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Taking its name from a seriesof anti-tyranny pamphletspublished in the early 18thcentury, the libertarianCato Institute is the foremost
advocate for small-governmentprinciples in American life.
EZRA KLEIN,AMERICANPROSPECT,SEPTEMBER12, 2006
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In the past hundred years, the intentions of Americas founding genera-tion have been all but forgotten. The size of the federal government has
grown exponentially while the autonomy of the individual has been sim-
ilarly reduced in scope. Coercion is used regularly against peaceful indi-
viduals to achieve unethical policy goals.
In response to the abandonment of our nations first principles, the Cato
Institute was organized in 1977. During the ensuing three decades, Cato has
brought the original ideas of America back to the center of public policy discourse.
And Cato peacefully spreads those values abroad, continuing a global devotion to
freedom begun over a quarter of a century ago.
Catos work is educational on two important
frontswith policymakers and with millions of
concerned individuals. Exhaustively researching
and analyzing data, Catos scholars make policy
proposals in a variety of books, policy studies, peri-
odicals, and online publications. Policymakers are
also exposed to Catos recommendations through
frequent Capitol Hill Briefings and other meetings.
Cato Sponsors and other friends of freedom
30 Years ofAdvancing Liberty
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One doesnt know whether to laugh or
cry when reading such silliness, but
we think this quote from one of the
leading lights of the neoconservative intelli-
gentsia is revealing of the growing promiscu-
ousness with which the conservative move-
ment approaches governance in America these
MessageYou ought to organize your committees by
priority. For example, create a FlourishingFamilies Committee. Get economists, relig-ious activists, and psychologists in one roomto figure out how government can reducestress on struggling families.
DAVID BROOKS in a February 22, 2007,New York Timescolumn offering advice to GOP presidential candidates.
from
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The clause was meant to limit the power of the
federal government by saying that the enumer-
ated powers of the federal government could
be used only for the general welfare, not for
what the Framers called factions and we call
special interests.
So, we would encourage policymakers and
the public to take the Constitution seriously.
That is why Cato has distributed nearly four
million copies of that remarkable document.
The Framers knew what they were doing. We ig-
nore their wisdom at our peril.
This is our 30thAnnual Report. We take great
pride in what the Institute has accomplished in
three decades. We are one of the most quoted
think tanks in America Our award-winning
the President and the Chairman
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FriedmanMilton
A Courageous and Persuasive Voice for Freedom
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he life of one of the 20th centurys
greatest champions of freedom is a
study in accomplishment. Milton
Friedman (19122006) was at the
same time scholar, scientist, advis-
er, teacher, mentor, communica-
tor, and public intellectual. He
advanced greatly our understanding of how freedom
works (and how coercion fails). He provided valuable ad-
vice and expertise to governments around the globe. He
taught and mentored generations of economists whose
accomplishments have revolutionized academic life. He
communicated his insights in clear and simple languageto millions of people through his columns, television
shows, books, speeches, and interviews.
Friedmans contributions to economic science were
recognized by the Nobel Memorial Prize in Economic
Sciences and many other awards. His investigations of
permanent income and consumer behavior and his pio-
neering work in monetary theory and policy have both
illuminated the workings of complex economies andgreatly improved policy. The taming of the inflation of
the 1970s was largely a result of people paying attention
to Friedmans admonitions against expanding the money
supply for short-term political advantage.
Friedmans university teaching and his example of
public involvement led generations of economists to
f tt ti th h f l ff t f b tit ti
his proudest accomplishment, Friedman immediately
responded that it was the elimination of military con-
scription. He also never tired of pointing out the terrible
effects of interfering with personal choice when it comes
to alcohol, narcotics, and other victimless crimes.
One proposal that originated with Friedman has
changed the debate about education the world over. In
Sweden parents can choose to send their children to the
schools of their choice, whether state or private, secular or
parochial, for-profit or nonprofit. Similar systems of
choice are being initiated throughout the world, includ-
ing in numerous American states, despite the powerful
opposition of the teachers unions. Pupils and parents theworld over have Milton Friedman to thank for promoting
their right to choose.
Friedman was most widely known, however, neither
as a scholar nor as a policy adviser, but as a charming,
thoughtful, and persuasive public communicator.
Through his columns in Newsweek from 1966 to 1983,
his 1980 PBS television series Free to Choose, and such
accessible and elegant books as Capitalism and Freedom,Free to Choose, and Tyranny of the Status Quo (the latter two
coauthored with his brilliant and loving wife Rose
Friedman), he brought the liberating message of capital-
ism, freedom of choice, and personal responsibility to
millions. When asked what motivated him to move
so quickly to dismantle socialism in formerly commu-
i tb t th i i E t i th i i i t M t
T
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The 2006 Milton Friedman Prize for Advancing Liberty
from the Cato Institute was awarded to Mart Laar, former
prime minister of Estonia and main architect of his coun-
trys remarkable economic transformation into one of
the worlds freest and most dynamic economies.
The prize and its accompanying $500,000 cash awardwere presented to Laar by Francisco Flores, former presi-
dent of El Salvador, on May 18, 2006, at a gala dinner at
the Drake Hotel in Chicago, attended by several hundred
Cato supporters and guests. Named after Nobel laureate
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ContentsCato Institute 2006 Annual Report
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uring 2006 Catos experts met the challenge ofprotecting and restoring individual rights withenthusiasm and enjoyed significant success.Necessarily, this involved working on issues that
embrace both federal and state policy considerations.
R E S T O R I N G
I N D I V I D U A L
S O V E R E I G N T Y
D
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connected to property rights. Joining Sande-fur on the faculty were, among others, RogerPilon, Cato vice president for legal affairs;Tom G. Palmer, vice president for interna-tional programs and director of CatoUniversity; and Scott Bullock, Institute for
Justice, who argued theKelo case before theSupreme Court.
Victories followed in the wake of the
efforts by Cato and its allies. Perhaps themost important has been passage of legisla-tion in 31 states to limit, to a greater or less-er extent, effects of the anti-property-rightsdecision of the Supreme Court. Restraintson untrammeled abuse of eminent domaingarnered 80 percent or more of the votes inreferenda in New Hampshire, Michigan, and
South Carolina. A week before the November referenda,
Roger Pilon wrote an op-ed that appeared inthe Los Angeles Times and other newspapers.Pilon echoed the Bill of Rights: If some-one else wants the property badly enough,theres a fair way to get it: Pay for it. Thats the
The Rise of Paramilitary Police Raids in America bypolicy analyst Radley Balko. Paramilitary raidsby police have increased a staggering 1,300 per-cent over the last 25 years. The vast majority ofthe raids are to serve routine drug warrants,including warrants for offenses as trivial asmarijuana possession.
Overkill provides a legal, historical, andpolicy background explaining the trend.
Balko critiques no-knock and short-noticeraids and explains how such confrontationaltactics cause violence rather than lessenrisks and offers recommendations forreform. He documents a shocking numberof botched SWAT raids in which excessivelymilitaristic tactics have threatened the livesof the targets of the raids, accidental targets,
and the police themselves.Overkill won praise from former Seattle
police chief Norm Stamper, who discussedthe problem of police raids in the War onDrugs at a Book Forum at Cato in Septem-ber. Supreme Court Justice Stephen Breyercited Balkos work in his dissenting opinioni d h ( h h ld h
Radley Balko
is doing forMaye whatdocumentary
filmmaker ErrolMorris did for
Randall Adams
in The Thin BlueLine: uncovera conspiracyof deceitful
prosecutionand shoddypolice work.
PAULJACOB,Common Sense,
DECEMBER12, 2006
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vouchers remain available.Other achievements to advance educa-
tional freedom include publication of thebook Liberty and Learning, revisiting MiltonFriedmans seminal essay proposing free mar-ketbased education on its 50th anniversary.
The issue of the affordability of highereducation has prompted calls for the federalgovernment to increase subsidies to higher
education. In response, Cato education poli-cy analyst Neal McCluskey argues thatwe need less, not more, federal money.
Appearing on CNBC, McCluskey explained,Money for higher education is like a drug,and the symptoms of the addiction are thetuition costs which keep going up. Federalaid fuels price inflation, giving colleges and
universities little incentive to hold downcosts as federal subsidies soar.
In George Orwells classic 1984, an all-pow-erful government controls every aspect ofindividuals lives and maintains meticu-
lous, comprehensive records on everyone. Nob hil hi l
Cato policy analyst Neil
McCluskey (top) and
adjunct scholarMarieGryphon (center) dis-
cussed her Policy Analysis
Giving Kids the Chaff:
How to Find and Keep the
Teachers We Need at a
Cato Policy Forum on
September 25. Gryphon
concluded that only mar-
ket forces and greater
choice can improve thequality of teachers. She
wrote an op-ed about her
study that appeared in
Business Week.
In 2006 Jim Harper,
director of information
policy studies, criss-
crossed the nation,
giving speeches, testifyingbefore legislative panels,
and meeting with state
officials in California, New
Hampshire, New Mexico,
Maryland, Tennessee,
and Utah in order to
stir up resistance to
the REAL ID Act.
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book every day to help structure programs anddevelop policies if Id had it at TSA.
Significant media coverage also ensued,including citations in the New York Timesin April, in Privacy Journalin May, and onNPRs newsmagazineAll Things Considered inDecember.
C
ato launched its involvement in bio-
ethics, increasingly crucial to individualrights, by naming Sigrid Fry-Revere asits first director of bioethics studies. Fry-Revere previously taught at the University of
Virginia and George Mason University. Herareas of policy research and developmentinclude genetic engineering, neuroethics,reproductive technologies, end-of-life deci-
sions, and research ethics.In a Los Angeles Times op-ed, Fry-Revere
wrote against the public funding of stem cellresearchbut for different reasons than areusually given by most opponents. Sheargued that government support for stemcell research has proved bureaucratic, waste-f l i fi kl d di i i d
The policy was
strikingly similarto charter schools,pioneered in theUS to introduceprivate fundsand market
forces into publiceducation andbacked by think-tanks such as theCato Institute.Times (LONDON),DECEMBER2, 2005
Catos new director of
bioethics studies Sigrid
Fry-Revere wrote in the
New York Postthat the lack
of organ donors could be
quickly remedied by relying
hi l k i i
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I consider thefoundation of theConstitution aslaid on this groundthat all powersnot delegated to the
United States, bythe Constitution,nor prohibited byit to the states, arereserved to the states
or to the people.To take a singlestep beyond theboundaries thusspecially drawn
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s Benjamin Franklin left Independence Hall onSeptember 18,1787, following the final draft-ing of theproposednew Constitution,a certainMrs. Powell asked him what kind of government
had been fashioned. Never at a loss for words, Franklin
C A G I N G
T H E F E D E R A L
L E V I A T H A N
A
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I
n the executive summary of Catos whitepaperPower Surge: The Constitutional Record ofGeorge W. Bush, Gene Healy, Cato senior edi-
tor, and Timothy Lynch, director of CatosProject on Criminal Justice, point to Bushsauthorization of the detention of American cit-izens without trial, his support for surveillancewithout warrant or oversight, his refusal to vetounconstitutional laws such as campaign
finance reform, among other policies, as evi-dence that Bush has overstepped his authority.Power Surge found sympathetic ears across
the political spectrum. Sen. Patrick Leahy (D-VT) approvingly cited the study in a speech onthe Senate floor, and the conservative blogRedstate.com called it a forceful, well-argued,respectful case against the presidents vision
for the scope of executive power.In related activities, Cato scholars weredeeply involved in the debate over wartimeexecutive power. Testifying before the Senate
Judiciary Committee in February, senior fel-low Robert Levy criticized President Bushsassertion that the National Security Agency
d i i i i h
Roger Pilon and senior fellow Mark Moller,speakers called for a return to interpretationof the Constitution as it was clearly meant byframers such as Madison. The day-long eventattracted well over 200 participants.
Topics addressed included Federalismafter Raich: Assisted Suicide, Wetlands, andPreemption; Executive Power afterHamdanv. Rumsfeld; and The First Amendment:
Campaign Finance, the Solomon Amend-ment, and Whistleblowers. The annual B.Kenneth Simon Lecture, Challenges tothe Rule of Law: Or, Quod Licet Jovi, Non Licet
Bovi? was delivered by U.S. Appeals CourtJudge Danny J. Boggs.
The conference coincided with the publi-cation of the 20052006 Cato Supreme Court
Review, edited by Moller. TheReview featuresessays on religious freedom, campaignfinance regulations, antitrust, and the ques-tion of whether the Supreme Court is prac-ticing law or politics.
ato regularly files amicus briefs with theh fi i i
The current
46-percent estatetax rate borderson being con-
fiscatory. ChrisEdwards of theCato Institute
reports that outof the 50 largesteconomies in the
world, we havethe third highest
estate tax rate.SEN. ORRIN HATCH
(R-UT)FLOOR OF THE SENATE,JUNE 8, 2006
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war crime, he cannot deny the accused thebenefit to trial by jury.
One of the major items on the agenda ofmany big-government conservativeshas been to create a federal definition
of marriage, although marriage laws are byimplication among the powers reserved tothe states under the Constitution. Amend-
ing the Constitution to create a federal defi-nition of marriage would allow the federalgovernment to reach into yet another area theFounders intended to reserve to the states.
In 2006 Catos opposition to this attemptwas highlighted by publication of the Policy
Analysis The Federal Marriage Amend-ment: Unnecessary, Anti-Federalist, and
Anti-Democratic by Dale Carpenter of theUniversity of Minnesota School of Law.Sen. Arlen Specter (R-PA) cited the studyon the Senate floor. Ultimately, the proposedamendment failed to garner the two-thirdsmajority necessary to pass each houseof Congress.
Tim Lynch, director of
Catos Project on Criminal
Justice, wrote a BriefingPaper, Doublespeak and
the War on Terrorism, in
September about how the
Bush administration disguis-
es the true nature of its
policies through distorted
language. An Associated
Press article that ran in
dozens of newspapers
around the country citedLynchs study.
Cato senior fellow Robert
A. Levy testified to the
Senate Judiciary Committee
on February 28 that the
National Security Agency
has broken the law by
eavesdropping on American
citizens without a warrant.He explained that the execu-
tive branch has unconstitu-
tionally eliminated oversight
by the other branches.
John Samples, director
of Catos Center for Rep-
resentative Government
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promote the books ideas to millions ofconservative listeners. Rep. Mike Pence (R-IN) urged all members of the RepublicanStudy Committee to readBuck Wild to under-stand where the party went wrong.
Slivinski gained even more media atten-tion with his Fiscal Policy Report Card on
Americas Governors, published as a CatoPolicy Analysis. Dozens of local newspapers
and radio stations reported on how welltheir states governors did in holding downspending and taxes according to Slivinskismeasurements.
At a February Book Forum for Size Mat-ters: How Big Government Puts the Squeeze
on Americas Families, Finances and Free-
dom, author Joel Miller related how govern-ment taxation and spending negativelyimpact families. That same month, at aCapitol Hill Briefing, Catos director of taxpolicy studies Chris Edwards discussed thebudgets tax proposals and the danger of ris-ing taxes if spending is not cut in coming
h i l ff d
Catos director of tax
policy studies Chris
Edwards testified beforethe Senate Budget Com-
mittee on September
28 about the state of
the economy. Edwards
recommended reform
of the income tax system
and scouring the federal
budget for programs to
cut or eliminate.
At a Cato Capitol Hill
Briefing, Stephen Slivinski,
Catos director of budget
studies, advocated budget
reforms to allow the execu-
tive to check runaway
spending by Congress
A lack of ethics in Congress
and reckless spending are
both results of the Republi-
can Party abandoning its
historic principles, Sen.
Chuck Hagel (R-NE) told
the audience at a New York
Cato seminar.
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C
ampaign finance reform has been usedas cover for expanding the advantagesof incumbents, many of whom do
not mind trampling on the Constitution.McCain-Feingold directly bans mention ofthe names of federal candidates in advertis-ing paid for by most individuals and organi-zations for 60 days prior to an election. Thelegislation also severely limits the ability of
challengers to raise the campaign funds nec-essary to buy enough advertising to effective-ly counter the massive free publicity enjoyedby incumbents.
John Samples, director of Catos Centerfor Representative Government, believes thatMcCain-Feingold is the greatest assaulton freedom of speech since the Alien and
Sedition Acts. In October the University ofChicago Press published Sampless book The Fallacy of Campaign Finance Reform, one ofthe few book-length criticisms of campaignfinance laws. George Will wrote in hisWashington Post column that Samples de-molishes the argument that campaignfi f h i d h i
that, although libertarians have tended toprefer Republicans over Democrats at thepolling booth, that margin has narrowedin recent elections. They conclude that thelibertarian vote is large enough to swing elec-tions, which seems to be borne out by theresults in a number of close elections inNovember 2006. Their study drew coveragefrom major media including The Economist,
which commented in an October article,Mr. Boaz and Mr. Kirby argue that wooingthe libertarian vote could propel either partyto electoral success but that neither showedsigns of trying very hard, each advocating a
variety of interventionist policies.In December, Cato vice president for
research Brink Lindsey published an essay
titled Liberaltarians in the New Republiconline. Lindsey argues that while Democrats
Read the
reports of theCato Institute,and they willtell you, theywill demon-strate to you
that the Bushadministrationis the biggest-spendingadministrationsince LyndonBaines Johnson.REP. JIM COOPER(D-TN)FLOOR OF THE HOUSEOF REPRESENTATIVES
JULY 18, 2006
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hirty years ago, scientist Paul Ehrlich predictedthat by the end of the 20th century famine, dis-ease, increasingly scarce resources, and relatedcatastrophes would reduce the population of the
United States to fewer than 25 million individuals.
A D V A N C I N G
E C O N O M I C
F R E E D O M
T
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Ian Vsquez.Late in the year Andrei Illarionov joined
the center as senior fellow. Illarionov is a for-mer chief economic adviser to Russian presi-dent Vladimir Putin. He worked at theKremlin from 2000 to December 2005, whenhe resigned in protest of policies that curtaileconomic and personal freedom.
Another new scholar is Indian economistand Times of India columnist Swaminathan
Aiyar, who joined the center as a researchfellow. He has been the editor of Indias twobiggest financial dailies, the Economic TimesandFinancial Express, and was also the Indiacorrespondent of The Economist for twodecades.
Committed to promoting policies that
protect human rights, extend personalchoice, and support economic freedom toend world poverty, the center is expandingCatos work on Central and Eastern Europe,
Asia, Africa, and Latin America. The centerworks with Catos foreign language websites,ElCato.org, Cato.ru, and Misbahalhurriyya.org( f ib ) h h hi h h d d
socialist dictator in a Development Policy Analysis by Gustavo Coronel, former Ve-
nezuelan representative to TransparencyInternational, titled Corruption, Misman-agement, and Abuse of Power in HugoChvezs Venezuela, published in Novem-ber. In major U.S. media coverage, Vsquezappeared on PBS in June to discuss Peru-
vian elections. Addressing African issues, in July Cato
published a Foreign Policy Briefing, Foreign Aid and the Weakening of Democratic Accountability in Uganda, by AndrewMwenda, political editor of theDaily Monitor,a newspaper in Kampala, Uganda. In thestudy Mwenda argues that to promotedemocracy and accountability, the West
should discontinue future aid flows.
Cato had Georgiathe former SovietRepublic of Georgiaon its mind inOctober with a groundbreaking confer-
ence in the capital, Tbilisi.Freedom, Commerce, and Peace: Ai l d d b
Cato Unbound,
an online maga-zine sponsoredby the libertarian
Cato Institute,plays host thisweek to one of
the immigrationdebates most ele-gant discussions.
Wall Street Journal,AUGUST 22, 2006
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and helps to lift nations out of poverty butthat foreign aid has no such impact. A
companion forum in September featuredGwartney.
Published by Cato early in 2007, The Improving State of the World: Why Were Living
Longer, Healthier, More Comfortable Lives on a
Cleaner Planetby Indur M. Goklany effective-ly challenges the conventional wisdom thatglobalization has made matters worse forhumanity and the environment. In a De-cember review, Allister Heath wrote in theSpectator that Goklany demonstrates thaton every objective measure of the humanconditionbe it life expectancy, food avail-ability, access to clean water, infant mortali-ty, literacy rates or child laborwell-being
and quality of life are improving aroundthe world.
Catos 24th Annual Monetary Confer-ence, Federal Reserve Policy in the Faceof Crises, in November drew a number
of distinguished speakers, including Randallf h d l
Andrei Illarionov, former
economic adviser to Russian
president Putin and seniorfellow at the Cato Institute,
described the accelerated
pace of change in Russia
and new ways in which
political, economic, and civil
liberties are being eliminated
at a Policy Forum, Russian
Energy Policy and the New
Russian State at Cato on
November 20.
Left to right, Nobel Laureate
Vernon L. Smith; Cato vice
president for international
programsTom Palmer; and
Kakha Bendukidze, state
minister on reforms coordi-
nation of the Republic of
Georgia, at Freedom,
Commerce, and Peace: A
Regional Agenda, a three-
day conference sponsored
by Cato and other free mar-
ket organizations in Tbilisi in
October.
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and Leading the Way: How U.S. TradePolicy Can Overcome Dohas Failings in
June. In the latter, he urged Washingtonto abandon the mindset that barriers totrade should be used as bargaining chipsto extract concessions from other countries.In June Ikenson also published CurrentControversy: Surplus of Politics, Deficit ofLeadership, dealing with the consequencesof appreciation of the Chinese yuan on U.S-China trade.
In August Dorn testified before the U.S-China Commission. He argued that Con-gress should encourage China to movetoward capital freedom and not focus nar-rowly on the exchange rate. Dorn publishedarticles in the Financial Times and Caijing
(Chinas leading financial magazine) makingthe case for economic liberalism. A June forum presented arguments for
and against international economic liberal-ization. Two Views on Global Develop-ment: Revive the Invisible Hand or Strengthena Society of States? featured Cato adjunct
h l k l i f h i
ABC Newsinterviewed
Cato senior fellow Pat
Michaels about globalwarming and climate
change on March 24.
Michaels contended
that most projections
about global warming
and its effect on the
environment are
exaggerated
Hong Kong chief
executive Donald Tsang,
right, affirmed his govern-
ments continuing commit-
ment to market freedom at a
Cato seminar. Tsangs aide
and Catos Ed Crane and
Ian Vsquez listen.
Liberalism and the left
was the topic of informal
discussion by Mario Vargas
Llosa, Andrei Illarionov,
Ian Vsquez and David
Boaz after a conference on
the future of Latin America
cosponsored by the Inter-
national Foundation for
Liberty and the Atlas
Economic Research
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explained why reform must include a tempo-rary worker program and a hard-earned
path to legalization for undocumentedworkers already in the United States.
Today the country is hearing anotherround of calls for more regulation andsubsidy of health care. Interestingly,
those proposals have come from a wide spec-trum of sourcesfrom think tanks andpoliticians associated with the right to theusual suspects on the left.
But the cracks in the supposed desirabili-ty of socialized health care have begun towiden. In April Cato published A SeismicShift: How Canadas Supreme CourtSparked a Patients Rights Revolution, by
Jacques Chaoulli, a physician and senior fel-low at the Montreal Economic Institute.In that study, Chaoulli recounts how he
argued and won the case ofChaoulli v. Quebecbefore Canadas Supreme Court, in whichthe court struck down two laws that gave theprovinces government-run Medicare system
i l l
Slope to National Health Care. In that paper,Tanner criticizes mandatory health insur-
ance broadly and argues that adopting sucha program would lead to a slow and steadydownward spiral to socialized medicine.Many state legislators were among the poli-cymakers to whom Tanner spoke directly onthis issue.
Catos director of health policy studiesMichael Cannon was one of the most promi-nent voices pointing out that governmentintervention in health care increases costsand takes away individual choice. In a Mayop-ed in theBoston Herald,Cannon criticizeda proposal by congressional Republicansthat would have expanded the federal gov-ernments power over the states health
insurance regulations. Fortunately, in a vic-tory for federalism, the bill failed to pass inthe Senate.
Last month the
Cato Institute, alibertarian think-tank, said Mr.Bush had showndisdain and indif-ference for theU.S. constitutionby adopting anastonishinglybroad view ofpresidentialpowers.
Financial Times (LONDON),JUNE 28, 2006
Cato policy analyst Sallie
James recommended a
thorough overhaul of U.S.
agricultural policy to reduce
subsidies and allow market
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Real Problem, Wrong Solution, Tanner andsenior fellow Jagadeesh Gokhale argue that,
although the way out of poverty is throughsaving and asset accumulation, federallyfunded grants to children, generally knownas KidSave accounts, are the wrong way toaddress the problem.
C
ato published two important booksdealing with health care from a freemarket perspective during 2006. In
Medical School wrote in a review in theNew England Journal of Medicine that he tends to
disagree with Klings free market approachto health policy. Nevertheless, Relman wrote,I warmly recommend his books to generalreaders who want to understand what eco-nomics has to say about health care.
Satire is the order of the day in adjunctscholar David Hymans Medicare Meets
Mephistopheles. The book is written from the viewpoint of an underling demon whoenthusiastically reports to his boss, the devil,about the success of Medicare in promotingthe seven deadly sins.
Cato senior fellow Randal OToole saysin a January policy study, A Desire
Named Streetcar: How Federal Sub-sidies Encourage Wasteful Local TransitSystems, that, although federal subsidies totransit have doubled since 1990, ridershiphas increased only 10 percent. OToole pro-poses devolving funding entirely to state andlocal governments.
ll l h d d i h f
Arnold Klings
Crisis of Abundanceis one of themost important
books writtenon health care.
TYLERCOWEN,PROFESSOR OF ECONOMICS,
GEORGE MASON UNIVERSITY
Catos director of trade
policy studies Dan Griswold
spoke at a Freedom to
Trade rally and mediaevent in Hong Kong during
the December World Trade
Organizations ministerial
meeting. Griswold drew
coverage on CNN and the
BBC, among other venues.
The courageous Ayaan
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address. Al Gores filmAn Inconvenient Truthwas a box office hit. California passed a man-
datory limit on greenhouse gas emissions.Numerous members of Congress called for awindfall profits tax on oil companies. Catoscholars were quick to respond and explainwhy energy and environmental concernsshould not be used as pretexts for new mar-ket interventions.
Last winter the rise in petroleum prices onthe global spot market fueled calls for feder-al intervention to hold down gasoline andheating oil prices for consumers, calls whichconveniently forgot the disaster of similarintervention in the late 1970s.
Cato senior fellow Jerry Taylor and seniorfellow andRegulation editor Peter Van Doren
injected a dose of common sense into thedebate with their January Policy Analysis,Economic Amnesia: The Case against OilPrice Controls and Windfall Profit Taxes.They argue that, although based on thepremise that oil companies make excessiveprofits that should be channeled back to the
i h i
Catos director of health
and welfare studies Michael
Tannertold congressional
staffers how free market
reforms can make medical
care and health insurance
more affordable at a May 31
Cato Health Care University
session on Capitol Hill.
Cato senior fellow Jerry
Taylorsaid that gas prices
are set by the market and
not nefarious corporations
at Fact and Fiction about
Gasoline Prices, a Cato
Capitol Hill Briefing on
June 30.
In truth, gasoline prices
today are taking less of
a bite from our pocket-
books than has been the
norm since World War II,
Regulationeditor and Cato
senior fellow Peter Van
Doren wrote in an op-ed
coauthored with Jerry
Taylor that appeared in
Investorss Business Daily
in May.
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JAMES MADISONPolitical Observations, APRIL 20, 1795
Of all theenemies topublic libertywar is, perhaps,the most tobe dreaded.
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hat are the best defense and foreign policiesfor the United States? Should we, as GeorgeWashington advised in his Farewell Address, stayclear of military alliances? Is the best course to
pursue a policy of peace, based on respect for other nations,
A D V A N C I N G
T H E C A U S E
O F P E A C E
W
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probable cost in blood and treasure if westay. In conclusion, Carpenter recommends:
Above all, U.S. policymakers need to ab-sorb the larger lesson of the Iraq debacle.Launching an elective war in pursuit of anation-building chimera was an act of folly.It is a folly they should vow never to repeatin any other country.
Most Americans now recognize the in-tractability of the war in Iraq. Polls showthat an increasing number of Americanshave come to believe that the decision toinvade Iraq was wrong. In an August op-edin the San Francisco Chronicle, Carpentercalled for a timetable of months, not yearsfor withdrawing from Iraq. His sober analy-sis of the sectarian violence in Iraq led him
to conclude that the United States cannotkeep the peace there at anything resemblinga reasonable cost in American blood andtreasure.
At a Policy Forum in November, TheU.S. Military and Counterinsurgency:What We Have Learned from Iraq and
f h i h i h bl di
C
ato foreign policy scholars drove thedebate about the North Korean and
Iranian nuclear crises. In an op-ed pub-lished byFoxnews.com on April 14, Carpenterand policy analyst Justin Logan proposed agrand bargain: The United States shouldoffer Iran full normalization of relations,including a public promise not to attackit, restored diplomatic relations, and normal-ized economic relations. In return, Iranwould need to give up any prospect ofbuilding a nuclear arsenal. Iran would berequired to immediately open its existingnuclear program to unfettered internationalinspections.
There has also been talk that the UnitedStates should bomb Iran to eliminate
weapons sites. Logan demonstrated thatsuch a plan is likely to make a bad situationfar worse in a Policy Analysis, The BottomLine on Iran: Costs and Benefits ofPreventive War versus Deterrence. Loganargues that, despite Irans inflammatoryrhetoric, an understanding of Irans history
d i l h h i i
As early as
December 2001,Institute scholarswere writing edito-
rials urging theadministration
not to go to waragainst SaddamHussein; when it
did, Cato was oneof the first think
tanks to warn thatthe lack of postwar
planning would
doom the recon-struction effort.NEWREPUBLIC,
SEPTEMBER13, 2004
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can troops abroad is that, once the UnitedStates gets involved somewhere, it becomes
difficult for America to extract itself, evenafter the original mission has faded. Preblelooked at the U.S. relationship with Japan ina Policy Analysis, Two Normal Countries:Rethinking the U.S.-Japan StrategicRelationship. He calls for the United Statesto begin withdrawing troops from Japan.That would allow Japan to take a moreassertive role in its own regions securityrather than rely on the United States. Thetwo nations, Preble further wrote in the
National Interest, should craft a new alliancethat is not a patron-client relationshipbut instead one based on shared interests,mutual trust, and understanding.
Christopher Preble and Justin Loganrevealed that public-sector ineffective-ness does not end with domestic pro-
grams but extends to foreign nation build-ing. They penned the cover story for theNovember 2006 issue of the Foreign Service
l h i i
Ted Galen Carpenter,
left, Catos vice president
for defense and foreign
policy studies, and Cato
director of foreign policy
studies Chris Preble
explored possible policy
implications of Carpenters
bookAmericas Coming
War with Chinaat a Cato
Book Forum on January 25.
Cato policy analyst Justin
Logan, front, argued on
Capitol Hill against efforts
by the State Department
to create a standing nation-
building office He said that
interventions in failed states
tend to be too costly to
succeed.
Cato vice president for
international programsTom G. Palmerspeaks
on The Political Economy
of Freedom to faculty
and students at Suleimani
University in northern Iraq.
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GEORGE F. WILL
May 18, 2006
The Cato Institute is the foremost
upholder of the idea of liberty in thenation that is the foremost upholderof the idea of liberty.
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he preceding pages of thisAnnual ReportillustrateCatos work advancing liberty in the United Statesand around the world. The following pages providea closer look at the people who make it possible and
at the means employed to spread the ideals of freedom.
T H E C A TO
I N S T I T U T E
A T 3 0
T
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C
ato got its message out to those whohelp craft federal laws at 16 Capitol Hill
Briefings throughout the year. Altogether1,600 people attended Capitol Hill events,which were coordinated by Catos govern-ment affairs department. At one briefing,David Boaz told his audience about the lifeand legacy of Milton Friedman. At two others,
Jerry Taylor explained why high gas pricesdo not necessitate government interference,
and Christopher Preble and Justin Loganmade the case against nation building. Otherswho spoke at Cato events included Rep. JeffFlake (R-AZ); Donald Marron, acting director,Congressional Budget Office; Rep. Paul Ryan(R-WI); and Bradley A. Smith, former FederalElections Commission chairman.
Cato also presented John Stossels ABCNews specials in three standing-room-onlyCapitol Hill events, bringing his unique liber-tarian perspective to Hill staffers. In latespring, Cato Health Care University featuredCato scholars discussing a free marketrationale for lessening government involve-
d i h i
Cato University
@Capitol Hilloffered veryconcrete policyapplication, in
addition to agood foundation
in principles.CHRIS BARKLEY
SENATE SUBCOMMITTEEON FEDERAL FINANCIAL
MANAGEMENT
Foreign aid has per-
mitted the Ugandan
government to remainunaccountable to
citizens, journalist
Andrew Mwenda
told a Cato Policy
Forum in October.
At a Cato Capitol
Hill Briefing, a crowd
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John Stossel; Columbia University econo-mist Jagdish Bhagwati; Instapundit editor
and University of Tennessee professor GlennReynolds; U.S. News & World Report colum-nist Michael Barone; Sens. John Cornyn(R-TX) and Kay Bailey Hutchison (R-TX);and Bobby Harrell (R), speaker of the SouthCarolina House of Representatives.
Cato held seminars in five major U.S.
cities during 2006, providing localSponsors and guests an opportunity
to hear from prominent nationally knownfigures on key contemporary issues. In New
York City, Sen. Chuck Hagel (R-NE)addressed the question of why so few of hisfellow Republicans are committed to smallgovernment; he was joined by Bradley A.Smith, former chairman of the FederalElection Commission, who discussed thewar on free speech being waged by advo-cates of campaign finance reform. In Atlanta,
John Stossel of ABCs20/20 focused on thenegative myths perpetuated by journalists
d h i h b fi f f
One of Catos best friends
in the media is ABCs John
Stossel. In May Cato hosted
a Book Forum for his latest
book, Myths, Lies, and
Downright Stupidity: Get Out
the ShovelWhy Everything
You Know Is Wrong.
Syndicated columnist
Robert Novaktold the
audience at a Cato Book
Forum forBuck Wildthat
as bad as Republicanshave been for limited gov-
ernment, Democrats in
power will likely be worse.
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C
ato typically publishes 10 to 12 booksevery year covering a wide range of
policy issues. During 2006 subjects in-cluded privacy, health care, property rights,educational freedom, and electoral competi-tion, among others.
Americas Coming War with China:
A Collision Course over Taiwan byTed Galen Carpenter. A warning about
what the U.S. must do quickly to avoidbeing dragged into war.(Published by Palgrave Macmillan.)
How Progressives Rewrote the
Constitution by Richard A. Epstein.How the New Deal still shapes theSupreme Courts decisions afterseven decades.
Trapped: When Acting Ethically Is
against the Law by John Hasnas.Examines overcriminalization in anage of corporate scandals.
Writing for
the majority[in Gonzales v.Oregon], Justice
Kennedy unloadsa paean to statesrights worthy of
the folks at theCato Institute.
Wall Street Journal,JANUARY 18, 2006
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The Fallacy of Campaign Finance Reform byJohn Samples. This book uncovers numerous
fallacies behind proposals for campaignfinance reform. (Published by University of Chicago Press.)
Medicare Meets Mephistopheles by DavidHyman. Demonstrates the success of thisentitlement program in encouraging theseven deadly sins while undermining thriftand honesty.
Economic Freedom of the World: 2006
Annual Report, edited by James Gwartneyand Robert Lawson with William Easterly.The leading index of global economicfreedom. (Copublished with the Fraser Institute.)
Liberty & Learning: Milton Friedmans
Voucher Idea at Fifty, edited by RobertC. Enlow and Lenore T. Ealy. A collectionof expert essays evaluating progressof Friedmans innovative idea.
Buck Wild: How Republicans Broke
h k d h f
S
ince its first issue in 1977, Catos quar-terly magazine Regulation has expertly
scrutinized the effects of regulatorypolicies on our lives and livelihoods. In2006 Regulation authorseach a leadingnational expertexamined both hot-but-ton and emerging policy issues. Amongthem were Roger A. Pielke Jr. on the dangersof politicizing science; Cindy Williams onhow to attract and retain individuals in the
military; David Schoenbrod on how theEPAs political conduct has led to unneces-sary deaths and how the agency can reclaimits mission and soul; and Thomas Lamberton how government smoking bans, despitetheir popularity, are not justified.
Cato produces a number of policy bul-letins providing a concise overview ofa current policy topic, including Free
Trade Bulletin, Tax & Budget Bulletin, andEconomic Development Bulletin.
Published three times a year, Cato Journal
id i i h f l d i l
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C
atoAudio is a monthly audio magazinefeaturing speakers at recent Cato
events. Topics in 2006 included A U.S.Exit Strategy from the Middle East,Reducing Tensions in Korea, Terrorismand Liberty, Tax Cuts and Stimulating theEconomy, and Social Security Choice forWomen and Minorities.
Four times a year, Catos Letterfeatures an
important speech from a recent Catoevent for some 130,000 subscribers who
receive the newsletter at no cost.In 2006 Catos Letter featured speeches
by Roger Pilon, Catos vice president for legalaffairs; Tucker Carlson of MSNBC; syndicatedcolumnist George F. Will; and Frederick W.Smith, chairman and CEO of FedEx Corpora-tion and a member of Catos Board ofDirectors.
tions. Cato experts were frequent guests on ABC, CBS, NBC, CNN, PBS, CNBC, FOX
News, MSNBC, NPR, and other majorbroadcast outlets.
Catos homepage, Cato.org, had 19 per-cent more visitors this year than last.The site averaged more than 26,000 vis-
its per day, or a total for the year of 9,600,000visits. In November alone there were more
than 1,000,000 visits. All other Cato websites are accessible
from Cato.org, including Catos new blog,Cato@Liberty, which features rapid commen-tary on current events posted by Cato scholars.
Catos foreign-language websites sharplyincreased the visibility of libertarian ideasaround the world. In many instances, theonly access individuals speaking these lan-guages have to the classic ideals of the ruleof law and civil society is through the Catowebsites, which function as contemporarycommittees of correspondence to peace-fully promote freedom around the globe.
i h l di i i i
MAJOR TELEVISIONAPPEARANCES
MAJOR RADIO
429
364
M E DI A C OV E RA GE F O R 2 00 6 I N CL UD E D
The Cato
Institute is oneof the mosteffective at
lobbying themedia onbehalf of
traditionalAmerican
principles ofindividual
liberty, limitedgovernment,free markets
and peace.GANNETT NEWS
SERVICE
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market economics.Cato.ru has established close ties with
prominent news and opinion media in Rus-sia. Our partners to date include such majorRussian media as Kommersant, Vedomosti,Gazeta.ru, Polit.ru, and Russia in Global
Politics, the five most widely read independ-ent publications in Russia.
Lampofliberty.org, Catos Arabic website,is running a syndication project that pub-
lished 165 libertarian-themed op-eds fromCato in Arabic newspapers starting in April2006 when the project got under way.
Newspapers and periodicals that carriedMisbahalhurriyya.org (Lamp of Liberty) arti-cles in 2006 includedAl Ghad (Jordan),Al Rai Al
Aam (Kuwait), Al Bawaba (Dubai), and AlHayat,which circulate throughout the region.
Another new feature in 2006 was CatoDaily Podcasts, featuring both Catoscholars and other friends of liberty.
Cato podcasts have become one of the mostpopular politically themed offerings on iTunes,
i h d l d i
Bottom left, Cato Unbound,
the institutes monthly online
magazine, has drawn critical
acclaim in its first year fromnational media. Top to bot-
tom right, Catos Spanish-
language website ElCato.org,
Russian-language website
Cato.ru, and Arabic-language
website
Misbahalhurriyya.org
(Lamp of Liberty) have
brought the literature of indi-
vidual liberty and civil societyto new audiences of millions.
Bottom right, Catos daily
weblog, Cato@Liberty,
provides the institutes
scholars with a venue to
respond immediately to
developments relating to
public policy.
C A T O S T A F F
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E X E C U T I V E
EDWARD H. CRANEPresident and CEO
DAVID BOAZExecutive Vice President
WILLIAMA. NISKANENChairman
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NEAL MCCLUSKEY
Policy Analyst
ADAM SCHAEFFERPolicy Analyst
C E N T E R F O R
G L O B A L L I B E R T Y
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EVANS PIERREDirector of Broadcasting
ANASTASIA UGLOVA
Web Content Manager/Podcast Producer
C O N F E R E N C E
LINDA HERTZOGConference Director
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ASHLEY MARCHDirector of Foundation Relations
YANAVINNIKOVDevelopment Manager
BEN WYCHEResearch Assistant
F I S C A L P O L I C Y
S T U D I E S
CHRIS EDWARDSDirector of Tax Policy Studies
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A F F A I R S
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N A T U R A L
R E S O U R C E
S T U D I E S
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J. MICHAELS
Senior Fellow in Environmental Studies
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Staff WriterPAT BULLOCKProduction Designer
GABRIELA CALDERNEditor, ElCato.org
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FADI HADDADINEditor, Misbahalhurriyya.org(Lamp of Liberty)
GENE HEALYSenior Editor
ELIZABETH KAPLANSenior Copyeditor
JASON KUZNICKIResearch Assistant
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TOM G. PALMERVice President for InternationalPrograms and Director ofCato University
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SCOTT G O
There is no institution that,person for person, dollarfor dollar, idea for idea, hasbeen even close to the Cato
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F E L L O W S
F. A. HAYEK (18991992)Distinguished Senior Fellow
JAMES M. BUCHANANDistinguished Senior Fellow
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EARL C. RAVENALDistinguished Senior Fellowin Foreign Policy Studies
RANDY E. BARNETTSenior Fellow
LAWRENCE GASMANSenior Fellow inTelecommunications
LEON T. HADARResearch Fellow in ForeignPolicy Studies
RONALD HAMOWYFellow in Social Thought
S H H
JIM POWELLSenior Fellow
RONALD D. ROTUNDASenior Fellow inConstitutional Studies
WILLIAM RUGERResearch Fellow in ForeignPolicy Studies
DAVID SCHOENBRODSenior Fellow
TELLERMencken Research Fellow
CATHYYOUNGResearch Associate
A D J U N C T S C H O L A R S
TERRY L. ANDERSONProperty and EnvironmentResearch Center
DOMINICK T. ARMENTANOUniversity of Hartford
ROBERT CORN-REVEREPartner,Davis Wright Tremaine
TYLERCOWENGeorge Mason University
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CLYDE WAYNE CREWSJR.
Competitive Enterprise Institute
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KEVIN DOWDNottingham UniversityBusiness School
ALAN EBENSTEINSanta Barbara, California
BERT ELYEly and Company, Inc
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EDWARD L. HUDGINSThe Objectivist Center
DAVIDA. HYMANUniversity of IllinoisCollege of Law
DAVID ISENBERG
Washington, DC
KAY H. JONESZephyr Consulting
JERRY L. JORDANFederal Reserve Bank ofCleveland, retired
DANIEL B. KLEINGeorge Mason University
ARNOLD KLINGEconomist and Author
DEEPAK K. LALUniversity of California atLos Angeles
F E L L O W S A N DA D J U N C T S C H O L A R S
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THOMAS GALE MOORE Hoover Institution
MICHAEL NEWUniversity of Alabama
ELLEN FRANKEL PAULBowling Green State University
SAM PELTZMANUniversity of Chicago
DAVID G. POSTTemple University Law School
ALVIN RABUSHKA Hoover Institution
RICHARD W. RAHNNovecon Management
ROBERTO SALINAS-LENMexico Business Forum
PEDRO SCHWARTZUniversidad San Pablo CEU
GEORGEA. SELGINUniversity of Georgia
Cato is ahead ofeveryone else inwhat it does, andthere would be a bigloss without Cato.C i l
Secretary of Commerce Carlos
Gutierrez reiterated his call forCongress to pass an immigration
bill that protects borders while
recognizing the needs of a grow-
ing economy at a Cato Policy
Forum in August.
Cato adjunct
scholarDepakLal held that
minimal govern-
ment intervention
and free trade
are the best path
for growth and
healthy interna-
tional relations
F I N A N C E S
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F I N A N C E S
2 0 0 7 I N C O M E
Individuals....................................................................... $15,185,000
Foundations.......................................................................... 3,113,000
Corporations 571 000
A S S E T S A N D L I A B I L I T I E S
Cash and Equivalents.............................................. $17,217,000
Net Fixed Assets............................................................... 6,158,000
Other Assets 1 299 000
On April 1, 2006, the Cato Institute changed its financial reporting from the calen-dar year to the fiscal year starting April 1 and ending March 31.
The numbers below are for the fiscal year ending March 31, 2007, and are conse-quently unaudited. Total revenue for fiscal 2007 was $20.4 million with individualcontributions accounting for 74.3 percent. Expenses for fiscal 2007 have not beenfinalized as of the annual reports printing, but our estimates are about $19.4 million,
resulting in a surplus of approximately $1 million.Our balance sheet remains strong with net assets of $23.7 million. This, in itself, is an
understated value, in that our wholly owned headquarters on Massachusetts Avenuein Washington is carried on the books at depreciated cost as opposed to market value.
I N S T I T U T I O N A L S U P P O R T
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I N S T I T U T I O N A L S U P P O R T
F O U N D AT I O N S P O N S O R S *
ANONYMOUS - 3
A. GARYANDERSON FAMILYFOUNDATION
ACHELIS & BODMAN FOUNDATIONS
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The Cato Institute
Taking its name from a series
B O A R D O F D I R E C T O R S
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Taking its name from a seriesof anti-tyranny pamphletspublished in the early 18thcentury, the libertarianCato Institute is the foremostadvocate for small-governmentprinciples in American life.
EZRA KLEIN,AMERICANPROSPECT,SEPTEMBER12, 2006
K. TUCKERANDERSEN
Senior Consultant, Cumberland Associates LLC
FRANK BOND
Chairman, Bond Foundation Inc.
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President, Cato Institute
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Chairman, Tamko Roofing Products, Inc.
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Executive Vice President, Koch Industries
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Chairman, Americans for Limited Government
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Chairman & CEO, FedEx Corporation
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Managing Director, SusquehannaInternational Group, LLP
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