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Freedom National Defense Culture AMERICAN ENTERPRISE INSTITUTE Free Open Education Research Prosperity 56747_C1_C4.qxd 11/6/09 6:44 PM Page 1 leadership policy independent liberty freedom national defense culture AMERICAN ENTERPRISE INSTITUTE free open education research prosperity free enterprise markets community democracy debate scholarship 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. Irving Kristol 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 The Public Interest passed away on September 18 in his eighty-ninth with Daniel Bell in 1965. The first issue included year, look about you. His memorial is the people essays by AEI scholar Robert Nisbet, 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 intellectual 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 conservatism 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 University of Chicago 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 Afghanistan. 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 think tank), to AEI community. with those that rely on the strengths of the American opinion-makers through our series of scholar-journalist 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 Blog. 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 1 56747_p01_20X.qxd 11/11/09 7:17 AM Page 2 Defending Free Enterprise Around the time AEI’s last Annual Report went to Institute. AEI came to Washington 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 pundits and mounted a spirited defense of free enterprise. politicians blamed the financial crisis on a suppos- edly unfettered free market, 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 Barack Obama took the oath measures is uncertain, the administration should of office, AEI’s economists 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, New York University professor of economics Nouriel Roubini, and Resident Fellow Alex J. Pollock 2 56747_p01_20X.qxd 11/11/09 7:05 AM Page 3 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 Federal Reserve 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.
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