August 04, 2005

Kelo’s Implications are Horrendous

Readers’ questions have prompted me to examine further the Supreme Court’s recent Kelo decision. Kelo is even worse than the calamity I declared it to be.

Kelo does not mean the end of private property per se, but it does mean the end of anyone’s secure possession, be the owner an individual or a corporation. To the extent that Americans still possess constitutional rights, Kelo could mean their end as well.

In 1981 General Motors used eminent domain against the Detroit ethnic suburb of Poletown. To make space for a GM assembly plant, 1,400 homes, 140 businesses, and several churches were destroyed. Today the exemplar of this practice is Wal-Mart.

What if Poletown had been a Chrysler plant that GM wanted to eliminate as a competitor? Under the Kelo ruling, if GM could show that its cars are more successful and produce higher taxable profits than Chrysler’s, and the eminent domain authority is not in Chrysler’s pocket, GM could prevail.

Today, Toyota, for example, could seek to condemn Ford’s Rouge River plant, which is known to be largely obsolete, in order to obtain the site for its own economic use. There appears to be nothing in Kelo to prevent this outcome.

Note some of the implications: According to economic theory, monopoly profits are higher than competitive profits. Kelo becomes a way to get around anti-trust laws and increase concentration in the name of public benefit.

Libertarians might be tempted to welcome the demise of anti-trust, as they see it as government intrusion, but not if they consider Kelo’s public choice aspects. Kelo opens up new channels of rent-seeking that enhance government power.

Consider, for example, Justice Souter’s New Hampshire property, which Kelo opponents gleefully note may be lost to the justice as a result of his vote. A hotel wants the property and can produce higher revenues for the community. But which hotel gets the property? Hilton? Hyatt? That decision rests with the enlightened insight of the eminent domain authority. As it is up to government to determine ownership, many considerations regardless of fact can determine the outcome.

Kelo could introduce new instability into share prices and financial markets as analysts factor into share prices the risks of firms being Keloed by competitors.

With Kelo, eminent domain could be used to condemn cigarette companies on the strength of the argument that the product produces more societal costs than are covered by tax revenues from tobacco products. Producers of alcohol products could find themselves Keloed as could gun manufacturers.

Indeed, as one astute reader noted, Kelo’s public benefit concept of eminent domain could be used to condemn privately owned firearms. The Second Amendment would still be there. We would have a right to firearms in the abstract just as we have a right to property in the abstract, but every specific right can be condemned.

Did the five justices who inflicted this calamity intend the implications of their ruling or are these implications the unintended consequences of a thoughtless decision?

While left and right engage in combat over Judge Roberts’ nomination to the Supreme Court and Roe v. Wade, more far-reaching issues go unattended. Left and right think control over court appointments is a life and death matter, but no matter who is appointed, the trend is always more power concentrated in government and more erosion of constitutional protections and civil liberties.

Is abortion really more important than habeas corpus, the attorney-client privilege, and the prohibitions against crime without intent, ex post facto laws, and self-incrimination?

It is astonishing that no bar association, no political party, no politician, no organized interest group, and no columnist or reporter ever asks a court nominee’s position on the legal principles, achieved over eight centuries of struggle, that make law a shield of the innocent instead of a weapon in the hands of government.

A country that so consistently neglects the basic foundations of liberty will not remain free.

Dr. Roberts, [email him] a former Associate Editor of the Wall Street Journal and a former Contributing Editor of National Review, was Assistant Secretary of the Treasury during the Reagan administration. He is the author of The Supply-Side Revolution and, with Lawrence M. Stratton, of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice. Click here for Peter Brimelow’s Forbes Magazine interview with Roberts about the recent epidemic of prosecutorial misconduct.