Bullshit. We are perfectly fine accepting all sorts of contact limitations in other areas. How many times have I heard on this site that people wish all states were like California in making non-competes unenforceable. And yet engineers still manage to get hired there.
I don't see why it wouldn't be possible to amend performance contract law to state that artists who actually wrote songs should always be allowed to perform them, even if someone else owns the "rights". Heck, even put in some reasonable royalty payment that the "rights owner" must be paid if the original performer performs her songs, but don't allow an outright ban on performing them.
The "rights owners" would still have full control over ability to use that music in other areas, and by other artists, commercials, political rallies, etc.