During my time as AEI president, I’ve met a lot of entrepreneurs from around thecountry. The businesses they’ve created differ drastically—from brokerage firmsto 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. Ourleadership 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

AEI—The “Entrepreneurial”Washington Think Tankby AEI President Arthur Brooks

Issue No. 1, February 2013

Enterprise ReportRestoring Liberty, Opportunity, and Enterprise in America

75 yearsFreedom. Opportunity. Enterprise.

75 years

bolstered our scholarship with new hires, including political journalists Ramesh Ponnuru andTim Carney and New York Times bestselling author Ed Conard. Ramesh and Tim are singlingout today’s greatest threats to free enterprise, and Ed is explaining how to reform our taxcode to promote entrepreneurship, innovation, and economic growth.

Of course, our policy challenges are not limited to the economy. That’s why I’m honoredand excited to announce the arrival of former U.S. Senator Jon Kyl, who will study America’scommitment to global leadership as a visiting fellow. Sen. Kyl’s arrival, as well as the com-

mencement of a new speaker series with the four Military ServiceChiefs, are testaments to the growing influence of AEI’s Marilyn WareCenter 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 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-BustingLeadership, 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 superintendentscan apply the same kind of entrepreneurial thinking as leaders in the private sector to breakthrough roadblocks and achieve real reform in America’s schools.

Rick’s work reveals the obstacles imposed by bureaucratic largess and political rent-seekers that place their own interests above those of students. But more importantly, he setsforth 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 ideasand reforms.

Thank you, as always, for your support of AEI and for your dedication to America’s freeenterprise system. It is exciting to begin another year with you by our side.

2

AEI president Arthur Brooks with former senator and new AEI visiting fellow Jon Kyl

Policy Focus

AEI on the Hill: An Inside Look at OurGovernment Relations Department

3

Scholar testimony before congressionalcommittees is public, prominent, andquantifiable. It is also a core strength ofthe Institute. AEI scholars testified 106times during the 112th Congress, morethan scholars from any other public policy organization. But as John insists,that metric only hints at AEI’s role onCapitol Hill, overshadowing arguablymore important strategies to solidifyAEI’s position at the center of debate.

Among these strategies is AEI’snew weekly gathering for SenateRepublican legislative directors. AEIscholars are leading lunchtime discus-sions that give context to the debates inCongress by tying policy specifics to thebroader fight for free enterprise. Thesediscussions not only inform policymak-ers—they are also part of a symbioticrelationship that provides AEI scholarswith an inside look at the foremostissues on Congress’s agenda.

The gridlock that has characterizedcongressional politics in recent yearsbegs the question: is AEI’s presence onCapitol Hill all for naught? The answer,according to John, is a definitive no,although the divided Congress doesaffect the way AEI communicates our

work. Indeed, progress on tax reform,entitlements, and defense spending—among other issues that AEI scholarsare watching closely—depends oncooperation between Republicans and Democrats.

In response to that reality, AEI’snew “Left-Right Briefings” seriesengages both sides of the aisle to build agreement on contentious policyissues. That is not to say that AEI is any less committed to its free enterpriseprinciples. Rather, as John explains,“Our ideas shine when contrasted withothers, and AEI receives more buy-in for our work when audiences see thatcontrast.” Having held a recent Left-Right Briefing on entitlement reform, AEI is planning future installments on education, housing policy, anddefense spending. John estimates thatDemocratic staffers represent at least 40 percent of the audience at each AEIevent on Capitol Hill, making theseforums a powerful tool to forge consen-sus and drive the debate forward.

With these initiatives gainingsteam and a greater number of policy-makers calling on AEI scholars, AEI’sgovernment relations department is

busier today than ever before. Thatwill only intensify in the months ahead.As one senior House member told Johnearlier this year, AEI scholars have noidea “how demanding we’ll be ofthem during this session of Congress.”But the team, as well as our scholars,are embracing that challenge withenthusiasm and aplomb. There is a reason, after all, why AEI is inWashington.

“It’s all about creating relational feedback loops between AEI scholars and mem-bers of Congress,” John Cusey said from his office on AEI’s 10th floor. Relationshipbuilding is a key part of John’s role as the director of AEI’s government relationsdepartment, which has helped establish AEI as a dominant force on Capitol Hill.Efficient and entrepreneurial, the four-person department has begun to implementnew initiatives to leverage that influence and deliver AEI scholarship to leaders onthe front lines in the 113th Congress.

112TH BY THE NUMBERS

106 AEI scholar testimonies

60 Percent increase in AEI scholartestimonies compared to 110th Congress

20 Free Enterprise Messaging Sessionsfor members of Congress and seniorstaff, hosted by Arthur Brooks

549 Private meetings between AEI scholars and members of Congress

15,000Capitol Hill staffers receiving regular AEI email updates

4

Joint Chiefs ofStaff at AEI Amidst large scale budget reductionsand a new focus on the Asia-Pacific,America’s military is entering a periodof significant transformation. AEI’sMarilyn Ware Center for SecurityStudies has launched an event seriesexamining American military strategyin 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 servicebranch. General James F. Amos, commandant of the Marine Corps, commenced the series on February 14 at AEI headquarters.

What Foreign Policy Challenge IsForemost on Your Mind in 2013?

Leon AronThe greatest challenge I’m considering in 2013 per-tains to US-Russia relations and the continuing deterio-ration of human and political rights under VladimirPutin’s authoritarianism. The United States has to manage the situation realistically but firmly in accor-dance with the traditional overarching values andgoals 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 DhumeWill Pakistan hold free and fair elections and deependemocracy? How will a precipitate American with-drawal from Afghanistan affect Islamic fundamentalismin India and Pakistan? Can India’s shaky governmentput economic reforms back on track? These quetionsare critical to our understanding of this dynamic region.

Roger NoriegaTwo Latin American transitions will have a significantimpact on US political, security, and economic interestsin the coming year. Mexico’s new president, EnriquePeña Nieto, has pledged to sustain responsible economic and antidrug policies and open his country’senergy 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 moredemocratic and less destructive regime will emerge in the year ahead.

Mackenzie EaglenThis will be a year that begins solidifying America’srole in the world under the stewardship of PresidentObama. The military is entering a perilous era of continued uncertainty, declining budgets, rising chal-lenges, and no letup in demand. As the nation beginsto divest itself of long-standing defense capabilitieswithout adequate risk management, the consequencesof doing so will be felt for many years to come.

AEI is accepting applications for our2013 Summer Institute, a four-weekacademic program for 25 select collegeundergraduates. Students will studyunder AEI scholars and Washingtoninfluentials and learn about the inter-section of public policy analysis andfree enterprise political thought.

The 2013 Summer Institute will takeplace in Washington, DC, from June 16to July 13.

For more information on how to apply, please visit

www.aei.org/for-students/

AEI 2013 SUMMER INSTITUTE

Reading the transcript from the event atAEI headquarters on February 5, youwould think that Arthur Brooks haddelivered the keynote lecture. Butinstead, it was House Majority LeaderEric Cantor who declared, “There is no greater moral imperative than toreduce the mountain of debt facing us,

our children, and theirs,” during his AEIaddress, “Making Life Work.”

Leader Cantor, who thankedArthur and AEI scholars at the beginning of his speech, offered anoverview of forthcoming HouseRepublican proposals on education,health care, innovation, and job

growth, all of which, he said, aredesigned to “ensure every Americanhas a fair shot at earning their success and achieving their dreams.”Media crews from seven major outlets and nearly 200 people attended the event.

5

Tim Carney, senior political colum-nist for the Washington Examiner,has joined AEI as a visiting fellow. Inaddition to his regular writing on theintersection of business and politics,Tim will help direct AEI’s Culture ofCompetition project, which is identify-

ing the corrosive effects of cronyism and proposing reforms torestore market competition. Winner of the 2008 TempletonEnterprise 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 newestmember of AEI’s Politics and PublicOpinion team. A frequent contributorto the New York Times, WashingtonPost, and Wall Street Journal, Rameshwill organize AEI events and writeabout domestic politics and policy.

Ed Conard, author of the NewYork Times bestselling bookUnintended Consequences: WhyEverything You’ve Been Told aboutthe Economy Is Wrong, has joinedAEI as a visiting scholar to continuehis work on US economic policy. In

particular, Ed will study the effect of taxes and governmentpolicies on risk taking and innovation. A partner at BainCapital from 1993–2007, Ed led the firm’s acquisitions oflarge industrial companies.

The Honorable Jon Kyl hasjoined AEI as a visiting fellow follow-ing his distinguished service inCongress. A former practicing attor-ney, 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. Duringhis final term, Kyl served as the minority whip, the second-ranking position among Senate Republicans. At AEI, Sen. Kylwill focus on restoring the American commitment to internation-alism and global leadership.

New Hires

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

House Majority Leader Eric CantorForeshadows GOP Vision During AEI Address

Mr. Washburne is the CEO of CharterHoldings, a Dallas-based diversifiedreal estate investment company. He is also the cofounder of MCrowdRestaurant Group Inc., which operates28 restaurants and employs approxi-mately 2,000 people, and the owner of the Highland Park Village shoppingcenter in Dallas.

What effects do you foreseeObamacare having on yourrestaurant business?

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 upto as much as $5.2 million per year.This will slow our expansion by tworestaurants per year, each of whichwould employ between 40 and 50 people. Not a great way togrow an economy.

How concerned are consumersabout higher taxes in 2013?

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

important discretionary spending is to our economy.

The effects of higher taxes are notsimply limited to the wealthy. Take some-one who wants to purchase a secondhome. There may not be much sympathyfor someone in that financial position. Butthat person is helping employ the realestate broker, the surveyor, the builders—dozens of people all the way down theline. Higher taxes will make peoplereconsider big purchases that employ alltypes of Americans. They essentiallydirect money away from constructiveactivity and into a governmental blackhole that produces nothing in return.

Is there something special aboutTexas that has helped fuel yourprofessional success?

Absolutely. I grew up in Dallas andwent to Southern Methodist University. I paid my way through school and was fortunate that I learned then aboutregulations with various entrepreneurialventures. Texas has a low-regulationenvironment where you can go in, rollup your sleeves, and achieve tremend-ous success.

What role do you see AEI serving intoday’s political debates?

AEI is the go-to resource for anyone

Ray Washburne, member of AEI’s National Council

Q&

We are building alliances and sharing our work with

groups across the country

Deep AEI engagement

Growing AEI engagement

Future AEI engagement

6

interested in moving the free enterprisemovement forward. AEI offers a criticalforum for free thought about how capitalism works and about how anindividual can make a difference.

You are active in helping recruitadditional AEI supporters fromaround the country—how do youdescribe AEI to people?

Staying connected can be difficult if youhave a young family and are running abusiness, but there are many businessleaders from around the country whowant to plug in with what is happening inWashington, DC. AEI serves that demandby bringing together like-minded peoplefrom outside the Beltway who want tointeract with the thinkers in Washingtonwho are shaping the direction ofAmerican politics. The close access thatsupporters have to policy experts is amajor reason why I’m involved with AEI.

If you could pick one AEI scholarto have dinner with, who would itbe and why?

AEI has so many great scholars, but Iwould pick Michael Barone. I’m a historybuff and was a history major in college,so I find Michael fascinating. He does aterrific job of placing today’s politicaldebates within a historical context.

“AEI is the go-to resource for anyone interested in

moving the free enterprisemovement forward.”

In his role as the director of AEI’sEducation Policy Studies program, Rick has monitored, studied, and supported a variety of school reformefforts nationwide, offering a firsthandaccount of the challenges that educa-tors face. This instructive experiencehas demonstrated to Rick that educatorswield far more power than they oftenrealize. Contracts, regulation, andunions—onerous though they may be—are not impenetrable.

Cage-Busting Leadership is written with educators in mind, but the book offers countless accounts ofsavvy problem solvers triumphing overbureaucracy. The case of former DCschools chancellor Michelle Rheeoffers one such example. When determining how to reduce the teacherworkforce, Rhee encountered regula-tions that forced her to evaluate each

teacher based on four criteria: profes-sional credentials, agency needs,unique skills, and seniority. The conventional, “caged” wisdom would suggest that each criterion be weightedequally at 25 percent. Deference toseniority, in particular, would entail firing the most junior teachers, regard-less of their performance.

As Rick explains, Rhee was notbeholden to convention. He writes,“the district went ahead and weightedschool needs at 75 percent, uniqueskills at 10 percent, professional credentials at 10 percent, and seniorityat 5 percent.” Despite multiple chal-lenges from the Washington TeachersUnion, the weighting system for reductions in force remains intact.

The purpose of Cage-BustingLeadership is not to fuel animositytoward unions or other adversarial

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

Spotlight

Cage-Busting LeadershipWe 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 forreform-oriented educators. Indeed, he compares them to a cage that traps educatorsand 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 overcomeobstacles once thought insurmountable to achieve real reform.

7

“Under Rick Hess’s leadership, AEIhas challenged orthodoxy from bothsides in the ongoing saga of educa-tion. Rick eschews simple solutionsand is unafraid of big ideas.”

—Joel Klein, Executive Vice President, NewsCorp, and Former Chancellor, New York City

Department of Education“Education Outlooks”

52 117

Public Events

Research Conferences18

BOOKS(edited or written by AEI scholars)

28

Twitter Followers

9,817

30�

Boards, Advisory Panels, and Other Professional Positions (for AEI scholars, in 2012)

“Education Outlooks” 52 117

Public Events

Research Conferences18

BOOKS(edited or written by AEI scholars)

28

Twitter Followers

9,817

Email Distribution List for Research and Events

9,662

Total Citationsfor EditedVolumes 587

30

Research Conferences18

Recipients of regular email updates

9,662

�

AEI Education Policy Studies: 10 Years by the Numbers

The American Enterprise Institute is a community of scholars and supporterscommitted to expanding liberty, increasing individual opportunity, andstrengthening free enterprise. AEI’s work is made possible only by the financialbacking 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

75 yearsFreedom. Opportunity. Enterprise.

75 yearsFreedom. Opportunity. Enterprise.

1150 Seventeenth Street, NW Washington DC 20036

202.862.5800 | www.aei.org

8

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

AEI’s Banter Podcast, hosted by AEIstaffers Stuart James and AndrewRugg, sheds light on today’s headlinesthrough provocative interviews withAEI scholars and leading thinkers andpolicymakers. This popular weeklyseries—with an average audienceexceeding 1,200 listeners—has featured Grover Norquist, Bill Kristol,Gov. Nikki Haley (R–SC), and AEI scholars Paul Wolfowitz, NickEberstadt, and Karlyn Bowmanamong its 80 guests.

To listen to Banter and subscribe to the series,

please visit media.aei.org.

Founded in 1938, AEI (then-AmericanEnterprise Association) dedicated itselfto promoting “a clearer understandingof our system of free enterprise and itsrelationship to America’s social andpolitical institutions.” Our timelessmission is more important today thanever before. Thank you for helpingmake our 75th anniversary possible.

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