The Parliamentarian’s Decision, the White House, DACA, and EB-5

By David North on September 22, 2021

My suspicion is that the White House breathed a quiet sigh of relief when the Senate parliamentarian ruled that a massive alien legalization program could not be inserted into the pending $3.5 trillion reconciliation bill, as reported by my colleague Art Arthur.

In my eyes, that bill, the heart of the Biden administration’s plan for America, was in a whole lot of trouble even without the additional controversy of the proposed legalization program. Removing it will make the passage of the rest of the package a hair more likely.

Senate Parliamentarian Elizabeth MacDonough concluded her review with these words: “The policy changes of this proposal far outweigh the budgetary impact scored to it and it is not appropriate for inclusion in reconciliation.”

I'm pleased with her decision, but don't understand her dismissal of the budgetary impact of the amnesty. She should have said that this is a major policy matter that should not be handled this way, for the reasons she cited, and that it will create unreasonable increases in federal spending for generations to come, as another colleague, Jason Richwine, has written.

The administration’s odd position is that such an amnesty would create many more jobs; my sense is that it will turn a lot of illegal jobs into legal ones, but I don't see how that would actually create jobs.

Interestingly, her decision to exclude amnesty from the bill may also set a precedent for two other immigration proposals that might be tied to the reconciliation bill. Those pieces of legislation could make it through the Senate, but only if all 50 Democratic senators agree to them, a big if.

The potential riders are the proposals to (1) grant full green card status to those in the Deferred Action for Childhood Arrivals (DACA) program, created without legislative approval during the Obama administration; and (2) to revive the main part of the EB-5 (immigrant investor) program, the controversial part of the program that called for the pooling of aliens’ funds in real estate projects that were usually in the lushest parts of our big cities, and often subject to rip-offs of the aliens’ funds by citizen middlemen in, or associated with, regional centers. The Senate in June failed to extend the authorization of the pooled-funds operation.

DACA. Both the DACA program and EB-5 are much smaller in size, and less controversial, than the Biden administration’s “You all come” amnesty proposals. The last time I looked at DACA’s numbers a year ago, I found some 646,000 active beneficiaries. The Biden administration might increase those numbers a bit through administrative measures. DACA still carries “childhood” in its title, despite the fact that many of its older beneficiaries are rapidly approaching middle age.

It would seem that the parliamentarian’s argument for excluding the massive amnesty from the reconciliation bill applies to DACA as well, even though it is about one-twelfth the size of the larger program. In each case, the program would make a huge difference in the lives of those covered by the program and for the rest of us, and would have vast negative impacts on the budget.

EB-5. The budgetary impact of the EB-5 revival bill is minimal, but contrary to the budget impacts of the amnesty programs — which are hugely negative — the EB-5 impacts are mildly positive. Until recently, 10,000 visas a year were routinely issued, created by 4,000 or so investments at a minimum of $500,000 (briefly $900,000) each. This produced about $2 billion each year in investments, a very small fraction of the additional foreign investments that comes to the U.S. every year.

But the $2 billion did not affect the budget. What it did, in addition to creating some jobs in big city construction projects, was to provide 1 percent loans to big-city real estate developers in what is called mezzanine financing. This is attractive to the developers because without the alternative of EB-5 funding (which is sort of captive capital), they would be paying 10 percent or so on those unsecured loans.

This reduced costs to the EB-5-affiliated developers by some $180 million a year; their borrowing costs would be $20 million instead of $200 million. For more on mezzanine financing in the EB-5 program, see here.

Some (probably small) portion of the $180 million in excess profits would probably eventually find its way into the Treasury; a small portion because real estate, generally, has multiple tax breaks. But some small percentage of $180 million is peanuts compared to the $3.5 trillion size of the proposed reconciliation bill.

Congress has a long and honorable tradition of holding hearings and taking committee and floor votes on controversial issues, such as the revival of pooled-funds part of the EB-5 program; there is no need for it to be slipped in as a part of a reconciliation bill.