America is a nation of immigrants and yet immigration has become a major hot button issue. Billionaire Donald Trump rocketed to the top of the Republican presidential contenders’ list with a few incendiary remarks about Mexican immigrants. Immigration reform, which would legalize the status of some 11.4 million illegal aliens residing in the United States, has been deadlocked in Congress since the last Bush Administration.
For all the different ideological positions on immigration, there is no question that immigration has contributed to the U.S. economy’s growth over the past half century. Based on Census Bureau data, the share of foreign-born Americans rose from a low of 4.7% in 1970 to nearly 13% in 2010. This translates into a 30 million boost to the U.S. population, accounting for more than a quarter of the population growth in that period.
Actually, since immigrants tend to have large families, their contribution is greater still: more than 20% of Americans speak a foreign language at home, or close to 70 million — more people than live in France or the U.K. That means immigrants have opened opportunities for trade and investment with their former countries. Plus, immigrants are disproportionately entrepreneurial. A 2011 study found that almost 20% of new Fortune 500 companies during 1985–2010 had an immigrant founder.
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Florida was one of the worst-hit states in the subprime mortgage crisis but in recent years, Miami has enjoyed an unprecedented real estate revival. Prices of land, apartments and construction have been going through the roof. And yet, in the rest of South Florida, some 17% of homeowners remained under water as of early 2015.
The reason for this selective prosperity — focused on exclusive neighborhoods and surrounding communities — is the massive influx of foreign money. Latin America still leads the pack in terms of who buys costly Miami properties, but there are buyers from Russia, the Middle East, China and Western Europe. They bring with them other businesses; downtown office blocks are chock full of firms serving the international high-net-worth set — selling and managing their real estate, investing their money, providing tax advice, leasing boats and private airplanes, etc.
Over the past two decades, the number of people with money to invest skyrocketed around the world. The development of large emerging economies, primarily China but also India, Brazil, Mexico, Indonesia and others, created substantial national upper middle classes practically from scratch. At the same time, high prices for oil and other commodities enriched the well-connected in commodity-exporting countries such as Russia and Venezuela.
China has been a world leader in creating the newly wealthy, thanks to the sheer size of its population. It now has over a million millionaires, most of whom have investable assets of between $1.5 million and $5 million.
However, growing global prosperity has not brought about a more stable world. On the contrary, instability has increased and in many countries people with money no longer feel comfortable. Even in China, the older generations still remember the years of starvation during Mao Zedong’s rule and the Cultural Revolution in the 1960s. They’re looking for a place to keep their money, and as they survey the troubled globe, they find that the U.S. is by far the safest alternative. Thus, the dollars shipped abroad by means of the U.S. trade deficit are finding their way back to these shores in the form of investments by wealthy foreigners.
Immigrants for a Price
If foreigners are worried about the safety of their money, they are even keener to ensure their personal safety as well a happy future for their kids. They’re looking for citizenship, or at least a residency permit, in a safe-haven country.
The government in Washington has been attuned to global demand for U.S. citizenship and has been willing to provide supply — at a price. In 1990, Congress created the Immigrant Investor Program, better known as the EB-5 visa program, which grants permission to apply for a green card — and gain an accelerated path to U.S. citizenship — to foreign investors as well as their spouses and unmarried underage children. All you need to be eligible is a $1 million investment into a project that creates 10 U.S. jobs for a period of two years.
In 1992, it was supplemented with a pilot program designed to provide more targeted benefits for the economy by setting aside some EB-5 visas for investors into economically disadvantaged areas. Applicants could invest half as much money, or just $500,000, through an authorized regional center, which develops designated targeted employment areas (TEAs), mainly rural areas or urban areas where the unemployment rate is at least 150% of the national average.
The program has been regularly reauthorized ever since, under different administrations. Interestingly enough, the current gridlock on Capitol Hill notwithstanding, the latest regional centers pilot program was extended just before the 2012 presidential election with all but unanimous support from both chambers of Congress. This extension runs out on Sept. 30 and unless Congress acts to reauthorize it again, it will sunset.