The United States was ranked 17th in The Heritage Foundation’s latest Index of Economic Freedom.
That’s not what Americans should expect from a nation whose foundation is built upon freedom.
How do we get back on course? A new Heritage report, “Restoring America as the Land of the Free,” outlines the path.
>>> When can America reopen? The National Coronavirus Recovery Commission, a project of The Heritage Foundation, is gathering America’s top thinkers together to figure that out. Learn more here.
As we try to recover from the economic damage caused by the COVID-19 pandemic, going down the economic freedom path is critical.
One way to promote economic freedom is to better respect and protect property rights. While the U.S. did fairly well in the index when it comes to property rights, there’s a lot more that needs to be done.
Imagine owning a home and then hearing a knock at the door. When you open the door, there’s a government official who informs you that the local government will be seizing your house because a developer will make better economic use of the property.
To the government, your nice home doesn’t generate nearly the tax revenue that a shopping mall would generate.
That wouldn’t happen in the U.S., right?
Unfortunately, in 2005, the U.S. Supreme Court in its infamous Kelo v. City of New London case gave the green light to the government seizing private property from one private citizen (after paying “just compensation”) and transferring it to another private citizen for economic-development purposes.
Justice Sandra Day O’Connor nicely captured the implications of that decision: “The specter of condemnation hangs over all property. Nothing is to prevent the State from replacing any Motel 6 with a Ritz–Carlton, any home with a shopping mall, or any farm with a factory.”
Not all eminent domain abuse is so obvious, but that doesn’t make it any less severe. Local governments use blight or redevelopment laws as a pretext for seizing perfectly fine homes for economic development.
Through eminent domain abuse, homeowners have been displaced from communities, with little chance of ever getting back to their neighborhoods. That problem has been especially harmful to minority communities.
Businesses are forced to move sometimes with little chance of reopening. The government may provide “just compensation”—which is actually frequently “unjust”—and it certainly doesn’t cover the loss of business goodwill and relocation expenses.
Such seizures for businesses are bad in the best of times, and they will likely be fatal for many businesses in the immediate aftermath of the pandemic.
Sometimes it doesn’t take a physical seizure of property to gut property rights.
If the government regulates a property to such an extent that it loses almost all of its value, the property owner, under existing law, is unlikely to receive compensation for that loss.
Environmental laws such as the Clean Water Act can require permits for engaging in even ordinary activities such as farming. If the cost and burden of securing permits doesn’t discourage property owners from using their land for such activities, then vague regulations, arbitrary enforcement, and the threat of severe civil penalties and criminal punishment will do the trick.
As people seek new sources of income, they often look to ways to use their homes for business ventures. Those ventures can help people afford living in their homes, and they can provide a feasible means of owning a business.
States and local governments, though, sometimes make it difficult, if not impossible, for many home-based businesses. That includes government restrictions on short-term home rental operations, such as Airbnb and HomeAway, and home day care providers that may be the best and only option for many families, especially low-income families.
Property rights aren’t just focused on property ownership and use. It’s also about the acquisition of property. For individuals who want to own homes, land-use regulations might make homeownership a pipe dream.
In a Brookings Institution report, Harvard University economics professor Edward Glaeser lays out the problems with local zoning laws, explaining, “The current system restricts the freedom of the property owner, and also makes life harder for poorer Americans.”
In 2016, the Obama administration released a report on the costly impact of government barriers to housing development, stating:
The growing severity of undersupplied housing markets is jeopardizing housing affordability for working families, increasing income inequality by reducing less-skilled workers’ access to high-wage labor markets, and stifling [gross domestic product] growth by driving labor migration away from the most productive regions.
These examples provide just a sample of how property rights are undermined and hurt the nation’s economic well-being.
If we want to restore the United States as the land of the free, we must fight for property rights. As this country looks for solutions in a post-pandemic world, strengthening property rights is one vital place to look.
Private property, such as land, can allow Americans to secure loans to invest in new businesses or secure the future of existing businesses.
The use of private property without undue regulation can help provide new opportunities for people who have dreamed of being their own bosses. When individuals know that the law protects their property from confiscation or excessive regulation by the government or private parties, they can feel free to use it for investment or charitable purposes.
One really can’t even be said to have economic freedom if individuals can’t even own, use, and acquire private property. At its core, property rights are about enjoying the fruits of one’s labor and the pursuit of happiness.