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Chilling Kelo v. New London Decision Dashes Trust in Top Court

U.S. SUPREME COURT: ADMINISTRATIVE STATE IS KING

Government May Condemn Private Property to Transfer to Another Private Party

By Carol W. LaGrasse, July 2005

The United States Supreme Court placed the administrative state on an imperial pedestal with its eminent domain decision in Susette Kelo v. City of New London. The culmination of a transition toward administrative government that began to hold sway during the 1930’s, the June 23, 2005, decision delivered by Justice John Paul Stevens held that, as long as a government agency has a considered plan, the agency may condemn private property for the purpose of transferring it to another private party.

The middle class waterfront neighborhood known as Fort Trumbull that would be leveled to make way for more upscale development had not been declared “blighted,” as had been the situation in the epidemic of eminent domain that destroyed urban neighborhoods, mostly black, during the fifties and sixties. This case was about whether the government could use an economic development plan to condemn perfectly good houses and businesses to make way for private buildings that would bring in more tax revenue.

The key to the majority’s decision is their belief that the city’s conclusion that the area was “sufficiently distressed to justify a program of economic rejuvenation deserved deference.” The ruling states, “The city has carefully formulated a development plan that it believes will provide appreciable benefits to the community, including, but not limited to, new jobs and increased tax revenue.”

The requirement in the Fifth Amendment to the Constitution that eminent domain be for a public use was effectively put to rest with Justice Stevens’ holding that further expanded the eminent domain power previously endorsed in a ruling settling a dispute involving the Hawaii Housing Authority in 1984:

“This court long ago rejected any literal requirement that condemned property be put into use for the…public.” Rather, it has embraced the broader and more natural interpretation of public use as “public purpose.”

That Supreme Court had considered it important that the Housing Authority’s argument involved a development plan. Just a few years before the Kelo decision was a Supreme Court ruling that powerfully demonstrated the discretion given to government agencies that use planning to deprive individuals of their property rights. Justice Stevens issued the 6-3 majority ruling in 2002 allowing the Tahoe Regional Planning Agency, an interstate authority on the Nevada-California border, to reject a plea for compensation for a temporary Taking. The property owners in this dispute had been denied all productive use of their property for between 32 months and almost six years, depending on the definition of the government “action.” The ruling endorsed in great depth the validity of moratoria on development during the planning process, even faulting the prospect of development without planning:

“To the extent that communities are forced to abandon using moratoria, landowners will have incentives to develop their property quickly before a comprehensive plan can be enacted, thereby fostering inefficient and ill-conceived growth.”

Government with a plan was thus virtually unquestionable; property rights were swept aside. In other recent Supreme Court decisions, government was given the power to usurp additional constitutionally guaranteed freedoms. In 2003 the question before the Supreme Court in McConnell vs. Federal Election Commission was “soft money” contributions during political campaigns. In its decision, the Supreme Court cut deeply into the First Amendment right to freedom of political speech, by allowing severe federal regulation of political contributions.

In 2005, the Supreme Court issued another shocking ruling in addition to Kelo that buttressed the administrative state. Setting aside Tenth Amendment state’s rights by extending the Commerce Clause to a state law of purely local interest, the Supreme Court crushed California’s law legalizing medical marijuana. In this case, Gonzales v. Raich, the Supreme Court sided with the federal Food and Drug Administration against state legislation. Contrast this with the Kelo case, where the Supreme Court sided with local government to allow any “conceivable public purpose” for eminent domain. The common element was deference to the sovereign administrative state.

A ruling by the D.C. Circuit Court of Appeals in the case of U.S. Chamber of Commerce v. Securities and Exchange Commission (SEC) brings this trend home. The federal SEC had issued rules requiring that three-quarters of the directors on any mutual fund, as well as the chairman, be “independent,” meaning that they could not be employees of the parent company. According to two prominent legal authorities, Ronald A. Cass and Henry G. Manne, this rule did not stack up against real life experience. In a Wall Street Journal article on July 1, they decried the Supreme Court’s ruling upholding the SEC rules in the little-noticed decision.

“(A)ll of the evidence pointed the other way: funds with non-independent boards and/or chairs did better for their investors than did funds run by more independent boards and chairs. The SEC came up with no evidence to the contrary,” wrote Cass and Manne.

The failure of the SEC to demonstrate any reason for the rule had no significance to the court, even in the face of contrary evidence. “Even though there was nothing concrete to make the new rule sensible, the reviewing court said it was sufficient for the Commission to adopt the rule as a prophylactic measure with no showing other than ‘its own experience and intuition’ to justify its action,” the joint authors observed.

The administrative state is becoming the supreme authority. “Planners” supersede the property rights of citizens, resulting in family insecurity, destruction of neighborhoods, needless suffering, and financial loss. Under the guise of regulating interstate commerce, the federal administrative behemoth may trample a state measure designed to allow local medical treatment. An arbitrary federal rule trumps functional corporate governance. Our highest federal courts give their imprimatur to the administrative emperor, whether the throne is local, state, or federal government. Laws are now fiat, not by “due process,” or the rule of law. Written law, based in the Constitution, is dying. There is no security for the citizen, for, without constitutional law, there is no law, only raw power. Feelings, as of the moment, will protect certain lucky individuals, where traditional moral beliefs and sensibilities are at the moment persuasive. Bribes and relationships will be the key. But, as each new law bringing another sector of life under the control of government is passed and each new court ruling releases another brake on the slide toward totalitarianism under the administrative state, the moral beliefs that brought these United States their Declaration of Independence, Constitution, and Bill of Rights will lose sway, and the all-powerful State will make ever more of the decisions about life’s choices and opportunities, with no recourse.

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