Previously we reported on the U.S. Chamber of Commerce's proposed approach to the scandal-plagued EB-5 program, which would, among other things, break the 10,000-a-year visa ceiling with a one-year quadrupling of admissions, calling for 30,000 extra aliens in the year.
The EB-5 program simply should be terminated; it is a haven for creative crooks, brings the U.S. only a relatively tiny bit of extra investment each year, investments which have routinely gone into padding the profits of big city real estate developers, and adding 10,000 passive investors and their kids to our population. Only a sliver of these new funds get to depressed areas.
But given the EB-5 middlemen's remarkable ties to Senate Minority Leader Chuck Schumer (D- N.Y.) , to the Kushner family, and to other well-placed pols, it is unlikely that the program will be terminated by Congress. So here is a suggested compromise regarding EB-5 which:
- provides the big city developers with the $2 billion a year that they have been getting in new low-interest loans;
- does not impinge on the 25-year-old ceiling of 10,000 visas a year;
- creates a system for closing the current backlog in about five years; and
- chips in perhaps $100-200 million a year to help with border-control costs.
Before expanding on these notions, it is useful to recall that the EB-5 (the fifth employment- based immigration category) program provides a family-sized set of visas (an average of two and half visas per investment) to aliens who sink $500,000 into government-identified, but not government-insured, developments. The funds in each of these is supposed to be at-risk, and each is supposed to provide ten full-time jobs, but these requirements have been so misinterpreted over the years that they mean little now.
These half-million-dollar investments are typically pooled in big city real estate developments in handsome areas of our cities; they produce what is known in the trade as "mezzanine loans" at 1 or 2 percent interest. (Mezzanine loans carry no collateral.) Some aliens never see their money again, and if they do, it is often many, many years later. In some of these losing situations, the aliens do not get green cards either.
So how do we keep the money flowing to the fat cats while getting rid of the backlog and without breaking the 10,000 ceiling?
My plan calls for dividing the 10,000 visa ceiling into two segments, 5,000 a year to diminish the backlogs (more on that below) and 5,000 a year for new investments. Each of the new investments will be for a full million dollars, not half a million, and each will be expected to use up two and a half visas. The new 5,000 investors will, in the future, do for the private sector what the 10,000 old ones used to do.
As for the 30,000 visas now backlogged, that backlog will be frozen, and nothing new added to it; but each year 5,000 aliens will get the visas they have been waiting for. I think this would be finished in five, not six years, because of the following provision:
If an alien is in the current backlog and wants to get a visa right away, he or she can do so by making another $500,000 million investment in the familiar manner. There will also be an upfront fee paid to the feds of $100,000 per visa in these cases; if one or two thousand people in the backlog opt for this approach each year it would produce $100 million to $200 million to help meet the mounting costs at the southern border.
The proposal also calls for a no-backlog requirement; once the 10,000 visas are gone for the year, the application process is closed until the next year. If the demand for these visas is large enough to create a potential backlog, then the rates, particularly the government's fees, can be raised until the market clears.
It would be a good thing, but perhaps unlikely to happen, that some of the current EB-5 provisions were updated to make it easier to handle the widespread corruption. It also would be good public policy to try to get a major part of these moneys out of the prosperous areas of the big cities and off into depressed urban and rural areas, where they were originally intended to go. There will be substantial resistance to these two very sensible ideas.
What we have suggested above is a way to head off the Open-Borders-for-the-Rich camp by creating a way to preserve the existing 10,000-a-year ceiling for EB-5 visas.
The first order of business, after all, is to make sure that things do not get worse.