The Daily reported earlier this week that the feds are clamping down on their "cash for visa" green-card program – called EB-5—because some people are offended by the thought of America selling residency. The program gives wealthy foreigners who are willing to invest $500,000 to a million dollars a green card. And then, two years later, if they can prove that their investment created 10 jobs, citizenship.
Reports The Daily:
Critics slam the program as a "cash for visas" scheme, but an increasing number of developers have been calling it their saving grace in the wake of the financial crisis that caused construction financing to dry up.
"We're using EB-5 because it's the only money available," said Henry Liebman. He has used the program to build more than 30 projects in an industrial section of south Seattle, including a two-building retail and office development called Home Plate Center, and is now looking to use it as source of funding for projects in four other states.
The niche program, created in 1990 and today open to 10,000 investors and their family members per year, has exploded since the financial crash left America pockmarked with stalled construction sites.
Nationwide, U.S. Citizenship and Immigration Services, which administers the program, has approved 219 development zones — rural areas or areas of supposedly high unemployment, where money can be raised through the EB-5 program at the discounted $500,000 per investor rate. That's up from just 11 zones in 2006. California has the most with 58; Florida is second with 20.
But the agency has been increasingly denying applications to create new development zones, officially called "regional centers," and issued a letter last week saying it was toughening its standards.
Now, there are many things wrong with this program but that it is "selling" green cards is not one of them, although the price tag that EB-5 charges might be irrationally steep. In fact, the "commodification" of green cards is the best way to bring some semblance of rationality to our otherwise loopy immigration rules and hence this program needs to enlarged, expanded and extended beyond just rich foreigners.
This idea was initially propounded many years ago by University of Chicago Nobel laureate, Gary Becker who recommended auctioning off green cards to individual immigrants, starting at $50,000, raising about $50 billion annually. Since then, many people have offered various iterations, including last year Federal Reserve of Dallas economist Pia Orrenius who suggested selling work visas to employers with complete transferability rights for $10,000 for a high-skill visa, $6,000 for a low-skill visa, and $2,000 for a seasonal visa. This would create a market for visas giving America some sense of just how attractive an economic destination it is at any given time. More importantly, since most immigrants would enter the country with a job, fears that they'd mooch off welfare would be greatly diminished.
But what is wrong with the EB-5 program? Plenty.
One: There is more than a hint of fatal conceit involved in immigration – immigration – authorities picking "development zones" worthy of investment. Seriously? These are folks who can't distinguish between innocuous foreigners who want to do nothing more than pump thousands of dollars into the economy visiting Mickey Mouse from the Mohammad Attas of the world who want to blow up the country. Yet they somehow know which areas and projects are good candidates for foreign investors.
Two: The Daily story notes that EB-5 has pumped massive amounts of money into the construction industry. "It's just a way of being able to get free money, basically, to build all sorts of projects," says Victor Essam, vice president of acquisition for Global Premier America. Global Premier is raising $5 million through the program to build medical offices in Orange, Calif.
But do we really need foreigners to hand out "free money" and re-inflate the housing bubble? Isn't the Federal Reserve doing a good enough job all by itself? Indeed, if we want to use foreign cash to help the housing industry, the better way to go about it would be to implement the scheme recommended by Vivek Wadhwa, an Indian expat and Silicon Valley-entrepreneur-turned-Ivy-researcher. Wadhwa suggests that America should hand green cards on an expedited basis to any foreigner willing to make a down payment toward a $250,000 house. Wadhwa's calculations show that at least 20 percent of the qualified immigrants will take the offer, instantly taking 100,000 homes off the market, and injecting $25 billion into the economy. The beauty of this idea is that foreigners who are going to live in a house will at least ensure that we are not mindlessly adding real estate stock that has no takers.
Three: The program makes even more cash available to Uncle Sam to politicize economic decision-making. Indeed, the projects funded by the program include not just ski resorts, gas stations and office towers but also – wait for it—wind farms! Evidently it isn't enough that American taxpayers have to be forced to fund Solyndra; now we want to enlist foreigners, many of who are trying to come here to escape government corruption and waste at home, too.
I could go on, but you get the point.