Rentiers are welcome in the U S

Some Americans may not be aware that U S Citizenship– or at least, lawful permanent residency– has long been for sale, legally and aboveboard. It’s called the EB5 program, and essentially provides that any foreigner “investing” $500,000 to $1 million in a U. S. business can become a legal permanent resident.  And, of course, entrepreneurs have found the niche market, setting up businesses in which foreigners may invest, without taking an active role in management of the enterprise.

A Chinese and American joint venture is “converting the dormant Northridge mall in Milwaukee into a regional shopping center featuring merchandise from Chinese retailers” according to Milwaukee Business Journal.  Presumably, each of the 200 Chinese retailers expected could support one or more EB5 visas.  300-500 local residents are expected to be hired, tho I think it’s a bit imaginative to suggest that these jobs would be “created” by the project.  Rather, like most economic development incentives, they are simply shifted from elsewhere.

A China Daily report on the project indicates that the Chinese investors might not be familiar with primitive North American travel conditions.  Milwaukee “is only an hour away from Chicago,” says the developer. Maybe someday.

Of course, the poor would-be immigrant has no similar opportunity.  She cannot say “I will work to build a business that will employ Americans,” nor even “I will borrow a half-million dollars to invest,” as the program doesn’t permit this.

So, as existing Americans, are we better off inviting a bunch of rentiers, or a bunch of hardworking laborers?  Too many people believe that the latter will drive down American wages– which may appear to be true, only because we fail to consider what the immigrants can produce.

If we insist on inviting rentiers, we have chosen an inefficient way to do it.  Instead of requiring $500,000 invested in a business, when plenty of American entrepreneurs are already able to supply capital, we could simply require $500,000 paid toward reduction of the Federal debt.

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2 Responses to “Rentiers are welcome in the U S”

  1. Rob Ross says:

    You lost me – why is it undesirable to invite people who invest in American businesses to become citizens?

  2. Administrator says:

    Well, it might be that the border should be entirely open, and everyone invited to live in the US. I neglected to state that I assume that wouldn’t work very well, that immigration should be limited to some lower amount. So then we have the question of how to decide who should be admitted, and who should be barred.

    You will recall that we define capital as material things that aid production. But that’s not what these immigrants bring. They bring money. There is already lots of money, the Fed can always make more, and under a greenback system the government could directly print what it needed. So how do we benefit from the money immigrants bring?

    It is required that the investment be used to “create” jobs. It is good for everyone to have the opportunity to work, but we know that’s not limited by money or capital, but by access to suitable land. The case mentioned in the post, a derelict shopping center in Milwaukee, will remain idle only as long as the taxes on the land are too low to force it into use. So it would be easy for State and local authorities to increase employment, if that was their main objective.

    In fact, the E5B requirements are only loosely related to jobs The investment can be thru a limited partnership (the immigrant needn’t take an active role), and can be for purchase of land. If it is made in an area of high unemployment, it can be as little as $500,000 and jobs assumed to be created indirectly (at contractors or suppliers) can be counted toward the total requirement of ten jobs. (see http://www.eb5immigration.com/faqs.php)

    So there is not requirement that the EB5 immigrant produce anything, or contribute to the production of anything. On the other hand, the laborer who comes without assets will produce, although he might not have skills to produce very much. (If the EB5 immigrant has important skills, there are other programs under which she could be admitted.)

    So it seems to me that, if we are going to allow people to become legal residents by investing money, we should take the money directly. 10,000 immigrants/year at $1 million each = $10 billion. Maybe you want to look at it this way: How much, over many years, must an American earn in order to save $1 million? I am sure it varies, but probably $3 or $4 million on the average. So how much taxes would she have had to pay while earning this much? (Count not just the taxes, but the cost of suboptimal tax-directed investments, and the cost of tax advice.) I bet it would be at least $1 million. So we are merely levelling the playing field.

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