Disappearing Property Rights

As we approach Independence Day, I find it prudent to reflect on our nation’s historical founding and its relevance today, given the rocky economic times in which we live.  This issue is buttressed with the upcoming appointment of Judge Sonia Sotomayor to the Supreme Court and the debate over federalism, which was very much alive this past Tax Day, April 15, 2009.

 

What were the Tax Day Tea Parties about?  According to their somewhat official website, the Tea Parties “were a true grassroots protest of irresponsible fiscal policies and intrusive government.”  I would contend that government is never more intrusive than when it takes your private property.  Such actions have slowly become more permissible since our nation’s founding.  Let me tell you a story…

  

 

Our Founding as Background

 

It is important to note that before Thomas Jefferson penned the now-famous words of the Declaration of Independence on July 4, 1776, “We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain inalienable Rights, that among these are Life, Liberty and the pursuit of Happiness,” he was well-versed in 17th Century British scholar John Locke, who Jefferson called, “one of the three greatest men who ever lived.”  In 1689, Locke wrote in his book Two Treatises of Government, “The state of nature has a Law of Nature to govern it, which obliges everyone, and reason, which is that law, teaches all mankind who will but consult it, that being all equal and independent, no one ought to harm another in his life, health, liberty or possessions.”

 

These ideals were echoed in America’s founding before Jefferson wrote his piece; The Declaration of Colonial Rights, on October 14, 1774, identified “Life, Liberty, and Property” as inalienable rights in response to Britain’s Intolerable Acts.  Furthermore, founder George Mason wrote the Virginia Declaration of Rights in the weeks before American Independence was declared, which were ratified June 12, 1776, and stated, “That all men are by nature equally free and independent, and have certain inherent rights, of which, when they enter into a state of society, they cannot, by any compact, deprive or divest their posterity; namely, the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety.”

 

Property’s Effect on Markets

 

Though different, there is no apparent conflict between Property Rights and the Pursuit of Happiness.  Adam Smith, at the dawn of the Industrial Revolution, wrote his magnum opus, The Wealth of Nations, illustrating the benefits of free market capitalism.  In it, he said, “By pursuing his own self interest he frequently promotes that of society more effectually than when he really intends to promote it.  I have never known much good done by those who affected to trade for the public good.”  It is worth noting that the world’s most successful political and economic systems were both founded here, in our country, in the year 1776.

 

Dr. David Baron, author of the textbook Business and it Environment (of which I am now too familiar), links property to the free market, stating in the first sentence of the Tenth Chapter, “Markets and property rights are the centerpieces of the free enterprise system.  Markets allow people to exchange goods and services, and property rights allow them to gain from trade.  Markets also provide information by establishing prices that reflect the cost of society’s resources used to produce goods and services.”  He goes on from there to defend regulation during “market imperfections,” a fight I’ll perhaps save for another day.

 

Happiness was linked to both a right to privacy and private property in the 1883 Supreme Court case Butchers’ Union Co. v. Crescent City County, in which Justice Samuel Freeman Miller concurred, “Among these inalienable rights, as proclaimed in that great document, is the right of men to pursue their happiness, by which is meant the right to pursue any lawful business or vocation, in any manner not inconsistent with the equal rights of others, which may increase their prosperity or develop their faculties, so as to give to them their highest enjoyment.”

 

James Madison, author of the Fifth Amendment, believed these are not only natural rights, but legal rights guaranteed in the basic kind of social contract outlined by the Magna Carta; coincidentally, the “what’s-in-it-for-me” self interest rendered a natural order that is inherently good, as members of our society were free to embark on endeavors benefiting them and their family as they accumulated the property necessary to enjoy life, liberty, and the pursuit of happiness.

 

Assault on the Fifth Amendment

 

Although I intend to focus on the last two phrases of the Amendment, I will include the entire text, with emphasis added, to show what is at stake here:

“No person shall be held to answer for a capital, or otherwise infamous crime, unless on presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”

There it is again, that pesky Right to Property, in what is now known as “The Takings Clause.”  As the federal government continues to narrowly define private property and broadly define public use, the claim for “eminent domain” undermines the entire Amendment.

 

Others may argue whether “taking” is equivalent to “devaluing,” as the Supreme Court surprisingly did in its 1996 case Lucas v. South Carolina Coastal Council, in which wetlands regulation would not allow construction on private property.  The Court stated that “Deprivation of all economically beneficial use is, from the perspective of a property owner, deprivation of the property itself.”  I instead want to address eminent domain, what private property actually is, and where we go from here.

 

Eminent Domain

 

What is eminent domain?  Dutch jurist Hugo Grotius in 1625 defined dominium eminens, Latin for “supreme lordship,” stating, “The property of subjects is under the eminent domain of the state, so that the state or he who acts for it may use and even alienate and destroy such property, not only in the case of extreme necessity, in which even private persons have a right over the property of others, but for ends of public utility, to which ends those who founded civil society must be supposed to have intended that private ends should give way.  But it is to be added that when this is done the state is bound to make good the loss to those who lose their property.”

 

Such feudalist reckoning, upheld in British common law, was supposedly abolished at this nation’s founding, but has slowly reemerged through eminent domain, again threatening private property and our fundamentally American way of life.  This reckoning has even infected the High Courts.

 

For instance, today, if a private company is successful enough to produce goods used by the public largesse, it no longer is found to be private, as stated in the 1877 Supreme Court case Munn v. Illinois, in which the state of Illinois was regulating the prices charged by grain elevators, with the state declaring them “public warehouses.”  The court actually cited the British common law theory, stating that when “affected with a public interest, private property ceases to become juris privati only.”  The Court goes on to say, “Property does become clothed with a public interest when used in a manner to make it of public consequence, and affect the community at large.  When therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for common good.”  Strike One.

 

In 1934, in the Nebbia v. New York case, the Supreme Court broadened government’s authority to regulate industry to those enterprises not affecting the public largesse when they upheld the minimum price of milk sold in grocery stores for the benefit of farmers who were disproportionately affected by the Great Depression.  As it turned out, grocery store owner Leo Nebbia was found in violation of the price floor for selling two quarts of milk and loaf of bread for 18 cents, when the regulatory price of a quart of milk was 9 cents.  Justice McReynolds, one of the infamous Four Horsemen of the Supreme Court, dissented, saying, “This is not regulation, but management, control, dictation.”  It’s more than that, now; it’s law.  Strike Two.

 

Then in 2005, in the Kelo v. City of New London, the Supreme Court defended the outright taking of private land for public use, eminent domain on its face, by upholding the City of New London, Connecticut’s decision to condemn a blighted urban neighborhood in order to construct business buildings as part of the city’s comprehensive redevelopment plan.  The controversial 5-4 decision upheld similar rulings Berman v. Parker ( 1954) (taking for public purpose is ok) and Hawaii Housing Authority v. Midkiff (1984), (taking with just compensation is ok), both of which were determined 8-0.

 

Dissenting the Kelo decision, Justice Sandra Day O’Connor stated, “Any property may now be taken for the benefit of another private party, but the fallout from this decision will not be random.  The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms,” arguing that the decision eliminated ”any distinction between private and public use of property — and thereby effectively deletes the words ‘for public use’ from the Takings Clause of the Fifth Amendment.” 
 

Strike Three?  Almost.  On the first anniversary of the now historic Kelo case, President George W. Bush signed an executive order stating that the federal government must limit its use of taking private property for “public use” with “just compensation”, which is also stated in the Constitution, for the “purpose of benefiting the general public.” He limited this use by stating that it may not be used “for the purpose of advancing the economic interest of private parties to be given ownership or use of the property taken.”  This order only applies to the federal government, however, and although the Kelo case sent state and local governments scrambling to prohibit eminent domain to protect its citizens, states and municipalities still govern themselves in this regard, and some are still able to seize private property for public use, with blatant disregard for the Fifth Amendment, however vaguely defined.

 

What, for that matter, is personal property?  Is it just land?  Well, no.  Buildings?  Houses?  What about apartments?  Supplies?  Bank accounts?  Out of control, this idea can extend into the pockets of both management and labor.  Capping executive salaries has been implemented for enterprises accepting public funds, but a bill has recently been introduced to link performance to pay for entirely private businesses, and another was proposed by Representative Barney Frank to cap salaries of all employees of publicly-funded businesses.  This is the Brave New World in which we now live.

 

Where do we go now?

 

First and foremost, let me say that it honestly appears our current President is a good person.  He cares for his family, and I respect that.  I believe he has struck an even initial posture in foreign policy strategy, even though he has had some Chavez-induced hiccups along the way.  He has more political capital internationally than perhaps any President ever, and that has to stand for something.  Although I am ideologically juxtaposed with the guy, he doesn’t scare me as much as he used to.

 

I would be fibbing, though, if I said I wasn’t concerned about our public policy, namely, the federal government’s intrusion into the private sector.  I believe such intrusion has dangerous consequences.  Government’s intervention in the free market should be somewhat like curling, the Winter Olympics sport.  (Summarized here.  Need a more energetic reminder? here you go).  Government should direct the flow of the free market, but can’t put a hand on it to stop it, or push it if it stops.  That’s what we do, though, with endless taxes and incentives.  In the shifting of our mixed economy away from capitalism, President Obama is quickly becoming the Chief Executive of American Business, with taxpayers, as of this week, owning more than 70% of General Motors.

That’s not my point here, though.  I’ve questioned Obama constitutionally on this site before (see Audacity of Expansion and What’s Been Up), but I admit I did expect a former Constitutional law professor to seek a nominee to the Supreme Court with proper jurisprudence and the utmost respect for the U.S. Constitution.  Not so.  Sardonically, it appears Judge Sotomayor will have her ruling in the Ricci v. City of New Haven case, the decision to scrap “Equal Justice Under the Law” (see Fourteenth Amendment) for 18 apt, non-African American firefighters who passed the test (out of the 118 that took the test, 27 were black) overruled while being confirmed to be a Supreme Court Justice, possibly within the same month.  I guess that’s “Equal Empathy Under the Law.”

But where does she stand on property rights?  Judge Sotomayor, in her ruling on the Didden v. Village of Port Chester ruling (2006), allowed the Kelo-style condemnation of Didden’s property, on which he planned to build a CVS, so that the Village of Port Chester could sell it to a developer, who built a Walgreen’s in its place.  The 3-judge panel, in which Sotomayor concurred, cited judicial precedence in the Kelo case, stating, “We agree with the district court that the voluntary attempt to resolve appellants’ demands was neither an unconstitutional exaction in the form of extortion nor an equal protection violation.” 

On Tuesday, Radley Balko of Reason magazine called this “state-sanctioned extortion.”  Richard Epstein of Forbes magazine wrote, “American business should shudder in its boots if Judge Sotomayor takes this attitude to the Supreme Court. “  As a self-appointed member of this perfunctory 3-judge panel, I concur.  On behalf of founders’ intent, the free market, more than 300 million Americans, and everything they own, I oppose Judge Sotomayor’s appointment to the Supreme Court.  Perhaps I set my criteria too narrowly, but due to the negative effects of proliferating broad definitions discussed herein, I stand by my opposition.

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