The EB-5 Engagement with Economists

Historians of the EB-5 visa know that this benighted category has witnessed persistent government ineptitude from its inception. In its early years, a series of former immigration officials teased informal guidance letters from naïve or inattentive occupants of the INS general counsel's office allowing all sorts of riskless forms of creative financing to serve, improperly, as qualifying $500,000 or $1 million investments. Not surprisingly, EB-5 fraud schemes flourished. That jig was up when a quartet of precedent decisions outlined a new set of EB-5 rules.

Now in its twenty-secondth year, the EB-5 program and its growing population of stakeholders still beg for publication of clear and reasonable regulations that maintain the integrity of the category yet are faithful to its legislative text, history and purpose, and are applied with consistent standards of interpretation.  

Even the most jaundiced audience members at the June 22, 2012 engagement came away dumbfounded, however, by the breadth of the economists' pronouncements of new and extreme extralegal interpretations and requirements. As a partial transcription of the presentation and later Q & A reveals, the government's supposedly economics-based interpretation of how investments lead to job creation has taken on such a miserly cast that it will out-Scrooge Scrooge.

Truth be told, I'm no economist and I have no formal training on when a new job is "created." (In parochial school, I learned that only God can create; in public school, I learned that neither matter nor energy can be created.) But I understand the painful yet salutary principle of capitalism known as "creative destruction" espoused by economist Joseph Schumpeter, namely, that there will be winners and losers, but ultimately more innovation, prosperity and jobs will ensue. (Phrased more prosaically, I would put it that "if you want to make an omelet you need to crack a few eggs.")  

Despite my lack of training in the mathematics of job creation, I understand, as the Obama administration confirms, that counting newly created jobs is not an exact science but rests on a variety of arguable presumptions and inferences. I also accept the precept that investments in America will more readily be made if the laws regulating the investment are not ever-changing, impracticable, unclear or arbitrarily applied.

Sadly, however, as commenters on the EB-5 engagement have noted, the USCIS economists' rabbit-from-the-hat proclamations have been "startling," are affected by fear and nervousness, and made it "riskier for Regional Centers to do any development type of EB-5 projects. [and] . . . [harder] for potential EB-5 investors to ascertain whether an EB-5 project complies with the EB-5 requirements."

My view, which I shared with USCIS leadership, is this:

With all respect to the economists and to your fine team, there really needs to be an engagement that discusses fundamental legal principles that take into account the law, the legislative history and the purpose of the EB-5 program. The direction the economic analysis is going -- in my view -- will destroy the program and hurt its salutary goals of investment and job creation in the United States.

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