main factor column to the case challeng- their own solutions. Some of their best essays were responsible for personal bankruptcies. ing the constitutionality of compiled in Uncle Sam, M.D. (AEI, April 2009) AEI scholars also furthered the health reform the Public Company Account- which was widely distributed to policymakers, debate through conferences. A June event exam- ing Oversight Board (known , and health professionals. ined five components of health reform, and a as “Peekaboo”) created by In a short primer, Joseph September panel with key players from the Congress in 2002 in a frantic Antos offered principles that 1993–94 debate provided a “then and now” per- response to the Enron scandal. “A little over should guide reform. He spective. Representatives (R-Wisc.) and three years later, in fall 2005, a handful of free- argued that we must avoid Tom Price (R-Ga.) and senior White House advisers market activists and litigators met in a an approach that further Ezekiel Emanuel, M.D., and Kavita Patel, M.D., windowless 11th-floor conference room at the centralizes power and deci- spoke at the AEI conferences. American Enterprise Institute in Washington,” sion making in Washington. Rauch wrote. “They included . . . Michael [S.] Scott Gottlieb, M.D., warned Strengthening Medicare, Medicaid, and Social Greve . . . who brought the group together. that the government will Security. AEI scholars addressed the pressing They shared a conviction that Congress’s 2002 regulate access to drugs and need for Medicare and Medicaid reform, and the creation was a constitutional monster.” The services, as Medicare does now. Several AEI scholars, AEI Press published several timely and scholars gathered together filed including Thomas P. Miller, evaluated health care volumes. In June, the Press suit in February 2006, asking the courts to proposals in real time on the Enterprise Blog. John released Reform Medicaid First, a strike down Peekaboo. In May, the Supreme E. Calfee compared the public option to Fannie monograph by leading health Court agreed to hear the case during its next Mae—a large, costly, anticompetitive behemoth that economists Thomas W. Granne- term. In a post on the Enterprise Blog, Mr. Greve would eventually need to be bailed out. AEI pub- mann of the Centers for Medicare wrote that “the case presents a direct, dramatic lished more than a dozen Health Policy Outlooks and Medicaid Services and Mark V. confrontation between the political institutions’ in 2009, including one by Robert B. Helms on Pauly of the University of Penn- government by free-form improvisation and the capping the tax exclusion for employer-sponsored sylvania’s Wharton School. A Supreme Court’s responsibility to protect the health (an idea championed by AEI fuller treatment of the subject, Medicaid Everyone constitutional structure and order.” scholars for decades as a key part of health reform). Can Count On, will appear in November. In October,

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Saving Lives through Defending Free Enterprise, continued Organ Donation

AEI scholars have a real and the Press published Walton Francis’s landmark more benefits by extending their working years. verifiable impact on people’s study Putting Medicare Consumers in Charge: Lessons Messrs. Biggs and Pollock have also been explor- lives through the shaping of from the FEHBP, the popular health benefit pro- ing the of today’s retirement finance public policy. But sometimes gram for government employees. system. Representatives Jim Cooper (D-Tenn.) and their research here at AEI With all the other issues on the national (R-Va.) presented their bipartisan enti- can save a life. After receiving agenda, Social Security stayed on the back burner tlement funding reform proposal at AEI in April. a donated kidney in 2006, for the administration and Congress in 2009, Sally Satel, M.D., began writ- but retirement finance was a top issue for millions Protecting Life-Saving Pharmaceutical Innovation. ing about her experience, of Americans—especially those who saw large Many gains in health over the past several decades researching organ donation, and examining chunks of their retirement savings melt away in have come from new and powerful medicines mechanisms that could increase the supply of 2008. AEI scholars, including Andrew G. Biggs, developed at great expense and with uncertain kidneys available for transplant. This year, she have been hard at work addressing problems of the promise of profitability. Concerned that health care received this e-mail: “After eighteen horrific retirement system. In his Retirement Policy Outlook legislation might stifle this life-saving pharmaceu- months on dialysis, my mother received a new series, Mr. Biggs explained how Social Security tical innovation, AEI scholars redoubled their kidney yesterday from an altruistic donor. The can provide more progressive and predictable ben- efforts to improve the policy environment for drugs. donor is a woman from Florida. I met her on efits and allow people near retirement to gain In articles and Health Policy Outlooks, Dr. Gottlieb matchingdonors.com. The reason I am telling you examined proposals for “comparative effec- this is because the donor registered on matching- tiveness research” and warned that it is donors.com after she read your December 16, likely to be used to ration prescription 2007, article in Magazine, drugs under a public health care plan. ‘Desperately Seeking a Kidney.’ I simply wanted to Mr. Calfee examined Food and Drug thank you.” Dr. Satel, joined by other leading Administration regulation of tobacco and experts, presents her life-saving research in her pharmaceutical development. The H1N1 flu 2009 AEI Press book, When Altruism Isn’t Enough: epidemic occasioned essays from Mr. Calfee The Case for Compensating Kidney Donors. and Dr. Gottlieb on vaccines and anti- Reviewing the book in , virals for influenza; Ernst R. Berndt, Rena N. Edward Morrissey wrote, “Under Dr. Satel’s Denoncourt, and Anjli C. Warner’s U.S. Mar- scheme, donors, as well as patients, can live long kets for Vaccines: Characteristics, Case Studies, and healthy lives.” Representatives Frank R. Wolf (R-Va.) and Jim Cooper (D-Tenn.)

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and Controversies was a particularly timely release from the AEI Press in May. John Vernon and Joseph Golec’s AEI Press book, Pharmaceutical Price Regula- tion: Public Perceptions, Economic Realities, and Empi- rical Evidence (2009), makes the case for free-market drug pricing, explaining why controls would hurt

consumers. On the international front, Roger Bate Resident Fellow Scott Gottlieb, M.D., and Senator Jon Kyl (R-Ariz.) Resident Fellow Thomas P. Miller; Joseph Antos, the Wilson H. continued his work to promote safe and effective Taylor Scholar in Health Care and Retirement Policy; and drugs in developing countries, writing Outlooks and They were also critical of the main Senate bill. Ezekiel Emanuel, M.D., head of the Department of Bioethics at the National Institutes of Health peer-reviewed journal articles on the dangers of poor- Mr. Viard criticized the legislation’s free allocation of quality drugs and how to supplant them. emissions allowances, arguing instead for auctioning (IMF), the World Trade Organization, and the inter- them (as Mr. Obama promised during the 2008 national economic regulatory architecture. Speakers The Best Way to Address ? campaign). AEI scholars press for superior solutions at a conference series on this subject included Most economists and some environmentalists favor to climate change, from economic levers like carbon Claude Barfield, Mr. Levy, IMF first deputy manag- a carbon tax to curb greenhouse gas emissions, but taxation—advanced by Messrs. Green, Hassett, and ing director John Lipsky, and bestselling author members of the House of Representatives opted for Hayward and examined in-depth by Mr. Hassett Dambisa Moyo. Messrs. Barfield and Levy also noted an emissions trading system. Writing about the bill and Ms. Mathur—to near-term adaptation strate- the negative consequences of Congress’s refusal to that narrowly passed in the House in late June, gies like geoengineering, the subject of a program ratify already-negotiated, good-faith trade agree- Steven F. Hayward said, “Waxman-Markey is the cli- directed by Lee Lane and Samuel Thernstrom. In ments. In an International Economic Outlook, they mate policy equivalent of Sarbanes-Oxley financial June, Scott Barrett, a leading expert on climate policy assessed the Obama administration’s elusive trade regulation, guaranteeing extensive new bureaucracy at Johns Hopkins, and Nobel laureate Thomas C. policy. Throughout the year, Desmond Lachman and substantial economic cost to the productive Schelling spoke at an AEI event about international examined how the dollar was faring against other economy while achieving few of its stated objec- governance questions related to geoengineering. currencies and the relative condition of European tives.” In a joint Energy and Environment Outlook, economies. In The Trap: Hard Truths about End- Kenneth P. Green and Mr. Hayward called the House Aid and Trade: A Prosperity Agenda. AEI’s Pro- ing Poverty (Columbia Business School Publishing, bill “an exercise in unreality,” noting that its provi- gram on International Economics took on thorny September 2009), R. Glenn Hubbard and William sions would require energy consumption to fall to policy challenges in 2009, including the future of Duggan criticized current foreign aid policies and levels not seen since the early twentieth century. the , the International Monetary Fund propose a new Marshall Plan for poor countries.

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Keeping America Strong and Safe

In the first ten months of his presidency, Barack AEI scholars have responded vigorously in Obama distanced himself, both rhetorically and articles, speeches, and conferences. A summary of substantively, from the Bush administration’s some of the activities of AEI’s Foreign and Defense prosecution of the war on terrorism, preferring a Policy Studies program follows. law enforcement approach to counterterrorism. He offered public apologies for past U.S. policies, made Taking Stock of Critical Threats. Minutes after a overtures to negotiate further with our adversaries major speech by President Obama on national in and the Islamic Republic of , security on May 21, former vice president Richard B. stepped back from commitments in , dialed Cheney (who rejoined AEI’s Board of Trustees this back defense spending, extended a friendly greeting year) offered a vigorous defense of the previous to Venezuelan autocrat Hugo Chávez, and blocked administration’s record in fighting terrorism. At AEI, previously negotiated bilateral trade agreements. Mr. Cheney documented the threats the nation The president tamped down the idea of American faced in the wake of the 9/11 attacks and how the exceptionalism, the belief that the is a Bush administration shaped the nation’s response. unique nation with a special role to play in the world. “Well over seven years into the effort,” he said, “one thing we know is that the enemy has spent most of this time on the defensive—and every attempt to strike inside the United States has failed.” Key to the successful post–9/11 strategy, he said, was “accurate intelligence”—including information obtained through legal enhanced interrogation procedures. The speech was a blockbuster, widely covered in both old and new media. Mr. Cheney’s outspoken defense of the Bush record is credited with shaping public opinion and tempering the Obama administration’s national security plans. Gathering accurate intelligence has long been a key

Admiral Michael Mullen, chairman of the Joint Chiefs of Staff, Senator Joseph Lieberman (ID-Conn.) aspect of war, and continues to argue for and Resident Fellow Thomas Donnelly at the launch of AEI’s Center for Defense Studies

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Vice President Cheney at AEI on the

“The [Obama] administration seems to pride itself on searching for some kind of middle ground in policies aggressive policies to confront terrorists intent on addressing terrorism. They may take comfort in hearing attacking the United States. disagreement from opposite ends of the spectrum. If AEI’s Critical Threats Project, directed by liberals are unhappy about some decisions, and conser- Frederick W. Kagan, is keeping track of the danger- vatives are unhappy about other decisions, then it may ous world. In April, Senator Joseph Lieberman seem to them that the president is on the path of sensible (ID-Conn.) gave the keynote address at an AEI compromise. But in the fight against terrorism, there is event to launch the project’s first initiative, no middle ground, and half-measures keep you half IranTracker.org, which draws on the work of exposed. You cannot keep just some nuclear-armed Richard B. Cheney, member of AEI’s Board of Mr. Kagan, Danielle Pletka, Ali Alfoneh, Michael terrorists out of the United States; you must keep every Trustees and former vice president of the United States, speaking at AEI on May 21, 2009 Rubin, and others to detail the challenges Iran nuclear-armed terrorist out of the United States.” poses to U.S. interests. The website became an indispensable source of up-to-the-minute informa- tion about the hotly contested Iranian presiden- poses serious problems for the Obama administra- that it would once again become a sanctuary for tial election in June, the protests that followed, tion. AEI hosted numerous events and published Islamic extremists hostile to the United States and the fall negotiations with Iran about its dozens of important essays assessing these threats and our allies. In his report to the president, U.S. nuclear program. In October, AEI launched Global and how to respond. Afghan commander Stanley McChrystal expressed Business in Iran, a database on the IranTracker concerns about “underresourcing” the operation. website with current information on international The Long War in Iraq and Afghanistan. During Mr. Kagan, part of General McChrystal’s advisory business transactions in Iran. In essays for AEI’s the 2008 campaign, President Obama made clear group, argued against a “small footprint” counter- Middle Eastern Outlook series, Mr. Alfoneh docu- his intent to reduce troop levels in Iraq in order to terrorism strategy and for a significant “surge” mented Iran’s creeping transition from a clerical focus on Afghanistan. Mr. Kagan praised him for there—increasing U.S. troop levels, training more theocracy to a military dictatorship of the Islamic exercising patience in withdrawing from Iraq Afghan soldiers, and developing a broader counter- Revolutionary Guards Corps. Critical Threats has and focusing on crucial milestones, such as elec- insurgency strategy. Senator John McCain (R-Ariz.) also launched a subsite designed to chart the tra- tions and budget development. He and Mr. Rubin argued for a similar approach in a February speech jectory of al Qaeda and its affiliates—in both continue to follow political and military develop- at AEI about Afghanistan. thought and action—in various global locales. The ments there. quest for nuclear weapons by both Iran and North As the summer wore on, the situation in Strengthening Our Defenses. Thomas Donnelly Korea continues to endanger their neighbors and Afghanistan deteriorated, increasing the likelihood and Gary J. Schmitt have been evaluating the

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Keeping America Strong and Safe, continued

serious defense cutbacks pro- Allies and Rivals in Asia. AEI scholars have been posed by the Obama adminis- examining America’s priorities in the world’s most tration, and Senators John populous region. John R. Bolton and Nicholas Cornyn (R-Tex.) and Saxby Eberstadt ratcheted up criticisms of the adminis- Chambliss (R-Ga.) gave speeches tration’s North Korea policy in a series of op-eds. at AEI to outline their concerns Dan Blumenthal and Mr. Schmitt have been assess- publicly. They supported the ing the erosion of U.S. power in Asia as rises. creation of a National Defense AEI’s Policy Working Group issued a report Panel to evaluate administra- on a defense strategy for our ally, and the Insti- tion proposals. Early next year, tute’s Asia Strategy Working Group crafted a new Mr. Donnelly will publish Lessons American strategy for the region as a whole. for a Long War: How America Threats to U.S. naval supremacy in the region— Can Win on New Battlefields (AEI including Chinese military development and piracy— Press, February/March 2010), were discussed at an April conference keynoted by Dead Aid author Dambisa Moyo, Visiting Scholar , and Visiting Fellow Mauro De Lorenzo with essays by counterinsurgency former Navy secretary Donald C. Winter. Meera strategist Brigadier General Shankar, the Indian ambassador to the United H. R. McMaster and others. In States, spoke at AEI in June on the challenges to September, AEI launched the our strategic partnership. Paul Wolfowitz, former new Center for Defense Stud- ambassador to , covered that nation’s ies, a project to shape debate successful democratic elections and the subse- about U.S. military power, with quent Jakarta bombings. AEI scholars also con- remarks by Admiral Michael vened events this year marking the thirtieth Mullen, chairman of the Joint anniversary of the Taiwan Relations Act and the Chiefs of Staff. The site has its twentieth anniversary of the Tiananmen Square own blog and will serve as crackdown. Michael Auslin followed Japan’s the intellectual headquarters economic and political malaise and its historic of AEI’s work on strategic and August election that produced a dramatic change military affairs. in leadership. Pervez Musharraf, former president of Resident Scholar Frederick W. Kagan Pakistan, at an AEI breakfast

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Dealing with the Bear. Russian leaders continued to employ revanchist rhetoric against the United States, undermine U.S. efforts to constrain Iran’s nuclear development, oppose missile defenses in , and interfere in republics of the former . Mr. Bolton and expressed great skepticism about the Obama administration’s proposal to negotiate British shadow security minister Pauline Neville-Jones and Meera Shankar, Indian ambassador to the United States, a second Strategic Arms Reduction Treaty by Visiting Fellow and Danielle Pletka, AEI vice president for Foreign and Defense year’s end. Leon Aron covered the changing U.S.– Policy Studies Russian relationship and the developing economic Latin American Outlook series, Roger F. Noriega has private-sector role in helping developing countries and political crises in Russia in his quarterly been delineating the choice for the United States solve their own problems. Mauro De Lorenzo Russian Outlooks. Mr. Eberstadt and Apoorva Shah and Latin America: on one side, trade, growth, spearheaded AEI’s development work with a authored a special illustrated Russian Outlook and democracy, exemplified by Brazil’s Luiz Inácio project examining countries that are making it examining Russia’s deteriorating demography and Lula da Silva and Mexico’s Felipe Calderón; on easier to do business. One of those countries is the resulting human resources crisis it faces. the other, populism, stagnation, and authoritari- Georgia, whose former prime minister Lado anism, exemplified by Messrs. Chávez and Zelaya. Gurgenidze wrote a Development Policy Outlook The Latin American Choice. President George W. In a Latin American Outlook, Mr. Noriega provided about the free-market reforms there and the Bush emphasized rapport with democratically details on Mr. Chávez’s emerging connections with economic growth that followed. Other AEI elected leaders in the Americas through increased Iran. In November 2008, former Peruvian presi- scholars engaged in development studies include trade cooperation with Colombia, Peru, and Cen- dent Alejandro Toledo visited AEI to speak about Mr. Eberstadt, Roger Bate, Philip I. Levy, and tral America and consistent support for Mexico in the challenges facing the region. Mr. Wolfowitz. A January conference explored a its war against violent drug traffickers. President new development paradigm; speakers included Obama has taken a different tack, warmly greeting New Approaches to Development, in Messrs. De Lorenzo, Bate, Donnelly, Gurgenidze, Mr. Chávez at the Summit of the Americas and and Elsewhere. AEI scholars are in the vanguard Levy, Wolfowitz, and other leaders in international echoing Mr. Chávez’s support for ousted Honduran of transformational change from top-down aid development. In April, bestselling author Dambisa president Manuel Zelaya, who was removed from to an approach that stresses investment, internal Moyo brought her critique of foreign aid for Africa office for usurping his country’s constitution. In his political and economic reform, and a greater to AEI.

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Renewing American Politics and Culture

The work of the scholars in AEI’s Social and radio news broadcasts, and Political Processes group illustrates the Institute’s their findings were reported commitment both to enduring scholarship and widely on national wires, in to providing informed commentary on the news major newspapers, and in of the day. Most of the scholars in this diverse the education trade press. group are working on long-term projects, yet Mr. Hess and Henry hardly a day goes by when one of them is not Olsen, director of AEI’s featured prominently in a news story. National Research Initiative, have launched a wide- Educating America. AEI’s education shop is ranging AEI research effort involving twenty one of the most active in the Institute, having reform-minded researchers who will convene held sixteen conferences in the past school year semiannually to suggest new lines of research and and produced more than ten to establish a forum for discussing K–12 issues. A Education Outlooks and several similar project directed by Messrs. Hess and major reports. One report, Schneider will focus on higher education. Diplomas and Dropouts, made The American Recovery and Reinvestment a huge national splash when it Act, known as the stimulus legislation, allocated an was released in June. Authored unprecedented sum for education: nearly $100 bil- by Frederick M. Hess, Mark lion. President Barack Obama has called for trans- Schneider, Andrew P. Kelly, parency and effectiveness in the allocation of and Education Sector’s Kevin those funds, warning of the consequences if they Carey, the report showed that are not used wisely. AEI is lending a hand to that at the average American col- end with its new Education Stimulus Watch reports. lege, fewer than 55 percent of Andy Smarick, a former top official at the Educa- first-year students graduate tion Department, joined AEI as an adjunct fellow within six years. The report to direct the project. His first report noted that and its authors were featured the stimulus and reform efforts might not go

W. H. Brady Scholar in Culture and Freedom Charles Murray and President on dozens of television and hand in hand. The second described early evidence Arthur C. Brooks

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“The drift toward the European model can be slowed by piecemeal legislative showing that states are spending the funds to he called on America to reject the European social preserve jobs and programs, not to enact reforms. model because it stifles human flourishing and victories on specific items of legislation, In September, the AEI Press published erodes the civic and cultural institutions and habits but only slowed. It is going to be stopped The Politically Correct University, in which more that make for a vibrant, sustainable, and satisfying than twenty scholars examine how the politically way of life. His lecture, “The Happiness of the only when we are all talking again correct imperative to promote “diversity”—of People,” took its title from ’s phrase about why America is exceptional, race, ethnicity, and gender, but not of ideas—has for the proper object of government. Madison is the diverted higher education from its true purposes. subject of Lynne V. Cheney’s forthcoming biogra- and why it is so important that phy, Founding Genius (Viking), which is designed to America remain exceptional. Lectures and Learning. In education and other reinstate the fourth president as one of our greatest That requires once again seeing the areas, the idea of “unintended consequences” has founding fathers and to describe the intellectual force become a widely acknowledged concern. In a he brought to the project of creating a new government. American Project for what it is: a Bradley Lecture in June, Christopher DeMuth In describing America’s social evolution, femi- different way for people to live together, proposed an alternative interpretation: “intended nists have long had a monopoly on the story of non-consequences,” which are a result of the women’s progress. Christina Hoff Sommers is unique among the nations of the earth, government’s limited toolkit for intervention and pushing back, writing a book on the true history of and immeasurably precious.” the competing interests of private parties who feminism. In op-eds, she has called attention to a lobby to modify the intervention. new form of reverse discrimination now playing Leon R. Kass, M.D., also delivered a Bradley out in the policy realm as feminist advocacy groups —CHARLES MURRAY, “The Happiness of the Lecture during the 2008–2009 season, marking in Washington hijack stimulus funds, getting People,” 2009 Irving Kristol Lecture the twentieth anniversary of the series with a the Obama administration to add funding to boost fresh interpretation of the Ten Commandments. In employment in fields dominated by women, to the May, he gave the National Endowment for the neglect of newly unemployed American men. In ’ , the federal govern- November, the AEI Press published a collection of ment’s highest honor for achievement in and contri- essays edited by Ms. Sommers entitled The Science Roger Scruton joined AEI in 2009 as a resi- bution to the humanities. on Women and Science, examining the claim that dent scholar. He writes a cultural column for Charles Murray received AEI’s highest honor, women are victims of a widespread bias in science and wrote a book and made the Irving Kristol Award, in March. In his lecture, and engineering. a film for the BBC on beauty. At the Institute,

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Renewing American Politics and Culture, continued

In September, Michael S. Greve convened a the plight of Muslim women and urging him to second Transatlantic Law Forum in Hamburg, discuss Muslim and Western differences in unvar- Germany, to examine how corporate interests shape nished terms. the legal environment and how private corporate In July, AEI launched a summer school, in litigants fare in European and American courts— which a roster of AEI’s most talented scholars and what to expect for future business litigation. In spoke on the importance of freedom and free enter- a July Constitutional Outlook, Mr. Greve criticized prise in the Institute’s 2009 Free Enterprise Lecture the Supreme Court’s record on business cases and Series. Over the course of the series, 150 young called on the justices to recognize their role in fix- people attended. ing the legal structure governing U.S. commerce. An AEI conference before the Supreme Court’s new Politics and Political Institutions. In January, the

Senior Fellow Newt Gingrich term addressed some of the same issues. country welcomed a new president to the White Edward Blum, in his 2007 AEI Press mono- House, and at AEI, President DeMuth turned over graph The Unintended Consequences of Section 5 of the reins to Arthur C. Brooks. In addition to his Mr. Scruton is working on a book on how con- the Voting Rights Act, and Abigail new duties, Mr. Brooks tackled the old “culture servatism, as a philosophy and way of living, can Thernstrom, in her book Voting war” debate, recasting it as a battle over the future provide a motive for people to take the environ- Rights—and Wrongs: The Elusive of the free enterprise system. ment seriously. Quest for Racially Fair Elections AEI scholars offered insightful analysis delivered the December (AEI Press, June 2009), have both before and after the November elections. Bradley Lecture on the formation of the West, been writing about the perni- Norman J. Ornstein has been a staunch advocate and in the fall of 2008 returned to a major theme of cious effects of Section 5 of the of streamlining the presidential appointment his scholarship: the morality of a free-market sys- Voting Rights Act. The Supreme and confirmation process. In preparation for the tem. His book No One Sees God: The Dark Night of Court cited AEI scholarship in transfer of power in January, he was asked to advise Atheists and Believers (Doubleday Religion, August its June decision in a much-anticipated case President George W. Bush’s Transition Coordinating 2008) was reviewed widely and was described challenging the constitutionality of Section 5. Council on ways to smooth the change from one by as “among the best of the Ayaan Hirsi Ali challenged President Obama’s administration to the next. genre; it is erudite, sincere and rendered in clear “new era” in U.S.–Muslim relations, saying that his A major issue Mr. Ornstein and John C. Fortier and accessible prose.” speech in Cairo did not go far enough in discussing continue to address is government continuity. If

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Washington were attacked, the existing presi- of their party. called for the renewal working on a book on the political implications dential succession plan could be useless. As mem- and refocusing of conservatism in his book of internal migration patterns. bers of the AEI–Brookings Comeback: Conservatism That Can Win Again Exploring the history of American politics, Institution Continuity of Gov- (Doubleday, December 2007). Steven F. Hayward, Walter Berns delivered a Bradley Lecture com- ernment Commission, they whose second volume on the Reagan presidency, memorating ’s two hundredth contributed to a new report The Age of Reagan: The Conservative Counter- birthday. “We say that a man can be known by that offers seven specific revolution, 1980–1989 (Crown Forum), came out the company he keeps,” Mr. Berns said. “So I say recommendations for improv- in August, and Mr. Olsen also wrote about the that a nation, a people, can be known and be ing the presidential succes- challenges facing conservatives. judged by its heroes, by whom it honors above all sion process. On the day of has joined the Washington others. We pay ourselves the greatest compliment the report’s release, AEI hosted Examiner as a . In the new edition of when we say that Abraham Lincoln is that man a conference featuring Frances Townsend, The Almanac of American Politics, 2010 (National for us.” The Wall Street Journal published a lengthy former homeland security adviser to President Bush. Journal Group, 2009), he argues that the nation excerpt of the speech. President Obama’s victory left Republicans has entered a new phase of politics that could The evolution of American politics and policy and conservatives uncertain about the condition benefit Democrats for some time. He is also has been intimately bound up with demographic and geographic change, and today, new changes are shifting the fault lines of American politics. In June, Karlyn Bowman and Ruy Teixiera, who direct the AEI– Election Demography Project, gathered experts at AEI to analyze demog- raphy and the 2008 election and its implications for the 2010 and 2012 elections. Ms. Bowman also continues to work on AEI’s Public Opinion Studies, which examine attitudes on a wide range of policy issues. Throughout 2008, AEI’s Election Watch team hosted monthly sessions to examine the election campaign, and they continue to publish AEI’s popular monthly Political Report. Resident Scholar Christina Hoff Sommers Resident Fellow Michael Barone

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Communicating AEI’s Ideas

In response to the great challenges facing our AEI’s online magazine, launched the Enterprise Blog nation, AEI scholars promote the Institute’s ideas to (blog.american.com) in April to favorable attention policymakers and the public with energy and from many high-traffic sites. Nick Schulz ably edits enthusiasm. Some of the ways AEI communicates American.com and the blog. AEI scholars also write with its growing audience are described below. for other prominent , including ’s Arena and the Health Affairs blog. AEI in New Media. To reach the growing Internet audience, AEI undertook a major redesign of its AEI in Print. The nation’s top papers publish more website, www.aei.org. The new site, which made op-eds by AEI scholars than by scholars from its debut in May, has many features, including the other leading think tanks combined. The Daily podcasts, full-length videos, and video highlights, Beast, a popular news-aggregator site, reviewed as well as RSS feeds for AEI work by scholar, articles on the op-ed pages of the New York Times, subject, or product. the Washington Post, and the Wall Street Journal AEI notifies thousands about between July 2008 and July 2009 and found that its latest activities through com- AEI “crushes the competition, liberal and conserva- prehensive, visually appealing tive, in racking up bylines.” daily (AEI Today), biweekly (AEI AEI also publishes seventeen Outlooks. These People and Programs e-newsletter), longer analytical essays include monthly publica- and periodic e-mail updates on its tions on developments in economics, financial work and conferences. services, and education; a quarterly report on AEI now has over a thousand Russia; and frequent editions on Asia, Latin fans on , and video high- America, the environment and energy, economic lights from AEI events are available development, health policy, and national security, on YouTube (www.youtube.com/ among other issues. aeivideos). users can Many AEI scholars are also and edi- follow the Institute (@AEIonline) tors. Michael Rubin edits the Middle East Quarterly, and President Arthur C. Brooks and Frederick M. Hess is an executive editor of (@arthurbrooks). American.com, Education Next. Michael Barone, Newt Gingrich,

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AEI–Legatum Partnership

In 2008, AEI formed a partnership with the London-based Legatum and Thomas Donnelly write regular columns for Institute. Formed by the the private portfolio investment firm the . Karlyn Bowman writes Legatum Capital, the institute is an independent research, policy, and a weekly column on polls for Forbes.com, and advocacy organization promoting political, economic, and individual John C. Fortier writes about politics for Politico. liberty in the developing and transitioning world. Roger Bate is the David Frum writes regularly for Canada’s National Legatum Fellow in Global Prosperity at AEI, and Legatum has Post and is a contributing editor, with Frederick W. generously supported his research work over the past year. AEI Kagan, to . Kevin A. Hassett cohosted a major conference in London in September with Legatum writes a weekly column about the economy for on the financial crisis and its broader ramifications. AEI scholars have Bloomberg.com, and he also writes regularly for also spoken at other Legatum events. In November, AEI hosted the . Michael Novak is a contributing U.S. launch of the Legatum Institute’s flagship publication, The Prosperity Index, which is an assess- editor of National Review Online. Norman J. Orn- ment of the nature of prosperity and how it is created in over one hundred countries. Legatum defines prosperity holistically to include both material wealth and quality of life. Rather than stein applies his intimate knowledge of Congress to replicating other measures that rank countries by their actual levels of material wealth or life satis- his weekly Roll Call column. faction, the Index produces a ranking based on the conditions that foster prosperity—that is, the AEI scholars publish regularly in leading aca- factors that promote economic competitiveness and improved livability in a given country. demic journals, and the Institute’s economists also produce working papers for the National Bureau of Economic Research, a clearinghouse for top scholarship. The highly regarded AEI Press pub- office brings bureau chiefs, key reporters, and debate. Hundreds of people called in, including lished fifteen new books this year, many of which columnists together with AEI scholars to discuss former senator Phil Gramm, former Fed chairman are featured in other sections of this report. important topics. Alan Greenspan, and many top reporters. AEI events are regularly covered by major AEI runs several longstanding lecture pro- AEI Live. Institute scholars appear regularly on television networks. During the first nine months grams: in September, the Institute kicked off the television and radio—for instance, Messrs. Barone of 2009, AEI held 150 conferences, many of which twenty-first season of its Bradley Lecture Series. and Gingrich are contributors, and were covered by C-SPAN. ABC, CBS, NBC, Fox, Charles Murray gave the annual Irving Kristol Mr. Frum has been a daily guest on CNN’s Situation CNN, the BBC, and have Lecture in March. Paul L. Joskow, president of the Room and offers regular commentary for American also broadcast from AEI. Alfred P. Sloan Foundation, delivered the annual Public Media’s Marketplace. A steady stream of AEI’s health policy scholars have hosted several AEI Center for Regulatory and Market Studies journalists comes to AEI conferences, and the press conference calls at key points in the health care Distinguished Lecture in February.

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Communicating AEI’s Ideas, continued

AEI on . In 2009, AEI convened meetings research by university-based academics and other on the Hill and hosted members of Congress and . NRI also brings distinguished aca- the administration at AEI forums. Scholars testi- demics to AEI as visiting scholars, and it provides fied before congressional committees more than fellowships for young academics at the start of forty times this year, leading scholars from other their careers. It organizes conferences, many of think tanks by a wide margin. Additionally, several which are described throughout this report. The AEI scholars serve on government boards and com- AEI Press published two volumes this year in missions. Peter J. Wallison and Bill Thomas were an NRI series on measuring inequality and well- appointed in July to the new congressional Finan- being. NRI also publishes Academics and AEI, a cial Crisis Inquiry Commission, to mention just one biweekly e-newsletter that informs thousands of prominent commission. professors about the work their colleagues are doing in conjunction with AEI, including papers, AEI in Academia. Established in 2002, AEI’s conferences, and AEI Press books. National Research Initiative (NRI), directed by AEI has an eleven-member Council of Henry Olsen, supports, publishes, and disseminates Academic Advisers, chaired by political scientist James Q. Wilson, that advises AEI’s president on the Institute’s research activities, publica- tions, and appointments. The council selects the recipient of the Irving Kristol Award. AEI also has fifty-one adjunct scholars from thirty- two universities. This summer, the Institute welcomed forty- seven interns from a pool of 978 applicants— the highest count in AEI’s application history. AEI’s internship program is rated by independent groups as one of the top such programs in the United States. Four of AEI’s summer interns from 2007 began at last year. Media cameras at an AEI event James Q. Wilson, chairman of AEI’s Council of Academic Advisers, and New York Times columnist David Brooks

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Supporting Our Institution

Why Invest in AEI? As described in the preceding AEI is undertaking a pages, AEI’s research is second to none and our variety of new initiatives scholars have a profound impact on the national and to promote and defend international stage. We aim to inform, enrich, and the economic and

influence public policy in the near term, but are also moral foundations of a Top students from around the world work as AEI AEI Trustee and Visiting Scholar devoted to issues much farther out on the horizon. free society. We are also researchers and interns Paul Wolfowitz at AEI’s World Forum Today’s economic and political circumstances doing important work present both great challenges and unprecedented on keeping the U.S. economy competitive and AEI as an Educator—To complement the original opportunities. In the year ahead, the Institute will strong and have created a team of leading scholars scholarship that AEI has produced for more than promote a vast array of market-driven approaches from around the country to lead this charge. sixty years, we are expanding our outreach efforts that will make a real-world difference. with a new series of targeted educational products, AEI’s investors receive updates on our scholars’ Critical Threats Project (CTP) and the Center for including pamphlets and primers, videos, podcasts, latest research, invitations to public events and pri- Defense Studies (CDS)—Our dynamic programs websites, and conference calls. vate events around the country (and abroad), copies involving John R. Bolton, Dan Blumenthal, Thomas of our recent books and essays, and the chance to Donnelly, Frederick W. Kagan, Gary J. Schmitt, How to Support AEI. All of AEI’s work is made become a part of our growing community. and others are designed to keep America safe and possible by private individuals, foundations, and strong. CTP and CDS conduct numerous activ- corporations. We seek sources of support—which New Opportunities for Strategic Investments. ities ranging from new, cutting-edge scholarship to can come in the form of cash, securities, stock, In addition to AEI’s traditional research programs, educational programs on Capitol Hill to new multi- matching gifts, or bequests—for the Institute as a we have launched several new initiatives for which media projects and websites. whole, as well as for our individual scholars, pro- we are actively seeking strategic investments. grams, and projects. Some of these areas are described briefly below. Program on Citizenship and America’s Political We are eager to explore how your investment For more information, please contact a member Institutions—Michael Barone, Walter Berns, Karlyn in AEI’s research can make an impact. AEI is a of our development team at 202.862.5834 or at Bowman, Lynne V. Cheney, David Frum, Leon R. public charity under section 501(c)(3) of the [email protected]. Kass, M.D., and others at AEI are promoting Internal Revenue Code; donations receive maxi- a more holistic understanding of what it means mum tax benefits. For additional information on Program on Free Enterprise and Economic Liberty— to be an American and creating a roadmap for joining our community or to give online, please The free enterprise system finds itself under assault. good citizens. visit www.aei.org/support.

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Finances

The AEI financial information reported below is incurred a substantial investment loss—totaling allow the Institute to continue robust operations provided in accordance with GAAP accounting con- $14.3 million—that is also excluded from the even in the face of a severe economic downturn. ventions in the same format as previous years. But revenue reported. this year, there are two significant exclusions from AEI is grateful to all who invested in the the figures in those charts that require explanation. Excluding these adjustments, the Institute raised Institute’s present and future ability to translate $6.8 million from individuals, $6.6 million from learning and ideas into innovative solutions to First, GAAP requires the net present value of multi- foundations, and $5.3 million from corporations. our most difficult public policy problems. year commitments be recognized in the year the The sum of these fundraising activities, along with pledges are made, even though some of those sales, brought the Institute’s annual revenues to AEI is committed to transparent accounting of the funds may be received in the future. Last year, $20.2 million. resources it receives. In addition to required tax AEI received roughly $41 million in revenue that filings, a copy of the Institute’s audited financial represents forward commitments and are excluded This figure does not include endowment and statement is available upon request. from current operating revenue. Second, AEI limited-term funding contributed in prior years to

2008 AEI Operating Revenue 2008 AEI Expenses ($20.2 million) ($30.3 million)

Social and Political Studies 19% Economic Policy Studies 28% Individuals Foundations 34% 33% Management and fundraising 19%

Conferences, book sales, and Foreign and Defense Corporations other revenue 26% The American magazine Policy Studies 7% 10% 24%

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Board of Trustees Edward B. Rust Jr. Martin Feldstein Michael Auslin Michael S. Greve Richard Perle Chairman and CEO George F. Baker Professor Resident Scholar John G. Searle Scholar Resident Fellow Kevin B. Rollins, Chairman Insurance Companies of Economics Kevin A. Hassett Senior Adviser Claude Barfield Ioana Petrescu TPG Capital D. Gideon Searle Resident Scholar Senior Fellow; Director, NRI Fellow Economic Policy Studies Managing Partner Robert P. George Michael Barone Tomas J. Philipson Tully M. Friedman, Treasurer The Serafin Group, LLC McCormick Professor of Jurisprudence Chairman and CEO Resident Fellow Steven F. Hayward Visiting Scholar Mel Sembler Director, James Madison Program F. K. Weyerhaeuser Fellow Friedman Fleischer & Lowe, LLC in American Ideals and Institutions Roger Bate Alex J. Pollock Founder and Chairman Gordon M. Binder Princeton University Legatum Fellow in Global Prosperity Robert B. Helms Resident Fellow The Sembler Company Resident Scholar Managing Director Walter Berns Vincent R. Reinhart Coastview Capital, LLC Wilson H. Taylor Distinguished Professor of History Resident Scholar Frederick M. Hess Resident Scholar Chairman Emeritus Resident Scholar; Director, Emeritus Arthur C. Brooks CIGNA Corporation Andrew G. Biggs Education Policy Studies Michael Rubin City University of New York President Resident Scholar Resident Scholar American Enterprise Institute William H. Walton Ayaan Hirsi Ali Managing Member R. Glenn Hubbard Edward Blum Visiting Fellow Sally Satel, M.D. Dean and Russell L. Carson Professor of The Honorable Rockpoint Group, LLC Visiting Fellow Resident Scholar Richard B. Cheney Finance and Economics R. Glenn Hubbard William L. Walton Columbia Business School Dan Blumenthal Visiting Scholar Gary J. Schmitt Harlan Crow Chairman Resident Fellow Frederick W. Kagan Resident Scholar; Director, Chairman and CEO Allied Capital Corporation John L. Palmer Advanced Strategic Studies Crow Holdings University Professor and Dean Emeritus John R. Bolton Resident Scholar James Q. Wilson Maxwell School of Citizenship and Senior Fellow Mark Schneider Daniel A. D’Aniello Leon R. Kass, M.D. Pepperdine University Public Affairs Karlyn Bowman Hertog Fellow Visiting Scholar Cofounder and Managing Director Syracuse University The Carlyle Group Senior Fellow Andrew P. Kelly David Schoenbrod Emeritus Trustees Sam Peltzman Alex Brill Research Fellow Visiting Scholar John V. Faraci Ralph and Dorothy Keller Chairman and CEO Research Fellow Nick Schulz Willard C. Butcher Distinguished Service Professor Desmond Lachman International Paper Resident Fellow DeWitt Wallace Fellow; Editor-in-Chief, Richard B. Madden of Economics John E. Calfee American.com Christopher B. Galvin Robert H. Malott Booth School of Business Resident Scholar Lee Lane Chairman University of Chicago Charles W. Calomiris Resident Fellow; Codirector, Roger Scruton Paul W. McCracken Resident Scholar Harrison Street Capital, LLC Visiting Scholar AEI Geoengineering Project Paul F. Oreffice George L. Priest Raymond V. Gilmartin John M. Olin Professor of Law Lynne V. Cheney Adam Lerrick Kent Smetters Henry Wendt Visiting Scholar Chairman and CEO, Retired and Economics Senior Fellow Visiting Scholar Merck & Co., Inc. Steven J. Davis Philip I. Levy Christina Hoff Sommers Resident Scholar; Director, Harvey Golub Officers Jeremy A. Rabkin Visiting Scholar Resident Scholar Chairman and CEO, Retired Professor of Law W. H. Brady Program Arthur C. Brooks Mauro De Lorenzo Lawrence B. Lindsey American Express Company George Mason University Visiting Scholar President Visiting Fellow Tim Sullivan Robert F. Greenhill School of Law Research Fellow David Gerson John H. Makin Founder and Chairman Richard J. Zeckhauser Christopher DeMuth Visiting Scholar Executive Vice President D. C. Searle Senior Fellow Phillip Swagel Greenhill & Co., Inc. Frank Plumpton Ramsey Professor Visiting Scholar of Political Economy Aparna Mathur Jason Bertsch Thomas Donnelly Research Fellow Roger Hertog Vice President, Marketing School of Government Resident Fellow Samuel Thernstrom Harvard University Lawrence M. Mead Resident Fellow; Director, AEI Press; Codirector, AEI Bruce Kovner Henry Olsen Nicholas Eberstadt Visiting Scholar Chairman Vice President, Director of the Henry Wendt Scholar in Geoengineering Project Caxton Associates, LP National Research Initiative Research Staff Political Economy Allan H. Meltzer Visiting Scholar Bill Thomas Marc S. Lipschultz Danielle Pletka Gerard Alexander Jon Entine Visiting Fellow Thomas P. Miller Partner Vice President, Foreign and Visiting Scholar Visiting Fellow Alan D. Viard Kohlberg Kravis Roberts & Co. Defense Policy Studies Resident Fellow Ali Alfoneh John C. Fortier Resident Scholar Charles Murray John A. Luke Jr. Visiting Research Fellow Research Fellow Peter J. Wallison Chairman and CEO W. H. Brady Scholar Council of Academic Joseph Antos David Frum Arthur F. Burns Fellow in MeadWestvaco Corporation Resident Fellow Roger F. Noriega Financial Policy Studies Advisers Wilson H. Taylor Scholar in Health Visiting Fellow Robert A. Pritzker Care and Retirement Policy James Q. Wilson, Newt Gingrich David A. Weisbach President and CEO Chairman Senior Fellow Michael Novak Visiting Scholar Colson Associates, Inc. Pepperdine University Leon Aron George Frederick Jewett Scholar Resident Scholar; Director, Paul Wolfowitz Eliot A. Cohen Scott Gottlieb, M.D. in Religion, Philosophy, and J. Peter Ricketts Russian Studies Resident Fellow Public Policy Visiting Scholar President and Director Paul H. Nitze School of Advanced Platte Institute for Economic International Studies Paul S. Atkins Kenneth P. Green Norman J. Ornstein John Yoo Research, Inc. Visiting Scholar Resident Scholar Resident Scholar Visiting Scholar 56747_C1_C4.qxd 11/6/09 6:45 PM Page 4

The American Enterprise Institute is a community of scholars and supporters committed to expanding liberty,

increasing individual opportunity, and strengthening free enterprise. AEI pursues these unchanging ideals through

independent thinking, open debate, reasoned argument, and the highest standards of research. Without regard

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Victoria Andrew, Jennifer Morretta, Evan Sparks, and Christy Robinson edited and produced this Annual Report. AEI thanks them for their work. Photography by Carmela Aquino; Callista Gingrich, Gingrich Productions; Peter Holden Photography; and Sylvia Johnson Photography