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- The cost of EB-5 visas is dwarfed by the billions of dollars invested, but there are economic and moral costs
- The EB-5 visa program allows businessmen who know the system to sell green cards — mostly to Chinese millionaires
- The schlubs trying to get foreign investment only on the strength of their business plan? They're left in the cold
Immigration bill enshrines program that lets foreigners get green cards in return for major investments.
The Senate immigration bill would create a permanent federal program allowing politically connected businessmen to sell visas to Chinese millionaires.
The "immigrant investor" visa program would become permanent under S 744, the "comprehensive immigration reform," championed by Senators Marco Rubio and Chuck Schumer.
Congress created the immigrant-investor EB-5 visa 20 years ago as a pilot program, and has renewed it consistently. Through this program, U.S. Citizenship and Immigration Services (USCIS) designates local governments or business coalitions as "regional centers" for foreign investment.
The regional centers then solicit foreigners to make major investments in projects - mostly real-estate development - within the region. In exchange for half a million in cash to the private project, the foreigner can get a green card for himself and his family. According to the Wall Street Journal, a vast majority of these visas go to Chinese investors.
In short, the program allows businessmen who know the system to sell green cards - mostly to Chinese millionaires. Unsurprisingly, you see these EB-5s wielded by politically minded U.S. businessmen.
Virginia gubernatorial candidate Terry McAuliffe made his fortune in the murky waters of political entrepreneurship. Beyond the millions the Clinton pal made at politically active failed telecom giant Global Crossing, McAuliffe invested big in GreenTech automotive, an electric car company.
GreenTech chose to build its cars in Mississippi over Virginia because Mississippi offered more subsidies, as McAuliffe tells it. One factor in snubbing his home state: Commonwealth officials were skeptical about GreenTech's plans to set up an immigrant-investor regional center.
GreenTech planned to solicit investments by going overseas and offering EB-5 visas to Chinese investors. State development official Liz Povar wrote in an email about GreenTech and its EB-5 request: "[I] still can't get my head around this being anything other than a visa-for-sale scheme with potential national security implications that we have no way to confirm or discount."
Wealthy Democratic donor and developer Bruce Ratner used eminent domain and government subsidies to transform a part of Brooklyn, building an NBA arena and a shopping mall. According to the Wall Street Journal, he built the arena with money raised through the immigrant-investor program - $228 million, according to a Businessweek report.
Developers obviously love this program. Andrew Kimball, developer of the Brooklyn Navy Yard, used the EB-5 to raise $60 million from China. "It was like a gift from the gods," he told the business newspaper Crain's New York.
But it was really a gift from the federal government. Businessmen like McAuliffe, Ratner, and Kimball see EB-5s as free tools to raise money. The program's champions in Washington - like the White House and sens. Pat Leahy, D-Vt. and Chuck Schumer, D-N.Y. - tout the program as free to taxpayers.
"There are economic and moral costs here."
And it's true that the costs of administering the program is dwarfed by the billions of dollars invested. But there are economic and moral costs here.
Economically, it's not clear that the U.S. wins from having the government steer money to politically connected projects like Ratner's remaking of Brooklyn, or McAuliffe's dream of electric cars. Absent the EB-5 program, at least some of that Chinese money would have gone to other projects that didn't have politicians' blessing, but did have more economic promise.
Those businessmen lucky enough - and connected enough - to have access to EB-5 visas find themselves competing over Chinese investors these days. The schlubs trying to attract foreign investment simply on the strength of their business plan? They're left in the cold.
But there's a civics problem here, too: Is it appropriate for the federal government to let private companies sell a scarce public good such as permanent residency? If a businessman wants money from a hesitant foreign investor, he could either pay a higher interest rate, or pay the investor with a green card. The higher interest comes out of the businessman's pocket. The green card doesn't.
Democrats justify the program as an employment program. The law requires the investors to demonstrate jobs created directly or indirectly. This is standard Democratic trickle-down industrial policy: give big businessmen corporate welfare in the hope the businessman creates jobs.
On the Republican side, the politics are also typical. The conservative base generally opposes loose immigration laws, while the party elite seeks to fulfill the demands of businessmen who pose as capitalists, but don't hesitate to demand government favors.
If Rubio and Schumer get their way, they ought to appropriate a few bucks to add a line to the plaque on the Statue of Liberty: "Give me your successful, your wealthy; Your blessed elites yearning to invest with Terry McAuliffe."
Timothy P. Carney, The Washington Examiner's senior political columnist, can be contacted at [email protected]. His column appears Sunday and Wednesday on washingtonexaminer.com.