By Jeff Carr Only in America could we find a way for politics to interfere with a program that has generated more than $5 billion in investment, creating thousands of jobs and long lasting infrastructure for communities at no cost to taxpayers. Unfortunately, that is exactly what is happening now to the EB-5 investor visa program as the clock ticks down to the September 30 reauthorization deadline for a fundamental component of the program.
Created in the early 1990’s as a means of bringing private investment into the U.S. and encouraging job creation, the EB-5 program drives economic growth and creates opportunities for Americans from coast to coast. I’ve worked with nearly 200 EB-5 projects spanning 48 states and U.S. territories to provide the necessary independent economic analysis—required by the federal government—to ensure each project generates its intended economic impact. In the process, I have seen first-hand the program’s capacity to create thousands of good jobs across a broad range of industries. And those observations have been well documented by others: the Brookings Institution estimates that the program has directly created at least 85,500 jobs since its creation.
You don’t need to be an economist to see the value in those statistics, but my deep familiarity with the myriad economic benefits of EB-5 leaves me particularly troubled by the recent spread of misinformation about the program. This has led to paralysis in our political system, which has stalled reauthorization of the EB-5 Regional Center Program, now set to expire in a matter of days. The lack of resolution on the program’s fate has already chilled the EB-5 market, driving away investors and halting construction on new projects.
Among other things, some in Congress suggest “reforming” the program to make it more challenging for urban areas to attract investment by changing the guidelines surrounding “Targeted Employment Areas.” Most of these efforts are well intentioned, with a goal of encouraging more investment in rural and high-unemployment areas. But squeezing money out of urban projects by doubling the minimum investment amount for projects in these areas will not somehow persuade investors to invest in rural projects. Rather, it will constrict the flow of EB-5 funding overall, essentially stripping the program of its national job creating power.
Here’s why: critics, mainly those from rural states, claim big urban projects take unfair advantage of the program’s lower investment tier for rural and high unemployment areas by using what they call “gerrymandered” census tracts. The term “gerrymandered” is pejorative. As I’ve seen in my more than 18 years of involvement in the EB-5 program, one person’s “gerrymandering” is another person’s thoughtful assembly of sub-municipal areas in a way that accurately reflects the unemployment and commuting patterns of the local labor market.
Detractors say these projects should only provide employment to those who live in close proximity, or within the census tract, of where the project will be built. But the reality is very few people both live and work within the same census tract, or even the same town or city.
It’s unfortunate to see the political theater in Washington distracting policymakers from the facts about how our labor markets work. Pitting rural and urban projects against one other diverts attention from the economic reality: all American projects are competing for investors against numerous other investment programs abroad. If the EB-5 Regional Center Program is not reauthorized, or is reauthorized in a way that constricts the program, the country risks losing an estimated $6.8 billion in investments and tens of thousands of jobs.
With the clock ticking, Congress should focus first and foremost on preventing the program from sunsetting. But it would also be advantageous for them to find ways to maximize EB-5’s economic impact in communities of all kinds. Reforms could make rural investments more attractive in a number of ways, such as reducing the job creation requirement per investor or redefining the way in which a rural area is classified for purposes of the program. Both of these options merit consideration.
If Congress lets the EB-5 Regional Center Program expire, it will put thousands of existing jobs in jeopardy. And if it reforms the way we calculate “Targeted Employment Areas” without an equitable balance to encourage investments across rural, and urban and suburban areas, it will disadvantage thousands of future jobs against foreign competition. EB-5 has a proven record of attracting foreign direct investment to the United States; let’s clear the political road blocks from its path.
Jeff Carr is President and Senior Economist at Economic & Policy Resources, Inc.
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