Monday, October 25, 2010
US Citizenship For Sale
Every day investors around the world choose to put their hard-earned cash into the U.S. Billions of dollars flow in the form of foreign direct investment, as when a group of Brazilians bought Burger King, and foreigners purchase hundreds of billions of U.S. stocks and bonds, as measured by the Treasury's TIC data.
But a small number of investors show up on these shores drawn by something more valuable than financial returns: the prospect of U.S. citizenship.
You can't simply purchase an American passport (at least not legally). But since 1990, foreigners with as little as $500,000 in cash have been able to invest their way to a quick green card, putting them on the path to citizenship. Quick, somebody call Lou Dobbs!
Yes, the U.S. government lets people with cash to jump the line for a green card through the EB-5 program.
Starting in 1990, 10,000 visas have been set aside each year for the EB-category. The program was designed to encourage foreign investors to create jobs by starting a new business or preserve jobs by investing in money-losing businesses. If they agree to invest $1 million, foreigners can get a visa, apply for green cards, and become conditional permanent residents.
After two years, provided they've made good on their promise to invest, created 10 jobs (family members don't count), and the business is still an ongoing concern, they can apply to have those conditions removed. And after five years with a green card, holders can apply for citizenship.
Of the 10,000 visas in the program, 3,000 are set aside for "targeted employment areas" -- rural areas, or places with an unemployment rate that's 150 percent or more of the national average. For these visas, the threshold is lowered to $500,000.
Another 3,000 visas are set aside for investments in "regional centers" -- areas or industries designated by states. (A full list of regional centers can be seen here.)
Some organizations, professional service firms, and companies promote the program as a whole, or market investment in particular projects as appropriate for EB5 aspirants, such as a ski resort in Vermont. Other entrepreneurs having a tough time raising cash are now seeking to use the program to tap into new sources of financing. The Wall Street Journal reported last week that developer Bruce Ratner is seeking to use the program to help raise funds in China for his massive, controversial Atlantic Yards development in Brooklyn, N.Y.
Now, many may view the prospect of giving favorable immigration treatment to investors as problematic. The phrase "bring us your moneyed investors yearning to breathe free" doesn't have the same poetic heft as the inscription about the tired, poor, huddled masses etched on the Statue of Liberty. From its inception, the price of citizenship has traditionally been a willingness to leave behind the old world and work hard -- not write a check to support the construction of a bunch of ski-in, ski-out condos.
But I happen to think this is a very good thing. If it were fully utilized, the EB5 program would bring at least $7 billion annually and create or preserve 100,000 jobs per year. It's not much in the grand scheme of things -- there are currently about 130 million Americans with payroll jobs. But given the trauma inflicted upon American workers in the past three years, every little bit helps. And this is something the U.S. should be doing more of.
One cure for the vast overhang of excess housing would be to offer expedited citizenship to people willing to purchase vacant homes in places in like Las Vegas or Detroit.
In fact, it's surprising that more people don't take the U.S. up on its offer. Consider the changing shape of the world's economic geography: We've got American companies with lots of cash that are reluctant to invest at home because they see better prospects abroad. Thanks to that same dynamic, millionaires are being minted by the millions in China, India, and Brazil, and elsewhere.
Unfortunately, the EB5 program has never come close to maxing out. According to U.S. Citizenship and Immigration Services, in 2009, just 1,028 people applied for EB5 status and 966 were approved, up from 776 applications and 485 approvals in fiscal 2007. Applications and approvals rose sharply in fiscal 2010, to 1,727 and 1,271, respectively.
I'm guessing the lackluster numbers can be chalked up to a failure of marketing rather than the limited attraction of the underlying product, or of its expense. In fact, the investment-related green card should probably be priced higher. Here's a thought experiment: Ask how much you'd have to be paid to give up American citizenship for you and your family and assume that of a randomly chosen foreign country. Something tells me the bidding would start at a point much higher than $500,000.