Property Rights Yield to Corporate Welfare, by Hans Bader
Americans can wave goodbye to constitutional property rights protections, after the U.S. Supreme Court ruled 5-to-4 that a Connecticut city could condemn the homes of its residents to give the land to a pharmaceutical manufacturer. The city claims the business will generate more tax revenue than the average citizens who currently own the property. What would we do without government elites to set our priorities straight?
In the June 23 decision in Kelo v. City of New London, the Court effectively erased the words “public use” from the Takings Clause, which allows the government to take private property only for that one purpose. As a result, more homeowners and small businesses will be deprived of their property, and taxpayers will be saddled with a corporate welfare bonanza.
Politically-connected businesses can now demand special favors from communities, threatening to leave or put a factory elsewhere if government officials don’t condemn property for their benefit. It’s not hard to imagine the domino effect that follows. Plants will be located in the community that offers a big business the most bribes. Faced with the threat of their properties being seized, small businesses and homeowners will lose the bargaining chip needed to obtain a fair price for their property from the big business interest. It’s hard to imagine this is the model of a just government our Founders envisioned.
But it’s not just bad law, it’s bad economics. Condemnation isn’t needed for a private project that really pays for itself, since the developer will be able to pay homeowners the market value of their property and still turn a profit without any government intervention. Condemnation is only needed for true public uses of property, like roads, because their straight-line geometry means that a single greedy homeowner who refuses to sell can sabotage the whole project. The same isn’t true for a commercial development, which can be sited wherever a developer finds willing sellers.
The Supreme Court attempted to justify its decision by claiming that the property seizures served a “public purpose,” since the city believed that the property would generate more jobs and tax revenue under new ownership. The problem with that reasoning is that the Fifth Amendment allows government to take private property for public “use”– not public purpose. Public use isn’t the same thing as a public purpose. Government isn’t really going to put condemned property like the Kelo’s to public use, but it can conjure up some sort of purpose to justify seizing someone’s house.
The government’s stated purpose could be ill-conceived or go awry. The Court itself admitted that transferring private property from one owner to another might not produce the anticipated benefits, like higher tax revenues. But it held that courts must defer to the government’s position that a seizure serves some public purpose unless the government’s position is obviously irrational, a standard the average homeowner will be hard pressed to prove. Moreover, this “public purpose” standard provides no protection not already given by other constitutional provisions. The due process and equal protection clauses already require any government action to have some minimal relation to a legitimate public purpose.
There was a time when Americans could expect better from the Supreme Court. In Calder v. Bull (1798), the high court declared that a “law that takes property from A and gives it to B” is “against all reason and justice” and is “not a rightful exercise of legislative authority.” Too bad Justices Stevens, Souter, Breyer, Kennedy and Ginsburg didn’t embrace that wisdom.