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AEI Enterprise Report, February 2013

AEI Enterprise Report, February 2013

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The American Enterprise Institute is a community of scholars and supporters committed to expanding liberty, increasing individual opportunity, and strengthening free enterprise.
The American Enterprise Institute is a community of scholars and supporters committed to expanding liberty, increasing individual opportunity, and strengthening free enterprise.

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Published by: American Enterprise Institute on Feb 25, 2013
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Issue No.

1, February 2013

Enterprise Report

Restoring Liberty, Opportunity, and Enterprise in America

AEI—The “Entrepreneurial” Washington Think Tank
by AEI President Arthur Brooks
During my time as AEI president, I’ve met a lot of entrepreneurs from around the country. The businesses they’ve created differ drastically—from brokerage firms to home improvement chains and start-up universities—and their personalities are just as wide-ranging. But what unifies these men and women is the way they think about obstacles. When many avoid uncertainty or discomfort, entrepreneurs embrace risk, welcome challenges, and seek out new waters. At AEI, we are applying an entrepreneurial mindset to public policy. Our leadership has surveyed the policy landscape to identify the most pressing challenges, and we’ve positioned AEI to meet them head-on. That’s why we’ve


Freedom. Opportunity. Enterprise.

bolstered our scholarship with new hires, including political journalists Ramesh Ponnuru and Tim Carney and New York Times bestselling author Ed Conard. Ramesh and Tim are singling out today’s greatest threats to free enterprise, and Ed is explaining how to reform our tax code to promote entrepreneurship, innovation, and economic growth. Of course, our policy challenges are not limited to the economy. That’s why I’m honored and excited to announce the arrival of former U.S. Senator Jon Kyl, who will study America’s commitment to global leadership as a visiting fellow. Sen. Kyl’s arrival, as well as the commencement of a new speaker series with the four Military Service Chiefs, are testaments to the growing influence of AEI’s Marilyn Ware Center for Security Studies, which is not yet one year old.

AEI is delivering our work to those best positioned to make a difference.
AEI is delivering our work to those best positioned to make a
AEI president Arthur Brooks with former senator and new AEI visiting fellow Jon Kyl

difference. To do so, we rely on our government relations department, which is profiled in this issue of the Enterprise Report. In three years’ time, the department has transformed AEI into a leading source of

policy ideas for members of Congress. And like good entrepreneurs, the department is continually refining its best practices and developing new strategies to build on its success. The intersection of entrepreneurial thinking and public policy is familiar territory for AEI’s education policy studies program. That program just celebrated its 10th year at AEI, and director Frederick “Rick” Hess has released a groundbreaking new book, Cage-Busting Leadership, which will change the conversation about education reform. Rick’s book, which is the subject of the Enterprise Report’s Spotlight, explains how educators and superintendents can apply the same kind of entrepreneurial thinking as leaders in the private sector to break through roadblocks and achieve real reform in America’s schools. Rick’s work reveals the obstacles imposed by bureaucratic largess and political rentseekers that place their own interests above those of students. But more importantly, he sets forth a concrete, positive agenda to help ensure that every student has the opportunity to succeed. Rick’s approach is a model that we can all follow to advance free enterprise ideas and reforms. Thank you, as always, for your support of AEI and for your dedication to America’s free enterprise system. It is exciting to begin another year with you by our side.


Policy Focus

AEI on the Hill: An Inside Look at Our Government Relations Department
“It’s all about creating relational feedback loops between AEI scholars and members of Congress,” John Cusey said from his office on AEI’s 10th floor. Relationship building is a key part of John’s role as the director of AEI’s government relations department, which has helped establish AEI as a dominant force on Capitol Hill. Efficient and entrepreneurial, the four-person department has begun to implement new initiatives to leverage that influence and deliver AEI scholarship to leaders on the front lines in the 113th Congress. Scholar testimony before congressional committees is public, prominent, and quantifiable. It is also a core strength of the Institute. AEI scholars testified 106 times during the 112th Congress, more than scholars from any other public policy organization. But as John insists, that metric only hints at AEI’s role on Capitol Hill, overshadowing arguably more important strategies to solidify AEI’s position at the center of debate. Among these strategies is AEI’s new weekly gathering for Senate Republican legislative directors. AEI scholars are leading lunchtime discussions that give context to the debates in Congress by tying policy specifics to the broader fight for free enterprise. These discussions not only inform policymakers—they are also part of a symbiotic relationship that provides AEI scholars with an inside look at the foremost issues on Congress’s agenda. The gridlock that has characterized congressional politics in recent years begs the question: is AEI’s presence on Capitol Hill all for naught? The answer, according to John, is a definitive no, although the divided Congress does affect the way AEI communicates our work. Indeed, progress on tax reform, entitlements, and defense spending— among other issues that AEI scholars are watching closely—depends on cooperation between Republicans and Democrats. In response to that reality, AEI’s new “Left-Right Briefings” series engages both sides of the aisle to build agreement on contentious policy issues. That is not to say that AEI is any less committed to its free enterprise principles. Rather, as John explains, “Our ideas shine when contrasted with others, and AEI receives more buy-in for our work when audiences see that contrast.” Having held a recent LeftRight Briefing on entitlement reform, AEI is planning future installments on education, housing policy, and defense spending. John estimates that Democratic staffers represent at least 40 percent of the audience at each AEI event on Capitol Hill, making these forums a powerful tool to forge consensus and drive the debate forward. With these initiatives gaining steam and a greater number of policymakers calling on AEI scholars, AEI’s government relations department is busier today than ever before. That will only intensify in the months ahead. As one senior House member told John earlier this year, AEI scholars have no idea “how demanding we’ll be of them during this session of Congress.” But the team, as well as our scholars, are embracing that challenge with enthusiasm and aplomb. There is a reason, after all, why AEI is in Washington.

106 60 20 549

Percent increase in AEI scholar testimonies compared to 110th Congress Free Enterprise Messaging Sessions for members of Congress and senior staff, hosted by Arthur Brooks Private meetings between AEI scholars and members of Congress Capitol Hill staffers receiving regular AEI email updates AEI scholar testimonies


What Foreign Policy Challenge Is Foremost on Your Mind in 2013?
Leon Aron The greatest challenge I’m considering in 2013 pertains to US-Russia relations and the continuing deterioration of human and political rights under Vladimir Putin’s authoritarianism. The United States has to manage the situation realistically but firmly in accordance with the traditional overarching values and goals of American foreign policy. Supporting growing Russian opposition—and its goal of a free, democratic, and stable nation— promises a huge benefit to US geostrategic interests. Sadanand Dhume Will Pakistan hold free and fair elections and deepen democracy? How will a precipitate American withdrawal from Afghanistan affect Islamic fundamentalism in India and Pakistan? Can India’s shaky government put economic reforms back on track? These quetions are critical to our understanding of this dynamic region. Roger Noriega Two Latin American transitions will have a significant impact on US political, security, and economic interests in the coming year. Mexico’s new president, Enrique Peña Nieto, has pledged to sustain responsible economic and antidrug policies and open his country’s energy industry to private investment; any backsliding is bad news for us. And as Venezuela’s authoritarian president Hugo Chávez loses his bout with cancer, it is not at all clear that a more democratic and less destructive regime will emerge in the year ahead. Mackenzie Eaglen This will be a year that begins solidifying America’s role in the world under the stewardship of President Obama. The military is entering a perilous era of continued uncertainty, declining budgets, rising challenges, and no letup in demand. As the nation begins to divest itself of long-standing defense capabilities without adequate risk management, the consequences of doing so will be felt for many years to come.

Joint Chiefs of Staff at AEI
Amidst large scale budget reductions and a new focus on the Asia-Pacific, America’s military is entering a period of significant transformation. AEI’s Marilyn Ware Center for Security Studies has launched an event series examining American military strategy in the decades ahead. Each event will feature one of the Military Service Chiefs from the Air Force, Army, Marine Corps, and Navy discussing the future of his service branch. General James F. Amos, commandant of the Marine Corps, commenced the series on February 14 at AEI headquarters.

AEI is accepting applications for our 2013 Summer Institute, a four-week academic program for 25 select college undergraduates. Students will study under AEI scholars and Washington influentials and learn about the intersection of public policy analysis and free enterprise political thought. The 2013 Summer Institute will take place in Washington, DC, from June 16 to July 13. For more information on how to apply, please visit www.aei.org/for-students/


New Hires
Tim Carney, senior political columnist for the Washington Examiner, has joined AEI as a visiting fellow. In addition to his regular writing on the intersection of business and politics, Tim will help direct AEI’s Culture of Competition project, which is identifying the corrosive effects of cronyism and proposing reforms to restore market competition. Winner of the 2008 Templeton Enterprise Award, Tim is the author of The Big Ripoff: How Big Business and Big Government Steal Your Money. Ramesh Ponnuru, senior editor for National Review, is the newest member of AEI’s Politics and Public Opinion team. A frequent contributor to the New York Times, Washington Post, and Wall Street Journal, Ramesh will organize AEI events and write about domestic politics and policy. Ed Conard, author of the New York Times bestselling book Unintended Consequences: Why Everything You’ve Been Told about the Economy Is Wrong, has joined AEI as a visiting scholar to continue his work on US economic policy. In particular, Ed will study the effect of taxes and government policies on risk taking and innovation. A partner at Bain Capital from 1993–2007, Ed led the firm’s acquisitions of large industrial companies. The Honorable Jon Kyl has joined AEI as a visiting fellow following his distinguished service in Congress. A former practicing attorney, Sen. Kyl served in the House of Representatives from 1987–1995. He was first elected to the Senate in 1994, and was reelected in 2000 and again in 2006. During his final term, Kyl served as the minority whip, the secondranking position among Senate Republicans. At AEI, Sen. Kyl will focus on restoring the American commitment to internationalism and global leadership.

To learn more about our scholars, visit www.aei.org/scholar

House Majority Leader Eric Cantor Foreshadows GOP Vision During AEI Address
Reading the transcript from the event at AEI headquarters on February 5, you would think that Arthur Brooks had delivered the keynote lecture. But instead, it was House Majority Leader Eric Cantor who declared, “There is no greater moral imperative than to reduce the mountain of debt facing us, our children, and theirs,” during his AEI address, “Making Life Work.” Leader Cantor, who thanked Arthur and AEI scholars at the beginning of his speech, offered an overview of forthcoming House Republican proposals on education, health care, innovation, and job growth, all of which, he said, are designed to “ensure every American has a fair shot at earning their success and achieving their dreams.” Media crews from seven major outlets and nearly 200 people attended the event.


interested in moving the free enterprise

Ray Washburne, member of AEI’s National Council
Mr. Washburne is the CEO of Charter Holdings, a Dallas-based diversified real estate investment company. He is also the cofounder of MCrowd Restaurant Group Inc., which operates 28 restaurants and employs approximately 2,000 people, and the owner of the Highland Park Village shopping center in Dallas.
What effects do you foresee Obamacare having on your restaurant business?

movement forward. AEI offers a critical forum for free thought about how capitalism works and about how an individual can make a difference.

important discretionary spending is to our economy. The effects of higher taxes are not simply limited to the wealthy. Take someone who wants to purchase a second home. There may not be much sympathy for someone in that financial position. But that person is helping employ the real estate broker, the surveyor, the builders— dozens of people all the way down the line. Higher taxes will make people reconsider big purchases that employ all types of Americans. They essentially direct money away from constructive activity and into a governmental black hole that produces nothing in return.
Is there something special about Texas that has helped fuel your professional success?

“AEI is the go-to resource for anyone interested in moving the free enterprise movement forward.”
You are active in helping recruit additional AEI supporters from around the country—how do you describe AEI to people?

Staying connected can be difficult if you have a young family and are running a business, but there are many business leaders from around the country who want to plug in with what is happening in Washington, DC. AEI serves that demand by bringing together like-minded people from outside the Beltway who want to interact with the thinkers in Washington who are shaping the direction of American politics. The close access that supporters have to policy experts is a major reason why I’m involved with AEI.
If you could pick one AEI scholar to have dinner with, who would it be and why?

Obamacare is going to have a detrimental effect. The cost to be noncompliant is $2,000 per employee; complying would cost $2,600 per employee. That adds up to as much as $5.2 million per year. This will slow our expansion by two restaurants per year, each of which would employ between 40 and 50 people. Not a great way to grow an economy.
How concerned are consumers about higher taxes in 2013?

Absolutely. I grew up in Dallas and went to Southern Methodist University. I paid my way through school and was fortunate that I learned then about regulations with various entrepreneurial ventures. Texas has a low-regulation environment where you can go in, roll up your sleeves, and achieve tremendous success.
What role do you see AEI serving in today’ political debates? s

Higher taxes are going to have a noticeable impact on discretionary spending, and that is going to reverberate throughout the economy. I do not think that the current administration appreciates how

AEI has so many great scholars, but I would pick Michael Barone. I’m a history buff and was a history major in college, so I find Michael fascinating. He does a terrific job of placing today’s political debates within a historical context.

AEI is the go-to resource for anyone


Cage-Busting Leadership
We have all heard about the challenges to education reform: byzantine regulation, powerful teachers unions, and contracts that make hiring and firing difficult to impossible. Rick Hess does not deny that these impediments make life difficult for reform-oriented educators. Indeed, he compares them to a cage that traps educators and inhibits improvement in American schools. But that cage, as Rick insists in his new book, is not ironclad. Cage-Busting Leadership tells educators how to overcome obstacles once thought insurmountable to achieve real reform.

30 “Under Rick Hess’s leadership, AEI
has challenged orthodoxy from both sides in the ongoing saga of education. Rick eschews simple solutions and is unafraid of big ideas.”
—Joel Klein, Executive Vice President, NewsCorp, and Former Chancellor, New York City Department of Education

AEI Education Policy Studies: 10 Years by the Numbers
Public Events

117 52

“Education Outlooks”

In his role as the director of AEI’s Education Policy Studies program, Rick has monitored, studied, and supported a variety of school reform efforts nationwide, offering a firsthand account of the challenges that educators face. This instructive experience has demonstrated to Rick that educators wield far more power than they often realize. Contracts, regulation, and unions—onerous though they may be—are not impenetrable. Cage-Busting Leadership is written with educators in mind, but the book offers countless accounts of savvy problem solvers triumphing over bureaucracy. The case of former DC schools chancellor Michelle Rhee offers one such example. When determining how to reduce the teacher workforce, Rhee encountered regulations that forced her to evaluate each

teacher based on four criteria: professional credentials, agency needs, unique skills, and seniority. The conventional, “caged” wisdom would suggest that each criterion be weighted equally at 25 percent. Deference to seniority, in particular, would entail firing the most junior teachers, regardless of their performance. As Rick explains, Rhee was not beholden to convention. He writes, “the district went ahead and weighted school needs at 75 percent, unique skills at 10 percent, professional credentials at 10 percent, and seniority at 5 percent.” Despite multiple challenges from the Washington Teachers Union, the weighting system for reductions in force remains intact. The purpose of Cage-Busting Leadership is not to fuel animosity toward unions or other adversarial


(edited or written by AEI scholars)


Twitter Followers

Research Conferences


Recipients of regular email updates


forces. Instead, Rick tells readers how to leverage entrepreneurial thinking and ingenuity to “identify challenges, dream up solutions, and blast their way forward.” As Rick writes, that mentality—compared to mere resignation to the status quo— “sounds like a lot more fun.”

AEI Annual Dinner
On May 8, AEI will honor Rep. Paul Ryan (R–WI), the 2013 Annual Dinner speaker, with the Irving Kristol Award, the highest honor conferred by AEI. Rep. Ryan joins a distinguished list of award winners, including presidents Gerald Ford, Ronald Reagan, and George W. Bush; Supreme Court Justices Antonin Scalia and Clarence Thomas; and columnists George Will and Charles Krauthammer. For more information about AEI’s Annual Dinner, please contact Mallory Johnson (mallory.johnson@aei.org; 202.862.5949).

Stay Connected to AEI
AEI’s Banter Podcast, hosted by AEI staffers Stuart James and Andrew Rugg, sheds light on today’s headlines through provocative interviews with AEI scholars and leading thinkers and policymakers. This popular weekly series—with an average audience exceeding 1,200 listeners—has featured Grover Norquist, Bill Kristol, Gov. Nikki Haley (R–SC), and AEI scholars Paul Wolfowitz, Nick Freedom. Opportunity. Eberstadt, and Karlyn Bowman years Enterprise. among its 80 guests. To listen to Banter and subscribe to the series, please visit media.aei.org.

Founded in 1938, AEI (then-American Enterprise Association) dedicated itself to promoting “a clearer understanding years of our system of free enterprise and its relationship to America’s social and political institutions.” Our timeless mission is more important today than ever before. Thank you for helping make our 75th anniversary possible.

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Freedom. Opportunity. Enterprise.


www.aei.org/rss @AEI

Freedom. Opportunity. Enterprise.

The American Enterprise Institute is a community of scholars and supporters committed to expanding liberty, increasing individual opportunity, and strengthening free enterprise. AEI’s work is made possible only by the financial backing of those who share our values and support our aims. To learn more about AEI’s scholars and their work, visit www.aei.org | www.american.com | www.aei-ideas.org To find out how you can invest in our scholars’ work, visit www.aei.org/support

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