Until I read a fascinating story, I had not heard of something called the EB-5 Visa Program for foreign investors. The idea is simple enough. If a foreign investor pumps $500,000 to a $1,000,000 into a project targeting a rural or poor urban area, their children are given legal rights to live in the United States. What could go wrong? Exactly what you would expect.

Basically, the meaning of jobs being created and poor regions as defined by the EB-5 was stretched so that most of the money went to fund luxury projects in wealthy cities. Districts were drawn to include poor regions but the vast majority of the construction took place in wealthy areas. That along with the fact that some of the developers simply absconded with large sums of money.

Most of the investors appear to come from China and individuals of enormous wealth found a way to invest their money not only with a financial return but also a pathway to United States citizenship for their children.

Personally, I’m not convinced the EB-5 program was created with the best of intentions at all. The politicians back in 1990, when it was implemented, most likely well-understand where the money would go and created a system by which it could flow to wealthy regions while following the loose guidelines of the program.

I’m not even upset the money went to fund luxury projects like Hudson Yards. I’m also not opposed to foreign nationals purchasing U.S. citizenship, which is exactly what is going on despite any arguments to the contrary. What makes me angry is pretending to be doing a good and wonderful thing by helping out the poor in rural regions and urban cities when there was never any such intention.

Some of the money did, in fact, go to projects of the nature for which they were intended but I strongly suspect that would have been the case even if the base purpose of the program was to simply attract foreign investments. When money comes into the United States for various projects it is a good thing. It would be nice if more money was spent to help poor rural areas and poverty ridden urban regions but reality is a tough mistress.

People largely don’t want luxury apartments in rural regions or the poor areas of the inner city. However, when a region undergoes development the area around it often improves as well. This reality is the best we can hope to accomplish.

Creating a program like EB-5 with unrealistic expectations of development in rural and poor regions is an exercise in deceit. I’m here to help, said the politician while stuffing their stomach at the trough. My Libertarian sensibilities say, go ahead and stuff your face, but be honest about it.

If the EB-5 program was created honestly, I’m certain organizations like Asian Americans for Equality would have found a way to use that money to help the poor in both rural and urban regions. I’m sure many investors believed they were doing a good thing because the project was under the mantle of the EB-5.

Tell investors the truth. This project is in a wealthy region and this other one is in a disadvantaged region. You decide which one in which to invest. I’d guess you’d have had more money going to the sorts of projects the entire program was designed to fund in the first place.

Tom Liberman

The Federal Reserve and the President of the United States seem to be at odds over the idea of raising interest rates. I’m of the opinion that most people, including many of my fellow Libertarians, don’t really understand the base purpose of the Federal Reserve and the point of increasing interest rates. I’m not an economist by trade but the issue is relatively straight-forward and I thought I’d take a few moments to go over it.

As I said, it’s relatively simple. Pretty much since the beginning of human history there has been something called the business cycle, or in common parlance, the boom-bust cycle. Basically, when times are good and people have plenty of money, they tend to spend it on speculative interests in the hope of gaining much more money. In contrast, when times are not good and money is in short supply, people have a tendency to hoard what they have. These two things exacerbate the business cycle.

Essentially, because people are spending more money on potentially enriching schemes during boom times the bubble goes to extremely high levels before it bursts and creates devastating economic destruction. Once the bust takes hold it is difficult to stop the downward spiral because people are reluctant to borrow money.

The solution created by Alexander Hamilton and the founders was the First Bank of the United States. Its primary idea was to raise interest rates during boom times thus curtailing people’s willingness to borrow money and fuel the boom and to lower interest rates during times of bust to encourage people to take out loans and pull the economy from its collapse.

It did not stop the business cycle altogether and thus its opponents, who felt there was artificial manipulation of the economy at the expense of growth abolished it. The booms and bust then grew much worse and so the Second Bank of the United States was formed with essentially the same goals as the first. Once again, the business cycle continued although with tempered effects because of the policies of the bank. As can be expected, people grew unhappy with the bank because they felt it was impacting the booming economy negatively and so it was abolished.

Immediately thereafter there again began a more virulent series of business cycles until Congress established the Federal Reserve which still exists to this day. As expected, the business cycles continue to be a problem as we have seen recently. One of the things that has happened since President Reagan is that the Federal Reserve has acted more to promote economic growth but not to slow it. This means, naturally that the boom cycle is not properly tempered.

That is the point of the Federal Reserve in their recent raising of interest rates. They desire to slow economic growth to temper the boom section of the business cycle. These actions anger the President of the United States in the midst of that cycle. Politicians desire to brag about the good they have done and lay blame for the bad, but the business cycle is beyond their control. The Federal Reserve cannot stop the cycle, the people who make policy can only hope to temper the catastrophic effects of the inevitable bust.

That is why it is generally considered a bad idea for politicians to dictate policy to the Federal Reserve. Their actions are often, and for good reason, opposite of those wished by the politicians.

Tom Liberman