Archives: 11/2009

A Special Kind of Eminent Domain Abuse

In federal eminent domain cases, the “scope of the project” rule requires that in determining “just compensation” under the Fifth Amendment’s Takings Clause, any increase or decrease in property value caused by the federal project be disregarded.  As it turns out, the federal government had discussed the idea of expanding Everglades National Park for over 30 years, and also induced the local government to enact tougher zoning standards that decreased the value of the property that was to be taken for this purpose.  This type of behavior is a special kind of eminent domain abuse called “condemnation blight.”

The Everglades-related federal actions forced Gilbert Fornatora to watch the value of his South Florida property decline until the federal government finally condemned it – and paid him much lower compensation than he would otherwise have received.  Then, once condemnation proceedings began, the government manipulated the hearing schedule by front-loading ill-prepared owners who lacked counsel, thereby setting a low valuation precedent that would then be applied to the later parties with representation, like Fornatora.  The Eleventh Circuit sided with the government, so Fornatora petitioned the Supreme Court to review the case.

Cato filed an amicus brief supporting this petition, arguing that property owners have virtually no “scope of the project” protection if they must prove that the government’s sole or primary purpose for pre-condemnation action was to depress property values for later eminent domain proceedings.  A more workable test, consistent with due process, is merely to require evidence of a nexus between the government’s actions and the depressed property value.  The Court should also hear this case to ensure that just compensation proceedings comport with the due process, equal protection, and general fairness standards the government is required to follow in a variety of other settings.

The Court will be deciding early in the new year whether to hear the case, which has the ungainly name of 480.00 Acres of Land v. United States.

Justice Grants and Federalism

USA Today reports that “the Justice Department gave more than $77 million in stimulus funds this year to 200 police agencies because of their locations rather than economic or crime-fighting needs, department records show.” Why? Because a 1994 congressional provision requires that every state gets a slice of the local law enforcement funding, regardless of need or circumstances.

The Justice Department has a merit-based ranking system, but in some cases it doesn’t matter thanks to Congress making sure that every plate gets some gravy:

In Houston, where increasing assaults nudged up violent crime in 2008, Police Chief Harold Hurtt says the city was “overlooked.” The agency requested money for 260 officers but got nothing despite a Justice Department score of 90.4. That was well above many of the agencies that qualified because they were the only applicants in their state, including Boise, which scored 58.5; Cheyenne, Wyo., 46.8; Honolulu, 81.3; and Omaha, 84.7.

As a Cato essay on fiscal federalism notes, irrational federal granting isn’t new:

A 1940 article in Congressional Quarterly lamented: ‘The grants-in-aid system in the United States has developed in a haphazard fashion. Particular services have been singled out for subsidy at the behest of pressure groups, and little attention has been given to national and state interests as a whole.’ A June 1981 report by the Advisory Commission on Intergovernmental Relations concluded, ‘Regarding national purpose, the record indicates that federal grant-in-aid programs have never reflected any consistent or coherent interpretation of national needs.’

The USA Today says that the National Sheriffs’ Association is upset because “the rule funded just 6.4% of sheriff applicants, compared with 16.7% of police agencies.” The U.S. Conference of Mayors, which represents both winner and loser cities, came up with a brilliant solution: “The way to solve this problem is…to increase the funding.”

The squabbling over the Justice grants illustrates the advantages of the federal government sticking to the limited powers that it was intended to wield. Local taxpayers should fund local law enforcement services. But in a day and age where Congress can play Santa Claus, this simple concept has become completely lost upon federal policymakers.

Monday Links

  • Michael D. Tanner on the Senate Sell-Outs: “At a time of 10.2 percent unemployment, they voted to make it more expensive to hire workers, especially low-wage workers. With the economy struggling, they voted for $485 billion in tax hikes. They voted to raise the payroll tax, limit your flexible spending account, and tax your health insurance plan. This is moderation?”

Pelosi Eyeing Global Tax on Financial Transactions

Imagine if the government got to pick your pocket every time you engaged in a financial transaction? That nightmare scenario is a distinct possibility now that senior Democrats have joined with European politicians and urged that such a tax be applied on a worldwide based. Reuters has the disturbing details:

Any tax imposed on financial transactions would have to take effect internationally to keep Wall Street jobs and related business from moving overseas, U.S. House of Representatives Speaker Nancy Pelosi said on Thursday.

“It would have to be an international rule, not just a U.S. rule,” Pelosi said at a news conference. “We couldn’t do it alone, we’d have to do it as an international initiative.”

Several House Democrats have proposed a Wall Street tax to pay for job-creating legislation they plan to pass in December. The tax, which could raise $150 billion per year, would tap into widespread public outrage at Wall Street in the wake of the financial crisis.

…The No. 4 Democrat in the House, Representative John Larson, said his proposal to impose a 0.25 percent tax on over-the-counter derivatives transactions would apply internationally. “Part of our proposal would include that it would be international,” Larson told Reuters after meeting with other lawmakers about the jobs package. Democratic Representative Peter DeFazio said his separate proposal, which would tax a wider array of trading activity, would cover all U.S. corporations and individuals no matter where their trades took place.

…Britain urged other governments earlier this month to consider a bank tax as a way to fund future bailouts, and France and Germany have also called for a bank tax. The International Monetary Fund is studying the idea.

This issue reveals the value of tax competition – but also its limitations. Pelosi and other collectivists realize that economic activity will migrate to friendlier jurisdictions if if they unilaterally impose this punitive tax. This externally-imposed discipline is why tax competition is a liberalizing force. But competition can be undermined if governments create a cartel, which is exactly what American and European statists would like to see.

Will a False Crisis Revive REAL ID?

I’ve written here before about how the National Governors Association is seeking to peddle state power over driver licensing and identification to the federal government in order to cement its role as a supplicant for states in Washington, D.C.

NGA is currently seeking to drum up a false, end-of-year driver license crisis to convince Congress to pass a new version of REAL ID called PASS ID, moving the national ID project forward.

The letter says that states must be “materially compliant” with the REAL ID Act by the end of the year or their citizens will not be able to use their driver’s licenses as identification to board commercial aircraft. This is technically true, in one sense, but it omits some important information.

The statutory deadline for REAL ID compliance was actually a year and a half ago, May of 2008. No state was in compliance then, and the Department of Homeland Security gave out deadline extensions wholesale—even to states that didn’t ask for them.

If Congress takes no action by the end of the year, the DHS will simply do this again. There is no end-of-year driver license crisis.

And it’s no harm, no foul—nobody who has studied identity-based security believes that the national ID law would cost-effectively protect the country. Ignoring or repealing REAL ID are the best paths forward.

The NGA, of course, believes that states will be better off with its preferred version of REAL ID. Some of the sharpest corners are taken off REAL ID in the new ”PASS ID“ version, but states are kidding themselves if they think PASS ID is good for their bottom lines.

As I wrote beforetwice!—PASS ID is likely to cost states as much or more than REAL ID. Its requirements are essentially the same, and its implementation deadline—one of the biggest cost drivers—is tighter in some respects than REAL ID.

Will Congress slip PASS ID into law by the end of the year the way REAL ID was slipped into law four-plus years ago? It’ll be interesting to see…

Colombia Trade Deal Enters Fourth Year of Limbo

Sunday marked the third anniversary of the signing of a free trade agreement between the United States and Colombia. It is an embarrassment to our great nation that this agreement with an important Latin American ally still sits on the shelf three years later, a victim of congressional trade politics.

As my Cato colleague Juan Carlos Hidalgo and I argued in a 2008 Free Trade Bulletin, and as I wrote in a more recent op-ed, the FTA with Colombia is a win-win for Americans. It fully opens the Colombian market and its 44 million pro-American consumers to our exports, while deepening our ties with one of our most dependable allies in the Western Hemisphere.

The AFL-CIO and other opponents of the agreement demand that Colombia further reduce violence against trade unionist before approval can be considered, and the president and Democratic congressional leaders have dutifully agreed. Never mind that the number of trade union members murdered in traditionally violent Colombia has declined dramatically under President Alvaro Uribe. Congress and the administration keep moving the goal posts, much to the frustration of the Colombian government.

Meanwhile, since the agreement was signed, U.S. companies have paid $2.3 billion in unnecessary duties, according to the “Colombia Tariff Ticker” sponsored by the Latin America Trade Coalition. On the foreign policy front, Colombia faces continued threats from the Marxist FARC guerrilla movement and its anti-American neighbor, President Hugo Chavez of Venezuela.

Refusing to enact the trade agreement with Colombia only reinforces suspicions in Latin America that the U.S. government is unreliable.

Chapman on Chicago Pols and Guns

Steve Chapman has another terrific column – this one about gun regulations and the tendency of politicians to exempt themselves from such regulations – for the public good, of course.  Here’s an excerpt:

Roland Burris, another Chicagoan, has endorsed a nationwide ban on handguns and, in 1993, organized Chicago’s first Gun Turn-in Day. But the following year, while running unsuccessfully for governor, he admitted he owned a handgun – “for protection,” he explained – and hadn’t seen fit to turn it in along with those other firearms. Lesser mortals apparently can protect themselves with forks and spoons.

The Supreme Court will soon be hearing an important case about Chicago’s firearm regulations and the right to keep and bear arms.  Cato just filed an amicus brief (pdf) in that case.

Also, persons interested in this subject should know that Cato associate policy analyst David Kopel has a new book just out.

For additional Cato work, go here.