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A principled interpretation of the just compensation clause, based on original meaning, would find a taking whenever an action or series of actions by the government measurably diminishes the value of an individual's or institution's legally-protected property interest. Government invocation of the “police power" would not excuse the payment of compensation. Government actions aimed at curtailing uses of property that harm third parties would not, however, constitute takings; the harmful uses being curtailed would not qualify as legally-protected property rights. Furthermore, government actions that only very indirectly and tangentially affect property rights may perhaps be too attenuated or insufficiently material to rise to the level of takings. Appropriate compensation would include payment for harm already incurred (based on a reasonable measure of market value) plus payment for future harm attributable to a taking. In lieu of paying future compensation, the government would have the option to rescind an offending law and thereby avoid future harm. Explicit monetary compensation need not be paid when a government action that interferes in property rights bestows benefits upon an aggrieved property owner that more than outweigh the harm to his property (implicit in-kind compensation). Finally, takings that merely benefit a private faction without providing benefits to the general public would not be authorized.
B. The Contract Clause
The contract clause prohibits the states from passing any law impairing the obligation of contracts; it does not apply to federal government action. There is good reason to assume that the framers meant this clause to serve as an essential protection against state retrospective encroachments on contractual obligations. Consistent with this interpretation, the Supreme Court during the 19th century struck down a wide variety of state-created contractual impairments. The Court also crafted an implied “police power" limitation to the contract clause, reasoning that there are certain state police or regulatory powers that cannot be contracted away.
The Court has virtually read the clause out of the Constitution in 20th century holdings, giving the states wide latitude to impair contracts on “public policy" grounds. Recent decisions indicate the clause is still alive, however; various commentators have proposed alternative methods to give the clause "more bite." The Supreme Court currently employs an ad hoc "balancing” approach in deciding whether an impairment is
justifiable -- an approach that ignores the Constitution's failure to limit the contract clause's application to “unreasonable” impairments.
A preferable approach would strike down state laws having the direct and primary effect of placing certain parties in a preferred contractual position by materially diminishing, lessening, or otherwise materially altering the legally binding effect of preexisting public or private contracts. This approach recognizes that the framers' primary concern was the abuse of factions, which had generated state laws (such as debtor relief statutes) that used contractual impairments to redistribute income.
C. Other Constitutional Provisions that Protect Economic
Five other constitutional provisions might be invoked in defense of economic liberties: the due process clause, the “negative commerce" clause, the uniformity clauses, the ex post facto clauses, and the equal protection clause.
The Fifth Amendment's due process clause prohibits the federal government from depriving an individual of “life, liberty, or property without due process of law.” On its face the clause affords procedural protection; it does not embody substantive rights. Little can be gleaned from the limited debate at the time of the clause's enactment. Nevertheless, the historical association of “due process” with “law of the land” strongly suggests that the framers viewed the clause as affording procedural, rather than substantive, protections. Accordingly, “substantive due process” is an oxymoron; "substantive" invocation of the due process clause in defense of economic liberties is inconsistent with a jurisprudence of original meaning.
The commerce clause authorizes Congress to regulate interstate commerce. Courts have applied this clause in a “negative fashion” to strike down state laws that "unduly burden” or “unduly discriminate against” interstate commerce. This provision is not, we believe, an especially good vehicle for vindicating economic liberties. The text of the clause does not prohibit the states from passing laws impinging on interstate commerce in the absence of congressional legislation; it merely grants Congress the authority to "regulate commerce.” In short, while case law precedents justify reliance on the “negative commerce” clause,
we believe that textual analysis counsels against ready invocation of that clause.
The uniformity clauses require that indirect taxes and bankruptcy laws enacted by Congress have a “uniform” impact. These statutes have a narrow focus. Thus, the uniformity provisions have at best a very limited role to play in advancing economic liberties.
The ex post facto clauses prohibit Congress and the states from passing “ex post facto laws." Those clauses do not appear to be directed at the defense of economic rights; they have long been viewed as applying to criminal, not civil, laws. Moreover, even assuming arguendo that those clauses originally were meant to apply to civil laws (a matter open to question), judicial precedent is well-entrenched that the clauses apply only to criminal laws.
The Fourteenth Amendment prohibits the states from denying any person the equal protection of the laws. The Supreme Court usually applies a deferential “rational basis” standard to uphold economic regulatory statutes that are challenged on equal protection grounds. Nevertheless, the Court occasionally strikes down “egregious” economic statutes whose discriminatory classifications have “no other purpose” than arbitrary favoritism for special interests. Equal protection should not be used expansively to invalidate “unreasonable” state economic regulatory laws; such an expansive application of “equal protection” has no firm constitutional basis.
The contract clause and the just compensation clause are the constitutional provisions specifically designed to vindicate economic liberties. Properly interpreted, they protect basic economic rights without inappropriately interfering with state and local authority.