On June 23, the Supreme Court delivered its decision in Kelo v. City of New London. The case presented an important constitutional issue — whether it’s permissible for units of government to use the power of eminent domain to seize private property where the land is to be used for “economic development” purposes. The Constitution allows government to take private property only where it is for a “public use” and providing that just compensation is paid.
Going back to 1954, the court has allowed property seizures where the reason is not for the construction of some item of public infrastructure such as a road or bridge, but for a private investment where it is alleged that there will be a “public benefit.” The plaintiff in Kelo sought to have the court draw a sharp line between the former category (legitimate) and the latter (illegitimate). Sadly, the court declined to do so; with its blessing, eminent domain abuse will continue.
Justice Stevens wrote the majority opinion in the 5-4 decision. His opinion was grounded upon two highly questionable ideas: first, that “economic development” is a crucial governmental function and second, that the judiciary should defer to the judgment of political officials as to the need for eminent domain. The trouble is that the first idea is false and the second an abdication of the court’s responsibility.
It is one of those clichés so beloved of power-hungry politicians that economic development needs to be fostered by government action. Stevens wrote, “Promoting economic development is a traditional and long accepted function of government.” No doubt he and the rest of the majority believe that, but is it true? Traditionally, the role of government included the preservation of order, the administration of justice, and the provision of a few “public goods” that are generally believed to be beyond the capacity of voluntary activity. Throughout most of our history, it was not regarded as a role of government to try to boost the level of economic activity.
Moreover, Stevens and his allies on the court implicitly assume that government-sponsored economic development works by creating benefits for “the general public.” As Justice Kennedy wrote in his concurring opinion, “A broad per se rule or a strong presumption of invalidity…would prohibit a large number of government takings that have the purpose and expected effect of conferring substantial benefits on the public….” Had the justices bothered to look past the standard political rhetoric, they would have discovered that these government-fostered “development” or “revitalization” projects often fail miserably.
Whether you look at so grandiose a project as Britain’s “Millenium Dome” or one as modest as Flint, Mich.’s Auto World theme park, you find that the history of governmental planning to boost the economy is littered with wrecks. Stevens writes naively about “carefully considered” development plans, but the truth is that the only kind of development plan that can be carefully considered is one where the investing entity has to bear the full costs and risk of his action. Where government risks taxpayer money or induces private investment by offering land on the cheap, it inevitably distorts the evaluation of costs and benefits. Maybe Stevens and friends think that American economic planners are better than those of the old Soviet Union, but they aren’t.
Even if some project should prove to be commercially profitable, there isn’t much reason to believe that “the public” will receive “substantial benefits.” If a luxury hotel is built on the New London redevelopment site, it will undoubtedly hire quite a few workers, but in all likelihood, very few of them would be former workers at the Navy’s Undersea Warfare Center, the closing of which in 1996 is largely responsible for the “economically depressed” nature of New London.
Suppose, further, that the hotel and shops the politicians envision end up paying taxes that add to the city’s revenues. Why assume that “the public” is going to benefit? Will citizens’ taxes be reduced? Will the added governmental expenditures those tax revenues make life markedly better for the inhabitants? Will, for example, New London’s streets get any better? Will the government schools educate any better? No. Most of the benefit of added tax revenue will go to those interest groups that are good at dipping into the public trough.
Commenting on Kelo in The Wall Street Journal, constitutional scholar Richard Epstein called the ruling “shameful” and that is exactly the word for this decision.
George C. Leef is executive director of the Pope Center for Higher Education Policy.