Harnessing Private Capital For Job Creation: An Analysis Of The EB-5 Program
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U.S. Policy Metrics
www.uspolicymetrics.com
202-652-0037
Hamilton Place Strategies
www.hamiltonplacestrategies.com
202-822-1205
June 2015
Harnessing Private Capital For Job Creation:
An Analysis Of The EB-5 Program
Steve McMillin, USPM
Michael Solon, USPM
Matt McDonald, HPS
T he EB-5 Immigrant Inves-
tor program was created
in the Immigration Act of
central role in the program’s
implementation, facilitating
a majority of the total visas
1990 to provide an alloca- issued over the history of
This report was commissioned by tion of visas for immigrants the EB-5 program.
the EB-5 Investment Coalition. The investing in a job-creating
findings represent the views of Prior to 2009, the EB-5 pro-
commercial enterprise. The
the authors alone. gram used only a small
program was modified in fraction of the 10,000 visas
Findings: 1992 through the creation allocated annually to the
of the Regional Center
• From 2005-2013, the program. In recent years,
Program, which allows im-
EB-5 program generated however, rising demand for
a minimum of $5.2 billion migrant investors to pool foreign investment on the
in private investment. In capital in larger projects and part of U.S. businesses paired
2013 alone, the program to meet the job creation
brought in a minimum with growing demand for
requirements of the program
of $1.6 billion in private EB-5 visas has increased
through W-2 employees,
investment. program utilization dramat-
independent contractors, or ically. Chinese applicants
• Assuming all minimum other indirect means. have managed to reach their
requirements are met for
each investment, invest- per-country limit and peti-
The Regional Center pro-
ments through the EB-5 tions from all other countries
gram was created as a pi-
program in 2013 would continue to rise.
create 31,000 jobs. Other lot program and has been
analyses relying on In- extended six times, most This increased utilization has
put-Output (I-O) models recently in 2012, when it been accompanied by pro-
find even more jobs will was reauthorized by unan- gram changes and manage-
be created with this level imous consent in the U.S. ment issues that have drawn
of investment. the attention of the Depart-
Senate and a margin of 412
• Analyses using I-O mod- to 3 in the U.S. House of ment of Homeland Secu-
els of snapshots of EB-5 Representatives. Regional rity Inspector General, the
investments show that Center Program authority Government Accountabili-
investments throughout will expire on September 30, ty Office, and the relevant
the U.S. fund projects in oversight committees of
a diverse range of indus- 2015 unless Congress acts to
tries and create tens of extend it once again. Re- Congress. These reviews will
thousands of jobs. gional centers have played a no doubt provide Congresswith a number of options for portunity to become lawful percent.2
improving efficiency, trans- permanent residents. Alternatively, the EB-5 pro-
parency, and accountability The current structure of the gram allows immigrants to
in the context of reautho- program allows immigrants invest $500,000 in a “target-
rizing the Regional Center who invest capital in job-cre- ed employment area” (TEA),
authority. ating businesses and proj- which includes a rural area or
This paper seeks to address ects in the United States to a high unemployment area.
the threshold question be- receive conditional perma- Rural designation adheres to
fore Congress, the contin- nent resident status for two the Office of Management
uation of Regional Center years through the United and Budget definition of
authority and, by extension, States Citizenship and Im- regions outside of any city
the continuation of a robust migration Services’ (USCIS) or town with a population
EB-5 program, based on the “immigrant petition by alien of 20,000 or more. Further-
program’s record, design, entrepreneur” (I-526). If the more, the program classifies
and job-creating potential. investor has satisfied the TEAs as areas with unem-
requirements ployment of
The rest of this paper will: ...the EB-5 program was
of the EB-5 at least 150
• Provide background on Program, the introduced as a means percent of the
the EB-5 program conditions for stimulating econom- national aver-
• Detail the economic im- of residency ic activity and promot- age rate.3
pact of the program are removed ing job growth through Regardless
through a the infusion of private of whether
• Demonstrate that the “removal of capital... an immi-
EB-5 program is a suc- conditions” (I-
cessful investment policy grant invests
829) allowing
and, secondarily, an im- $1,000,000 or $500,000, each
them and their dependents
migration policy participant must prove that
to become lawful perma- their qualifying investment
• Highlight the efficiency nent residents of the United is personally owned, legally
of the program’s private States without further condi- obtained, and understood
capital investment tions. to carry both a risk of loss or
• Discuss potential reforms Investment Requirements - chance for gain.
to increase the program’s 10 U.S. Worker Jobs Through In addition to the preceding
economic impact Assumed Risk Greater than capital qualifications, the
$500K.
Program Background. EB-5 program adheres to its
Immigrants participating purpose of stimulating eco-
The EB-5 Immigrant Inves-
in the EB-5 program are nomic activity and promot-
tor program was initially
required to make a mini- ing job growth by requiring
created by Congress as part
mum capital investment of that investments create a
of the Immigration Act of
$1,000,000 dollars in new minimum of 10 full-time jobs
1990. Along with four alter-
U.S. enterprises.1 If a partici- for U.S. workers. Immigrants
native employment-based
pant chooses to invest in an may also satisfy this require-
(EB) visas, the EB-5 program
existing business—a com- ment if their qualifying in-
was introduced as a means
mercial enterprise estab- vestment saves a minimum
for stimulating economic
lished before November 29, of 10 jobs in a “troubled busi-
activity and promoting job
1990—the capital investment ness”.4 A troubled business
growth through the infusion
must increase the business’s is classified as an enterprise
of private capital, while also
net worth or the number of that has operated for at least
offering 10,000 eligible peo-
qualifying U.S. workers em- two years and incurred a
ple each fiscal year an op-
ployed in the business by 40 net loss of 20 percent (deter-
2mined on the basis of gen- applicants have to complete tional sources of financing
eral accounting principles) the USCIS “application for became scarce during the
during one of the two years regional center” (I-924) and start of the 2008 recession,
preceding the investment. undergo a thorough vetting alternative means of accru-
process. Regional centers ing capital such as the EB-5
Regional Centers Have
qualify based on a variety of program and creating re-
Helped Propel The EB-5 Pro-
factors such gional centers
gram Forward.
as their pro- were viewed
As an alternative to the posed geo-
Regional centers have as practical
original program, immigrants graphic scope,
been critical in financ- means for
have the option of initiat- their ability ing a wide array of local funding devel-
ing a qualifying investment to improve ventures for a diversity opment proj-
through the EB-5 Regional regional pro- of communities across ects.
Center Program. A region- ductivity and the country.
Examples of
al center essentially pools economic projects fi-
EB-5 investments with other growth, and a comprehen- nanced in whole or in part
domestic sources to finance sive economic plan that through this method include
commercial projects. There- demonstrates how the cen- the Hunters Point Naval
fore, rather than seeking out ter will create both indirect Shipyard in San Francisco;
an individual opportunity, and direct jobs. Upon ap- the Panorama Tower in Mi-
investors can go to regional proval, these centers can ami; and Marriott hotels in
centers that can direct funds then begin accepting immi- Seattle and Los Angeles.
to projects. grant investment and pool-
ing the capital to facilitate In addition to these large-
Investors utilizing region-
large development projects scale commercial projects,
al centers are subjected to
that create more jobs. regional centers have been
the same obligations con-
critical in financing a wide
cerning both level and area While regional centers have array of local ventures for
of investment, but operate been in place since 1993, the a diversity of communities
under different job creation program only recently expe- across the country. EB-5
requirements. Rather than rienced a rapid growth spurt regional center investments
creating or preserving 10 beginning in 2008. Accord- helped build hundreds of
direct jobs, USCIS allows ing to an analysis conducted affordable housing units in
regional center investors by the Brookings Institution, Miami. They allowed manu-
to create 10 indirect jobs as only 16 regional centers were facturer Proterra to relocate
a means for incentivizing created from the program’s and expand operations for
increased investment. US- inception up until 2007.6 As their zero-emission battery
CIS currently defines indirect of the end of 2013, the num- powered busses to South
jobs as those that are “creat- ber of regional centers was Carolina. And in Chicago, Illi-
ed collaterally or as a result nearly 25 times larger with nois, regional center invest-
of capital invested in a com- over 400 centers in 44 states, ment is aiding the construc-
mercial enterprise affiliated the District of Columbia, and tion of treatment centers for
with a regional center by an U.S. territories. Today, there patients with Alzheimer’s or
EB-5 investor.”5 Additional- are now over 600 centers long-term mental illness.
ly, only economic models (Fig. 1).
approved by USCIS can be EB-5 money is often de-
The 2008 spike and subse-
used to estimate indirect job scribed as “patient capital.”
quent growth in the num-
gains. During the crisis and the
ber of regional centers can weak recovery, EB-5 financ-
In order to create a new partially be attributed to ing was available and of-
regional center, interested the financial crisis. As tradi- fered at lower rates, allowing
3The national unemployment
Fig. 1: Number Of Authorized EB-5 Regional Centers
rate has nearly reached
pre-recession levels. Yet, this
652 ignores the fact that there
are many “missing” workers
who have stopped looking
for work due to the weak-
ness of the economy. The la-
bor force participation rate is
currently 62.8 percent, down
+3,975% roughly three percentage
points since the crisis. Some
of this drop is undoubtedly
due to the aging of our pop-
ulation, yet most estimates
find that a good portion is
16 also explained by the weak
recovery.10
2007 2015 Additionally, approximate-
Source: United States Citizenship And Immigration Services (May 2015) ly 2.3 million workers are
employed part-time for
solely economic reasons,
capital-intensive projects Targeting High Unemploy- roughly one million more
such as hotels that directly ment Areas. than pre-crisis figures. Last-
and indirectly employ thou- ly, there are twice as many
Beyond providing “patient
sands of people to get off counties in 2015 with greater
capital,” the EB-5 program
the ground. In the first three than or equal to 6 percent
offers investors the abili-
years after the crisis, Hilton, unemployment than in
ty to commit $500,000 in
Hyatt, and Starwood Hotels 2007. This also holds true for
investments
all turned to EB-5 financing, counties with
as opposed
according to a New York In the first three years greater than
to $1,000,000
Times report.7 after the crisis, Hilton, or equal to 8
by targeting
“It’s a method of financing a high un-
Hyatt, and Starwood percent un-
that’s current, available and employment Hotels all turned to employment.11
very credible,” said Craig area. Despite EB-5 financing. Overall, the
Mance, Hilton’s senior vice an economic EB-5 program
president for development recovery that is technically incentivizes investment in
for North America. “It’s help- beyond its sixth year, it is these regions that include
ing deals move forward.” evident that groups and ar- pockets of high unemploy-
Overall, the regional center eas of the nation have been ment through TEAs.
program has become the left behind. Unemployment
Program Participation Is On
vastly preferred means of at the county level shows
The Rise.
investment for immigrants immense variation in 2015,
swinging nearly 25 percent- Demand for the EB-5 visa
participating in the EB-5 pro-
age points between 1.6 and has grown exponentially
gram. Ninety-eight percent
26.6 percent among the over the past few years,
of EB-5 visas in 2013 were
most employed and most leading to an increase in the
allocated based off invest-
ments through regional unemployed counties in the number of immigrants in-
country (Fig 2).9 vesting in and entering the
centers.8
4Fig. 2: Unemployment By County March 2015
Percent Unemployment
3.70 and below
3.70 to 5.00
5.00 to 6.10
6.10 to 7.30
7.30 to 8.80
8.80 to 11.10
11.10 to 16.00
Source: F.R.E.D. 16.00 and above
United States through the mainland Chinese investors cause investors’ family
program. While 749 individu- to immigrate to the United members, including spouses
als gained conditional resi- States and manage their and children, are included in
dency through the EB-5 pro- investments. the cap, 10,000 investors will
gram in 2005, that number never enter the U.S. through
These delays will do more
quickly rose to 1,360 in 2008 the EB-5 program. From
than simply inconvenience
and has continued to expand 2005-2013, 24
these pro-
to 8,543 visas granted in 2013 ...over the last two years, percent of all
spective
(Fig. 3). conditional
immigrants. the EB-5 visa program
residency
In fact, over the last two They also has nearly reached its
visas were
years, the EB-5 visa program threaten the cap of 10,000 visas.
given to the
has nearly reached its cap of ability of the
investors’
10,000 visas. As total de- program to
spouses and 40 percent were
mand has steadily increased, attract viable investments.
given to their children. In
per-country limits have been Not only will Chinese-born
total, only 35 percent of the
implemented to ensure that investors be deterred from
visas were allocated to the
the program remains with- participating due to these
investors themselves (Fig. 4).
in its quota. On May 1, 2015, suspensions, as the largest
Chinese applicants reached category of investors in the The Bottom Line: The EB-5
their EB-5 quota, leading the program, a limit on their ap- Program Creates Tens Of
State Department and USCIS plications will make it more Thousands Of Jobs.
to implement retrogression difficult for regional centers The early years of the EB-5
on future investors from the to finance larger projects by program yielded minimal
country. Quota retrogression pooling the funds of inves- investment and job creation
will significantly delay I-526 tors from multiple countries. due to low participation. But
application processing and It’s worth noting that be- since a surge in popularity
increase the time it takes for
5wards TEA investment and
Fig. 3: Total EB-5 Visas Issued 2005-2013
its lower cost.12
8,543 Assuming applicants only
invested at the minimum
required rate ($1,000,000 for
6,628 non-TEA and $500,000 for
TEA), the program triggered
a minimum of $1.5 billion
invested in TEAs and $88 mil-
lion in non-TEAs in 2013 (Fig.
3,668 5). With this level of invest-
3,340
ment, the EB-5 program can
2,408 claim responsibility for cre-
ating potentially 31,000 U.S.
1,360
806 jobs in 2013, based on the re-
749
346 quirement that each investor
has fulfilled the minimum of
10 net new jobs created.13
2005 2006 2007 2008 2009 2010 2011 2012 2013
To put that in perspective, in
Source: D.H.S. Immigration Yearbook 2005-2013 the past 12-months, 11 states,
including Alabama, Arkansas,
Connecticut, Delaware, Idaho,
in 2008, the EB-5 program investment in TEAs made
Iowa, Kansas, Nebraska, New
has shown consistent – and up 98 percent of the total –
Mexico, North Dakota, and
growing – annual yields of a testament to the growth
South Dakota, saw less job
domestic investment and of regional centers and the
growth.14
U.S. job creation. preference of investors to-
The majority of the growth
in the EB-5 program has Fig. 4: Total EB-5 Visa Breakdown 2005-2013
been through the region- 100%
al center program, which
90%
simplifies the investment
process for applicants and 80%
contains job creation re- 70%
quirements that can be easi-
60%
er to fulfill. The vast majority
of program participants who 50%
invest through regional cen- 40%
ters do so in targeted em-
30%
ployment areas (TEAs), there-
by investing at the lower 20%
cost of $500,000 rather than 10%
$1,000,000.
0%
In 2005, before the program
2005 2006 2007 2008 2009 2010 2011 2012 2013
gained in popularity, invest-
ment in TEAs made up 58 Spouses Investor, Not in TEA
percent of the total visas Children Investor, TEA
allocated towards employ-
Source: D.H.S. Immigration Yearbook 2005-2013
ment creation. But in 2013,
6Given a typical investment tivity at no programmatic Highway Administration to
of $500,000 and a minimum cost, the EB-5 program can estimate the number of jobs
requirement of 10 jobs, the only reduce the deficit, while created by federal highway
EB-5 program uses roughly the stimulus added to the investments, use Input-Out-
$50,000 in private capital per deficit and in turn will hinder put models to estimate jobs
job. Meanwhile, estimates growth in the long run.16 of the EB-5 program and find
for the American Recov- larger job gains.
Snapshot
ery and Reinvestment Act, Analyses Of The EB-5 program is all A recent
commonly known as the Economic private capital and the peer-reviewed
stimulus, ranged from more Impact Across program itself is funded analysis by
than $100,000 per job to The Country. through user fees, not the Alward
$400,000. Under this scenar- Institute for
io, the EB-5 visa program is The analysis taxes.
Collabora-
500 percent more efficient at above relies
tive Science
creating a job (Fig. 6).15 on conser-
looked at the impact of to-
vative assumptions. While
Moreover, the stimulus was tal EB-5 spending including
it ignores the effects of
public money, provided by associated household spend-
pooling EB-5 investments
the taxpayer or added to ing and additional immigra-
through regional centers, it
the public debt. The EB-5 tion expenses. David Kay—a
only assumes 10 jobs are cre-
program is all private capi- regional economist who
ated when in fact many EB-5
tal and the program itself is specializes in development
investments can create far
funded through user fees, strategy, policy analysis, and
more. Other analyses, similar
not taxes. Therefore, because program evaluation—found
to those used by the Federal
it generates economic ac- that over the course of FY
2013 the EB-5 program sup-
ported more than 41,000
Fig. 5: Minimum Total Annual EB-5 Investment 2005-2013 jobs.17 The full impact of the
EB-5 visa program becomes
$1.6B apparent when considering
the impact on local job cre-
$1.4B ation.
MB Consulting, LLC conduct-
$1.2B ed an analysis on EB-5 eco-
nomic impact that examined
$1.0B a selection of projects in
numerous industries com-
$0.8B
pleted by a variety of region-
al centers. The study found
$0.6B
that 83 regional center proj-
ects from across the Unit-
$0.4B
ed States and the Mariana
$0.2B Islands were able to produce
$15 billion in investment and
$0.0B create 103,685 jobs from 2011
to 2014. While high levels of
2005 2006 2007 2008 2009 2010 2011 2012 2013 investment and job creation
were concentrated in states
Source: D.H.S. Immigration Yearbook 2005-2013 with large populations,
**Includes TEA & Non-TEA Investments states such as North Carolina
7the EB-5 program’s impact
Fig. 6: EB-5 And ARRA Cost-Per-Job Comparison
across the entire United
States; it provides a nuanced
$300,000 picture of the program’s ex-
tensive effects in metropol-
itan areas as well. MB Con-
sulting’s analysis identified
that EB-5 investments in ma-
jor urban areas such as New
+500% York City were able to create
and support over 57,000 jobs
in a variety of industries. In
Los Angeles, Wright Johnson
$50,000 estimated that the program
generated nearly 10,300 jobs
for constructing apartments,
hotels, and mixed use build-
American Recovery EB-5 Program ings.
and Reinvestment Act Urban areas throughout the
United States continue to
deal with challenges such as
Source: James Feyrer And Bruce Sacerdote, National Bureau of
Economic Research
shortages of quality hous-
ing or fluctuating levels of
poverty and must also find
were still able to generate resorts were the most suc- ways to capitalize on oppor-
$160.4 million in investment cessful in terms of job cre- tunities for growth. The EB-5
and 2,741 jobs with projects ation, generating a five-year program creates investment
focused on cold storage, total of 49,980 jobs. Other that can, in many ways, work
continuous care, and hotel industries such as assisted towards solving the prob-
construction. The EB-5 pro- living facil- lems that
gram impacts states across ities exhib- 83 regional center proj- urban areas
the country (see Table 2). ited steady ects from across the currently
An additional analysis con- growth over United States and the face. In addi-
ducted by Wright Johnson, the same Mariana Islands were able tion to pro-
time period, to produce $15 billion in viding capital
LLC looked at a variety of
generating a investment and create for develop-
EB-5 regional center projects
total of $89.5 103,685 jobs. ment, EB-5
across the United States
million in investment is
from 2011 to 2015. The anal-
EB-5 invest- also respon-
ysis found that the selected
regional centers from Wash- ment and creating an esti- sible for providing a wide
mated 2,850 jobs. The Wright array of jobs in these com-
ington to Puerto Rico were
Johnson, LLC data show munities. Each commercial
able to generate $2.5 billion
that the EB-5 program helps development enables job
in investment and create an
businesses across a variety creation directly centered on
estimated 67,364 jobs.
of sectors, from real estate, construction or maintaining
As data from Wright John- healthcare, manufacturing, the valuable supply chains
son, LLC (see Table 1) show, and tourism. that enable development.
mixed use projects and proj- Furthermore, the benefits of
ects focused on apartments, Data from the above analy-
ses does not simply illustrate such employment permeate
hotels, manufacturing, and
8outside of the immediate rect job creation. highway spending using a
scope of the EB-5 program similar model that takes into
Lastly, these new employees
by generating an additional accout direct, indirect, and
now have more income that
set of jobs in response to the induced job creation.20
they can spend at restau-
overall rising levels of in- rants, housing, furniture, There are benefits to poli-
come catalyzed by direct job cars, and more, referred to cymakers in understanding
creation. as induced job creation. The both direct and indirect job
Direct, Indirect, And Induced sum impact is the increase creation, and weighing each
Jobs. in final demand, and while it appropriately in making pub-
may seem complex to mea- lic policy. But by no means
One critique of the EB-5 pro-
sure, economists have been should one ignore the val-
gram is that it allows for the
developing and fine-tuning ue of indirect job creation,
inclusion of indirect jobs cre-
models over the past 70 plus nor would it be prudent to
ated towards the minimum
years to tackle these types ignore the decades econo-
10 jobs created requirement.
of questions. mists have spent developing
While direct job counts may
and refining the models to
have the benefit of great- Wassily W. Leontief devel-
estimate it.
er certainty, such a narrow oped the first I-O model at
view of economic impact the national level in 1941, This argument parallels the
will inevitably undercount followed by Walter Isard who debate over dynamic scoring
the impact of investments. created regional models in for budgetary policy. Static
Just as indirect and induced the 1950’s. Today, I-O mod- analyses fail to account for
19
jobs metrics are used for els such as IMPLAN and RIMS the full benefits of policies
multifaceted projects such II are used by a wide-variety such as corporate tax reform
as the Keystone XL pipeline, of economic actors such as and deny policymakers rele-
they apply with equal force city planners, investors, and vant information. Discount-
in the context of the EB-5 elected officials. Economic ing the dynamic effects of
program.18 analyses continuously rely the EB-5 program by restrict-
on these tools as the several ing job counts to just direct
The impact of an investment
sectors of developed econo- jobs will have a similar effect
that builds a hotel does not
mies become on invest-
end at the hotel’s doors.
highly inter- While direct job counts ments.
Economists break down the
dependent. may have the benefit of Additionally,
impact into direct, indirect,
Simply put,
and induced job creation. In greater certainty, such a from a practi-
these are
the case of a hypothetical narrow view of econom- cal standpoint
widely ac-
hotel construction project, ic impact will inevitably with respect
cepted mod-
the hotel directly employs undercount the impact to the EB-5
els that are
construction workers and of investments. program,
widely used
then hotel managers and eliminating
by federal
staff. Indirectly, the construc- the consid-
statistical agencies, includ-
tion of the hotel uses con- eration of indirect and in-
ing the Department of Com- duced jobs would severely
crete, bricks, and wood, lead-
merce’s Bureau of Economic undermine the effectiveness
ing to more production and
Analysis and the Department of the program. For one, it
mining of those materials
of Labor’s Bureau of Labor
and thus more jobs. Mean- would reduce participation
Statistics.
while, food, cleaning, and as many projects would no
electrical businesses now In fact, the Department of longer qualify for these in-
have a new customer, creat- Transportation and Feder- vestments. Second, it would
ing more demand for labor. al Highway Administration favor investment in labor-in-
This process represents indi- calculates the jobs impact of tensive sectors over other
9Fig. 7: Visa Allocation By Category Of Admission 2013 the United States. The EB-5
visa accounts for less than
one percent of that total
990,553
(Fig. 7).21 The vast majority
of immigrant programs are
designed to connect fam-
ilies and protect refugees
and asylees, with only 15
percent of all visas related
to employment. Even with-
in the category of employ-
ment-based visas, the EB-5
program makes up only 5.3
percent and is the only pro-
161,110 gram specifically mandated
to create U.S. jobs. From
8,543 the perspective of U.S. im-
migration policy, the EB-5
Total Employment- EB-5 Visas program admits a relatively
Based Visa small number of immigrants,
all of whom have sufficient
Source: D.H.S. Office Of Immigrant Statistics
financial means and are thus
unlikely to enroll in various
low-income public benefit
programs.
higher-productivity sectors. goals across the legislative
Government policy should and political spectrum, be- The real value of the pro-
not favor one sector over cause it catalyzes growth at gram, however, is not the
another. Therefore, including no cost to the taxpayer. number of people that come
indirect jobs in the count is to the United States, but
The following framework is how their investments lever-
beneficial in that it levels the the proper way to assess the age job creation. EB-5 visas
playing field for investment EB-5 Immi- generate a
from EB-5 participants. grant Investor minimum
The real value of the
The EB-5 Program As Pri- program: a
program, however, is not investment
vate investment, Not Immi- visa class that of $1,000,000,
gration Policy. requires either
the number of people
or $500,000
$1,000,000 or who come to the Unit-
Any analysis of the EB-5
$500,000 in ed States, but how their in a targeted
program must be considered
investment investments leverage job employment
in the context of the pub- area, that cre-
and at least creation.
lic policy landscape in 2015. ates at least
10 U.S. worker 10 jobs. As
The national debate over tax
jobs created detailed above, in 2013, these
reform, trade expansion, and
to obtain lawful permanent investments totaled $1.6
infrastructure policy have
residency, often referred to billion. However, this level of
one thing in common: a de-
as a green card. investment understates its
sire to boost private invest-
ment to help fuel long-term Every year approximately importance.
growth. one million new legal immi- EB-5 investment is “patient
grants (Lawful Permanent capital” which persists even
Encouraging more private in-
Residents) are admitted to during times of stress and
vestment is central to policy
10demands lower rates of re- program is a rounding error challenge efforts to increase
turn than other alternatives. as it relates to overall immi- savings and capital forma-
It’s therefore very promising gration levels tion (Fig. 8). As
for durability and long lead but is dispro- the U.S. popula-
Looking more long-
capital-intensive investment portionately tion ages, more
that tend to have a larger large relative
term, the demograph- of the popula-
employment footprint than to its effect on
ic changes the Unit- tion will shift
other investment alterna- private domes- ed States faces will from accumu-
tives. Furthermore, while tic investment challenge efforts to lating savings
investment generated by the and net new increase savings and to consuming
EB-5 program represents a job creation. capital formation. them. A 2005
fraction of total U.S. foreign McKinsey study
In the two
direct investment, it remains summarizes
years after our most recent
a source of capital that can this challenge best:
economic crisis, investment
have a significant role on the spending fell 34 percent.22 “In the past, aging of the
regional and local level. Since then, gross domestic baby boomers supported
While it is typically consid- private investment has in- wealth accumulation as they
ered in the context of im- creased back to pre-crisis moved through their peak
migration policy, the EB-5 highs, but as a percentage income and saving years,
program is far too small and of GDP, it remains below the but was overwhelmed by
has a different set of goals bottom of 2000-01 recession strong behavioral trends
relative to other programs levels at 16.7 percent.23 to save less. In the next 20
to be solely considered years, however, the baby
Looking more long-term,
immigration policy. By any boomers will enter retire-
the demographic changes
conceivable metric, the EB-5 ment and will reinforce
the United States faces will
Fig. 8: Aging Population As A Percentage Of The United States Population 1900-2050
Age 60+ Age 65+ Age 85+
30%
25%
20%
15%
10%
5%
0%
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Source: U.S. Administration On Aging
11these behavioral trends to that may favor rural invest- program and not an immi-
create a significant financial ment over urban investment, gration program, a reform
‘headwind:’ baby boomers proposed reforms will only that excludes spouses and
will save less, younger gen- inhibit the ability of the dependents from the cap
erations will continue to program to create jobs. As better aligns the cap with
save less, and birth rates will stated above, the job re- the goals of the program.27
slow. The resulting decline in quirement’s methodology is This would increase the cap,
the growth rate of financial already economically sound. but given the existing low
wealth accumulation means Further, urban investments number of visas within the
there will be less house- like the Barclay’s center in program, the EB-5 visa would
hold savings to support a New York are valuable to still be small relative to oth-
fast-growing retiree popula- local economies. There is no er visa categories in terms
tion and it will become more economic reason to favor of number of immigrants.
difficult to support domes- rural over urban investment. However, it would leverage
tic investment and sustain As a general rule, the U.S. investment and job growth
strong economic growth.”24 government should ensure significantly.
capital flows as efficiently as
Moody’s echoed these con- Second, cyclical adjustments
possible, going to where it’s
cerns last March arguing should be considered under
economically needed.
that aging will reduce an- potential reforms. As stat-
nual economic growth by Although some of the re- ed above, investment fell
0.4 percentage points and forms proposed in the Sen- 34 percent during the most
0.9 percentage points from ate threaten to inhibit the recent crisis. Adjusting the
2014-2019 and 2020-2025, effectiveness of the EB-5 EB-5 cap for cyclicality would
respectively.25 program, there are options improve the effectiveness
that could improve the abil- of the program. Specifically,
The United States needs
ity of the EB-5 program to two approaches should be
policies that will increase
boost the U.S. economy. Two considered during recession
investment to sustain eco-
reforms that could enhance years: reducing the mini-
nomic growth through short-
the program’s investment mum investment threshold
term crises and in long-term
and jobs impact are the and/or raising the cap.
challenges. At no cost to the
treatment of dependents
taxpayer,26 the EB-5 program In conclusion, government
and cyclical adjustments.
is an efficient means of at- policy proposals from tax
tracting private investment The EB-5 program has con- reform to trade to infra-
proven to generate U.S. job sistently approached its cap structure all seek to boost
growth. of 10,000 visas since partic- U.S. investment, because it
ipation experienced a rapid is critical to capital-forma-
Reform: Opportunities To
growth spurt in 2008. This tion and long-run economic
Enhance Economic Impact.
increase in de- growth. Going
A recent proposal by leading mand is largely forward, an
Senators to reauthorize the due to the fact ...reform that excludes aging pop-
EB-5 Regional Center pro- that a sub- spouses and depen- ulation will
gram for five years is a wel- stantial share dents from the cap bet- likely reduce
come development. Howev- of these visas ter aligns the visa quota private invest-
er, some proposed program is allocated to with the goals of the ment in the
changes could result in a the spouses program. U.S. There-
reduced impact of the pro- and children of fore, we need
gram on the U.S. economy. investors. Be- smart gov-
By creating more restrictive cause EB-5 is more properly ernment policies to sustain
job requirements and rules thought of as an investment growth. Extension and im-
12provement of the EB-5 pro- About The Authors
gram will further enhance
the program’s benefit to the Steve McMillin
U.S. economy. Steve McMillin is a Partner of
US Policy Metrics, based in
Washington, D.C. Steve has
over twenty years of policy
experience including careers
at both the White House and
on Capitol Hill. Steve served
as Deputy Director of the
White House Office of Man-
agement and Budget (OMB)
from July 2006 – January
2009.
Michael Solon
Mike Solon is a Partner of
US Policy Metrics, based in
Washington, D.C. Before Jan
2012, Mike was the principal
of a Washington consulting
firm, Capitol Legistics, which
he founded in 2007. Mike is
a 25-year veteran of Capitol
Hill, with extensive experi-
ence in various Leadership
offices. In addition to his 14
years with Sen. Phil Gramm,
Mike worked for numerous
House and Senate members
as a Staff Director, Economic
Policy Advisor, and a Policy
Director.
Matt McDonald
Matt McDonald is a Partner
at Hamilton Place Strategies,
based in Washington, D.C.
Most recently, Matt was a
consultant for McKinsey &
Company, served as an Asso-
ciate Communications Di-
rector under President Bush,
and served in senior roles on
the past three presidential
campaigns.
13Endnotes:
1. U.S. Citizenship and Immigration Services, “EB-5 Adjudications Policy Memorandum,” 30
May 2013
2. ibid
3. ibid
4. ibid
5. “EB-5 Immigrant Investor Pilot Program” See U.S. Citizenship and Immigration Services
6. Audrey Singer and Camille Galdes, “Improving The EB-5 Investor Visa Program: Interna-
tional Financing For U.S. Regional Economic Development,” The Brookings Institution, Feb.
2014
7. Janet Morrissey, “Visas-For-Dollar Program A Boon To Hotel Developers,” The New York
Times, 6 Sept. 2012
8. U.S. Department of State, “Report Of The Visa Office,” 2013
9. 2015 March Unemployment Rate by County, GeoF.R.E.D.
10. Steven Braun et al., “Understanding the decline in the labour force participation rate in
the United States,” VOX, 18 Aug. 2014
11. 2007 March Unemployment Rate by County, GeoF.R.E.D.
12. Department of Homeland Security, “Immigration Yearbook,” 2013
13. ibid
14. Bureau of Labor Statistics, “State and Local Unemployment Release,” Table E, May 2015
15. James Feyrer and Bruce Sacredot, “Did The Stimulus Stimulate?” The National Bureau Of
Economic Research Feb. 2011
16. Congressional Budget Office, “The Budget and the Economic Outlook: 2010 to 2025,” Jan.
2015
17. David Kay, “The Economic Impact and Contribution of the EB-5 Immigration Program,”
Invest in the USA, May 2015
18. U.S. Department of State, “Final Supplemental Environmental Impact Statement for the
Keystone XL Project,” Jan. 2014
19. Jeffrey Carr and Robert Chase, “Input-Output Analysis—A Way To Measure Economic And
Job Impact,” Economic & Policy Resources, Inc., 15 May 2015
20. U.S. Department of Transportation, “Federal Highway Administration Operations Spend-
ing,” 2014
21. Department of Homeland Security, “Immigration Yearbook,” 2013
22. N. Gregory Mankiw, “How To Make Business Want To Invest Again,” The New York Times
10 Sept. 2011
23. F.R.E.D. Graph: Gross Private Domestic Investment v GDP
24. Diana Farrell et al., “U.S.: From Boom To Bust?” McKinsey & Company, Jan. 2005
25. Elena Duggar and Anne B Van Praagh, “Aging Will Reduce Economic Growth Worldwide
14In The Next Two Decades,” Moody’s Investors Service 06 Aug. 2014
26. Congressional Budget Office, “Cost Estimate of H.R. 5569,” 9 May 2008
27. Department of Homeland Security, “Immigration Yearbook,” 2013
15Appendix:
Table 1: EB-5 Job Creation Estimates By Table 2: EB-5 Job Creation Estimates
Industry By State
Sum of Estimated Sum of Estimated
Industry Jobs Created State Jobs Created
Apartments 4492 Arizona 47
Assisted Living Facility 2849 California 4381
Condos 2089 Colorado 412
Digital Media Company 25 Connecticut 1723
Electric Powered Vehicles 895 District of
Finance 728 Columbia 32
Hospital 1292 Florida 8704
Hotel 20950 Hawaii 510
Idaho 3401
Luxury Home/Condo 691
Illinois 1712
Manufacturing 2982
Louisiana 1100
Mineral Extraction 910
Mississippi 24
Mixed Use 18023
New Hampshire 402
Office Building 2004
New Jersey 313
Oil & Gas Drilling Plant 2576
New York 57585
Refurbishing Television
Panels 40 No. Mariana
Islands 4092
Residential 1189
North Carolina 2741
Resort 3535
Ohio 682
Restaurant 1020
Oregon 330
Schools 1187
Pennsylvania 309
Grand Total 67475
South Carolina 1537
Source: Wright Johnson, LLC Tennessee 236
Texas 4830
Vermont 3481
Washington 4763
Wisconsin 338
Grand Total 103685
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