If you have issues viewing or accessing this file contact us at NCJRS.gov. .. U.S. Department of JustIce Office of Legal Policy ]Report to the Attorney General Economic Liberties Protected by the Constitution March 16, 1988 ~ ~ 115093 U.S. Department of Justice National Institute of Justice This document has been reproduced exactly as received from the person or organization originating It. Points of view or opinions stated in this document are those of the authors and do not necessarily represent the official position or policies of the National Institute of Justice. Ponnission to reproduce this ~material has been granted by. PubI1C Domain/Office of Legal Poli_co±y________ _ to the National Criminal Justice Reference Service (NCJRS). Further reproduction outside of the NCJRS system requires permis­ sion of the ~ht owner. REPORT TO THE ATTORNEY GENERAL ON ECONOMIC LIBERTIES PROTECI'ED BY THE CONSTITUTION JAN 1:) Rec'd ACQUISITIONS Office of Legal Policy March 16, 1988 ®fftrr of tqP 1\ttotnPR Qf)puprnl Iht.sltingtnn; ]1. at. znssn In June, 1986, it was my pleasure to host the Attorney General's Conference on Economic Liberties at the Department of Justice in Washington, D.C. This conference provided an opportunity for a candid exchange of the very different views held by prominent legal scholars on the scope of constitutional j"rotections afforded to economic rights. The conference served as a catalyst for increased discussion of these issues both within the Department and outside it. The present study, "Economic Liberties Protected by the Constitution," is a further contribution to that discussion. It was prepared by the Justice Department's Office of Legal Policy, which functions as a policy development staff for the Department and undertakes comprehensive analyses of contemporary legal issues. The report examines both the original meaning of constitutional provisions.which address economic freedoms and current scholarly literature on the topic. This study does not purport to establish ultimate conclusions on the issues presented. It was written ~n recognition of the fact that there are no sasy answers to economic liberties questions, and that reasonable people can take several points of view on those questions. The study will generate considerable thought on a topic of great national importance, and will be of interest to anyone concerned about a provocative and informative examination of the issues. EDWIN MEESE III Attorney General Executive Summary Several provisions of the Constitution prohibit government en­ croachment on individual economic liberties. In recent years various scholars have advocated that the courts apply those provisions and strike down laws that restrict economic freedoms. This Report examines the original meaning and surveys the case law development of those constitutional provisions that have been invoked in defense of economic liberties, evaluates scholarly analyses of economic liberties issues, and proposes possible standards that might be applied in analyzing two important constitutional provisions that protect economic liberties: the just compensation clause and the contract clause. The analysis set forth herein is merely tentative. The standards developed in this Report reflect our best assessment of the economic liberty clauses' original meaning; we do not attempt to achieve "desirable public policy results" at any cost. Furthermore, we take no position on the desirability from a public policy standpoint of the results we derive. This Report should be read with the knowledge that principled interpretivists differ (and may well continue to differ) as to the scope of constitutional protection afforded individual economic liberties. Principled analysis of the Constitution's "economic liberties" provisions generates no easy answers. Further discussion and debate is necessary, however. The founders of the Constitution clearly were concerned with shielding individual economic liberties from governmental assault. They placed special emphasis on protecting property rights, which had been undermined by state special interest laws enacted immediately following the American Revolution. The founders' interest in promoting economic liberties is made manifest in a host of constitutional clauses. The two clauses that explicitly protect particular economic rights are the contract clause and the Fifth Amendment's just compensation clause. A. The Just Compensation Clause The Fifth Amendment's just compensation clause forbids the taking of private property for public use without just compensation. Read in a manner consistent with its original meaning, this clause appears to require that individuals be fully compensated for all diminutions in the value of their property rights caused by government action. The Supreme Court has interpreted the Fourteenth Amendment as making the just compensation clause applicable to the states. 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. Govern­ ment 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 in­ directly 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 Jaw 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. TJlis 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 redistrib­ ute income. C. Other Constitutional Provisions that Protect Economic Liberties 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 clau~e. The Fifth Amendment's due process clause prohibits the federal gov~rnment 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 C.1e limited debate at the time of the clause's enactment. Neverthe­ less, 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, "substan­ tive clue process" is an oxymoron; "substantive" invocation of the due process clause in defense of economic liberties is inconsistent with a juri~,prudence 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 dause does not prohibit the states from passing laws impinging on interstate commerce in the absence of