My name is Roger Pilon. I am vice president for legal affairs at the Cato Institute and the director of Cato’s Center for Constitutional Studies. I thank you, Mr. Chairman, for inviting me to testify today on the Supreme Court’s recent decision in the case of Kelo v. City of New London1 and to offer members of the committee my thoughts on H.R. 3405, the Strengthening the Ownership of Private Property Act of 2005 (STOPP).
Let me say at the start that I’m delighted, but not surprised, that both houses of Congress as well as state legislatures across the country have responded to the Supreme Court’s Kelo decision as they have. The public outcry against the decision has been loud and sustained—and rightly so.2 For the Court, in effect, removed what little remained of the “public use” limitation on government’s eminent domain power, its power to take private property for “public use” provided just compensation is paid to the owner. As a result, except where states limit their own power through state law, federal, state, and local governments are free today to take property from one private party and transfer title to another for virtually any reason they wish. Not surprisingly, it is usually the poor and powerless who are at greatest risk of losing their homes or businesses under this regime, while the well‐connected profit handsomely by obtaining title to property “on the cheap.” Exploiting those connections, they ask government officials to exercise their “despotic power,” as eminent domain was known in the 17th and 18th centuries,3 so that they might be spared from having to offer prices a willing seller might accept. It is a rank abuse of that power, and the Court’s complicity in the abuse makes it only worse.
People are turning to their legislatures, therefore, including to the United States Congress. Since the purpose of these hearings is twofold—to review the Kelo decision and to consider whether and how the STOPP Act addresses the problems raised by it—I will discuss both, at least in summary form.4 I should note here, however, that the problem rests rather more with the Court than with the political branches, although it starts with those branches. Had the Court done its job over the years, that is, these hearings would not be necessary. And let me be clear about that. This is not exactly a case of “judicial activism,” at least as that term is often used today, although it is “activism” of a kind. What we have here, rather, is political bodies exercising eminent domain and the courts failing to police their use of that power to ensure that it is exercised consistent with the limits imposed by the Fifth Amendment’s Takings Clause.
Thus, although the problem begins with the political branches, it is the failure of judicial review—the Court’s “restraint,” if you will, its deference to those branches—that brings us together here. That deference amounts to “activism” insofar as the term refers to judges failing to apply the law: whether that failure arises because they are too active or too passive, it comes to the same thing—they are not doing their job. It is not a little ironic, however, that people are turning to their legislatures to address this problem since the problem could be addressed quite simply by the political branches themselves, merely by restraining their own power in the first place. Thus, the STOPP Act might usefully be recast to legislatures, including this one, as follows: Stop abusing eminent domain in the first place; then we wouldn’t need to turn to the courts.
But as the Founders understood, it is in the nature of political power that it will inevitably be abused, which is why they provided for an independent judiciary—to check that power.5 The courts have failed in that, however, so H.R. 3405 has been proposed. To see whether it will address the problem, let me first review very briefly the principles of the matter, distinguishing the regulatory takings issue, which is not before the committee today, from eminent domain in its fuller sense, which is before us. I will then look even more briefly at how the Court has failed to police abuses in both of those areas.
II. The Court and Eminent Domain
There are two great powers that belong to government, the police power and the power of eminent domain. As the Declaration of Independence says, the reason we create government in the first instance is to secure our rights. That’s what the police power is all about: it’s what John Locke called the “Executive Power” that each of us enjoys in the state of nature,6 which we yield up to government to exercise on our behalf once we leave that state, enter civil society, and create government. Although the Executive Power, now the police power, is nowhere mentioned in the Constitution, implicit in the document’s structure and in the Tenth Amendment in particular is the idea that we left that power with the states, delegating to the federal government only certain enumerated powers—to tax, to borrow, to regulate interstate commerce, and so forth.
Like the police power, the eminent domain power too is nowhere found in the Constitution. It is said to be an “inherent” power of government, yet unlike the police power, no one enjoys the power of eminent domain in the state of nature and hence no one has it to yield up to government when government is created. Indeed, there could hardly be any such inherent power in the state of nature, for it is a power to take what belongs to another, albeit with just compensation, but against his will and hence in violation of his inherent right to be left alone in his life, liberty, and property.7 For that reason it was known as the “despotic power.” Thus, unlike the police power, the eminent domain power is inherently illegitimate.
Such legitimacy as the power enjoys stems, therefore, from two sources. First, although none of us had the eminent domain power to yield up to government, we agreed all the same, through the social contract we drafted in the original position (the Constitution), to let government exercise that power so that it might provide us with “public goods” at a reasonable cost. Yet even then the power was recognized only implicitly, in the Fifth Amendment, in connection with the explicit limits on its exercise that are set forth in the Takings Clause: “nor shall private property be taken for public use without just compensation.” By implication, government may take private property, but only for a public purpose, and only with just compensation. (Note too that eminent domain is merely an instrumental power, exercised in service of some other power—the power to build roads, forts, schools, and the like.) Second, as a practical matter, the power exists to enable public projects to go forward without being held hostage to holdouts seeking to exploit the situation by extracting far more than just compensation. When properly used, therefore, eminent domain protects the individual from being exploited for the public good, but it protects the public from being exploited as well.
Thus, the best that can be said for eminent domain is this: the power was ratified by those who were in the original position, the founding generation; and it is ”Pareto superior,” as economists say, which means that at least one party (the public) is made better off by its use while no one is made worse off—provided the owner does indeed receive just compensation. In virtue of its inherent illegitimacy, however, there must be a strong presumption against its use. Thus, if property can be acquired through voluntary means, our principles as a nation urge us to take that course. Only if necessary should governments resort to this despotic power.
Here, then, is how the police power and the power of eminent domain are related. First, when government acts to secure rights—when it stops someone from polluting on his neighbor or on the public, for example—it is acting under its police power, not its power of eminent domain, and the owner thus regulated is entitled to no compensation, whatever his financial losses, because the use prohibited or ”taken” was wrong to begin with. Since there is no right to pollute, we do not have to pay polluters not to pollute. Thus, the question is not whether value was taken by a regulation but whether a right was taken. Proper uses of the police power take no rights. To the contrary, they protect rights.
Second, when government acts not to secure rights but to provide the public with some good—wildlife habitat, for example, or a lovely view, or historic preservation—and in doing so prohibits or ”takes” some otherwise legitimate use, then it is acting, in part, under the eminent domain power and it does have to compensate the owner for any financial losses he may suffer. The principle here is quite simple: the public has to pay for the goods it wants, just like any private person would have to. Bad enough that the public can take what it wants by condemnation; at least it should pay rather than ask the owner to bear the full cost of its appetite. This is your classic regulatory takings case, of course: the government takes uses, thereby reducing the value of the property, sometimes drastically, but refuses to pay the owner for his losses because the title, reduced in value, remains with the owner. Such abuses today are rampant as governments at all levels try to provide the public with all manner of amenities, especially environmental amenities, ”off budget.” There is an old‐fashioned word for that practice: it is ”theft,” and no amount of rationalization about ”good reasons” will change the practice’s essential character. Even thieves, after all, have ”good reasons” for what they do.
Third, when government acts to provide the public with some good and that act results in financial loss to an owner but takes no right of the owner, no compensation is due because nothing the owner holds free and clear is taken. If the government closes a military base, for example, and neighboring property values decline as a result, no compensation is due those owners because the government’s action took nothing they owned. They own their property and all the uses that go with it that are consistent with their neighbors’ equal rights. They do not own the value in their property.
Finally, we come not to takings of illegitimate uses, requiring no compensation, nor to takings of legitimate uses, requiring compensation, nor to takings of mere value, requiring no compensation, but to takings in the full sense—takings of the entire estate. Here, compensation is not the issue—although just compensation often is an issue, for rarely does an owner receive the full value of his losses. Setting that problem aside, the main question here, as in the Kelo case, is whether the taking is for a “public use.” That the term does not enjoy a precise definition does not mean that it cannot be defined at all, of course, yet that is the implication, in effect, of Kelo. The Court stripped the term of its very purpose—to limit condemnations to those that are for a public use. It read that limit on power out of the Constitution, leaving every owner in America exposed.
In the amicus brief the Cato Institute filed in Kelo, written by the University of Chicago’s Richard Epstein, one of the nation’s preeminent experts on property rights law, we distinguished four categories of “public use” that can be found in the case law.8 The first is straightforward and unproblematic: when government condemns private property and takes title itself for some public use like a public road, park, military facility, or the like, we have a clear public use. The second category is ordinarily unobjectionable as well: this involves condemnations and transfers of title from one private party to another, whether undertaken by government or by the party under government authorization, when the subsequent use will be available to the public at large. Common carriers like railroads, utilities, and network industries, facing holdout and assembly problems, come to mind here. As Cato’s brief states: