1889 Institute doesn’t generally come down on the side of government “owing” money or material goods to anyone. We favor negative rights – those that say government shall not abridge a given freedom – over positive rights, like the “right” to free medical care. So what is different now? How could we possibly say that governments owe someone money? Well, in this instance, state and local governments throughout the country drew first blood. They forced businesses to close, reduce capacity, and require masks for entry. The results were obvious: thousands of businesses closed, many permanently, and millions of workers out of a job.
Remember those negative rights? Some of them are outright bans. The government cannot abridge your freedom to speak, practice your religion, or bear arms under any circumstances. Others are conditional: for instance, government actors cannot take your life or liberty without due process – a criminal or civil trial. A taking falls into the latter class. A government actor, or someone to whom the government lends its condemnation power (like a railroad or utility company), cannot take your property without paying you just compensation. The U.S. Constitution says so, the Oklahoma Constitution says so, and our basic sense of justice demands it.
There are times when the needs of the community inescapably conflict with the rights of an individual or a small group. When the needs of the many outweigh the needs of the few, basic justice demands that the many compensate the few for their trouble. This is where the idea of a taking comes in. Our laws demand that we provide just compensation when we force someone to give up their property for the greater good; we don’t leave them empty-handed. They might not be happy with the arrangement, but we’ve done our best as a society to make them whole.
The Oklahoma Constitution says, “Private property shall not be taken or damaged for public use without just compensation. Just compensation shall mean the value of the property taken, and in addition, any injury to any part of the property not taken.” The U.S. Constitution has a similar provision: “Nor shall private property be taken for public use, without just compensation.” This provision was the very first part of the federal Bill of Rights that courts said should also apply to states. At first blush, these provisions may not seem to have much relevance for the average Oklahoman, but they do. You see, “takings” refer to more than just the actual physical occupation of land or possession of movable property. There is also something known as a regulatory taking.
Finding a taking does not imply that government was wrong to take the property, nor does it imply culpability. Instead, it is a recognition that when the needs of the many outweigh the needs of the few, it is only just that the many bear the costs of their needs. The few should not be forced to shoulder the entire burden of the community’s needs. In fact, even if a taking were not only justified but the only moral choice, it would still be a taking. Consider the hypothetical situation of a flood endangering a town. The authorities realize that if they flood a nearby farm, they can save the town, potentially saving lives and certainly saving billions of dollars in property, but at the cost of a couple million dollars in property. Assuming the farm can be evacuated in time, almost any moral philosopher would conclude that flooding the farm to save the town is the right thing to do. Does that mean it’s not a taking? Not necessarily. Courts are divided on this issue, but the most just interpretation of the clause is that yes, even when government acted rightly, a conscious choice to destroy the value of a property is a taking.
So how do we determine if a government action is a regulatory taking? The U.S. Supreme Court has identified three factors to help answer that question: 1) the “economic impact” or how much the regulation will cost the property owner; 2) how much the regulation interferes with “investment-backed expectations,” asking whether the property owner relied on what the law used to look like when investing in property, and whether those expectations were frustrated; and 3) the “character of the governmental action.”
How do these questions apply to businesses that were unable to operate because of state or municipal laws that either ordered them to close, reduced their capacity below the point where they could make money, or otherwise made it impossible to remain solvent? In short: businesses that fit this description almost certainly have a claim for a taking.
The economic impact is clear: many businesses had to close their doors during the lockdowns. Some have reopened, but many never will. In either case, government regulations completely deprived some businesses of their livelihoods during the lockdowns. Others were able to remain open, but with very limited ability to cover their costs, much less turn a profit. These businesses were in survival mode, hoping that the lockdowns ended before their resources ran out.
The investment-backed expectations are also straightforward: people put their whole livelihoods into small businesses. They often leave good, safe jobs to become entrepreneurs. They invest money, but even more, they invest time. They take classes, train employees, buy equipment, and lease space. These are all investments made with the expectation that the city won’t force them to shut down for months on end.
Finally, we look at the character of the governmental action. Governments have had the power to order a quarantine for almost as long as there have been governments. Forcing sick people to stay away from healthy people is sometimes necessary, though with advances in medicine and hygiene, it is not needed as frequently as it once was. Lockdowns were not just quarantines, though. A quarantine orders sick people to stay locked away. The lockdowns indiscriminately ordered sick and healthy people alike to stay locked away. This is unprecedented. Not unusual or even extraordinary. Unprecedented. Never before have we let government tell healthy people they couldn’t work. The character of this government action certainly warrants just compensation.
How will the cities afford to pay all the businesses they crippled or destroyed? Perhaps that’s a question they should have asked when they were implementing the lockdown. But, as it happens, the state is seeing an influx of federal money, with a large portion being directed to municipalities. Perhaps they can afford justice after all.
Mike Davis is Research Fellow at 1889 Institute. He can be reached at [email protected].
The opinions expressed in this blog are those of the author, and do not necessarily reflect the official position of 1889 Institute.