Backlash

By Terry L. Anderson

The name “Kelo” became a household word last summer when the U.S. Supreme Court ruled that the city of New London, Connecticut, had the right to use its eminent domain powers to take property without consent but with compensation from one private owner, Susette Kelo, and sell it to another private owner who would contribute more to the tax base of the city.

Though the ruling was a legal setback for property rights advocates (such as the Institute for Justice, which argued the Kelo case in the Supreme Court), it sparked a nationwide movement to rein in eminent domain powers. From Ohio to Oregon, courts and legislatures have been asked to reduce their power to regulate private property. In Montana and six other states, ballot initiatives this fall will determine whether state and local governments can take property through regulation without compensating the owners.

Such initiatives are a response from citizens who think that their politicians have gone too far. Susette Kelo is an ordinary citizen who no doubt understands that governments may need the power of eminent domain to build roads or schools, but using that power to transfer property from one private owner to another went beyond government’s appropriate scope.

PERC scholars Robert Fleck and Andrew Hanssen (who can be contacted at perc@perc.org), argue that there is nothing new in this backlash. Throughout the nineteenth century, courts were asked to roll back the use of eminent domain powers. When the courts failed to do so, as in Kelo, citizens took the initiative to rein in their political representatives. Th e same holds in the twenty-first century.

A July 24 article in the High Country News, a publication “for people who care about the West,” carried a headline, “The wrong vote this November could CRIPPLE YOUR GOVERNMENT.” Ray Ring, a High Country News editor and author of the article, argues that takings initiatives are a libertarian conspiracy to “derail all future efforts” to regulate such things as cyanide process gold mining, urban sprawl, and Wal-Mart-type box stores.

Ring is correct that the takings initiative movement is broader than restricting the government’s ability to use eminent domain, but his and others’ opposition misses an important point about these initiatives. Initiatives such as Montana’s I-154 don’t necessarily “derail” land-use regulations, but they do shift the cost from the landowners to the taxpayers. Regulations can still be adopted; but if they are judged to reduce property values, the cost will be borne by the public taxpayers who are demanding the regulation in the name of public goods—rather than by private landowners. (By the way, regulations for health and safety are not affected by this initiative.)

For example, open-space regulations limiting where and how many houses can be built arguably generate a public benefit. If taxpayers have to pay for such regulatory takings—rather than forcing a private owner to pay for them—they may prefer fewer of them. But this is just the law of demand telling us that raising the price of regulation will reduce the demand for it—“derail” it, in Ring’s terms.

The extent to which takings have gone too far is revealed in a statement by Montana Governor Brian Schweitzer regarding the state’s effort to require access to private waterways. He was quoted in the New York Times (July 26) as saying, “If you want to buy a big ranch and you want to have a river and you want privacy, don’t buy in Montana. The rivers belong to the people of Montana.” Given such statements, you don’t have to be a libertarian to vote for regulatory takings initiatives.

The governor’s statement was aimed at wealthy out-of-state landowners, but Kelo made ordinary people realize that the government’s power to regulate or take private property, with or without compensation, doesn’t affect only the wealthy. Takings initiatives give voters a chance to say how far regulations can go without compensating landowners when their property values are reduced by land-use regulations.

In addition to being PERC’s executive director, TERRY L. ANDERSON is a bow hunter. In his “On Target” column he confronts issues surrounding free market environmentalism. Contact him at perc@perc.org.

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Terry Anderson is the William A. Dunn Distinguished Senior Fellow and former President of PERC as well as the John and Jean De Nault Senior Fellow at the Hoover Institution, Stanford University. He believes that market approaches can be both economically sound and environmentally sensitive. His research helped launch the idea of free market...
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