Tyler Cowen: A $5 million gold card for immigrants makes economic sense

President Donald Trump would like to offer migrants who want to work in the U.S. a “gold card,” akin to a green card, with one significant difference: the price tag. A gold card would cost $5 million, compared to government fees of $235 for a green card.

It’s a good idea, both from the standpoint of government revenue and for wealthy prospective immigrants. But the U.S. would have to be careful not to foreclose other, more affordable ways for people to come and work and live in the country.

Trump estimates that the U.S. could sell 1 million gold cards, which would give holders quick residency rights and a path to citizenship, family members included. That would bring in $5 trillion. He also suggests that many companies would buy them to bring in talented workers. Even if his estimates are overly optimistic, there is some real money on the table.

Under current law, there already is a path to residency and citizenship by investing in the U.S. through the EB-5 program. After expenses are accounted for, and depending on details, the cost is about $1 million. That’s an 80% discount on a gold card, and meanwhile the government gets the benefit of new jobs added to the U.S. economy.

The Trump proposal is intended to replace this program, which has been criticized for fraud and abuse. Charging a flat fee may be better than requiring a certain amount of investment, since there is no ambiguity as to whether the person has paid up and no incentive to concoct dubious job-creation schemes. The gold card may involve some of the same problems as the EB-5 program in terms of being an easy way for spies and potential terrorists to enter America, but it’s unlikely to make them worse, and at least the price would be higher.

Economists, including the late Nobel laureate Gary Becker, have long entertained the idea of selling the right to immigrate. It would help the U.S. meet its fiscal obligations while offering residency to those who value it most, at least insofar as that concept is defined in monetary terms.

As usual, however, the devil is in the details. There is a good chance Trump’s proposal could work out well — and a chance it could severely damage the nation.

One worry is selection effects. The $5 million fee means the program would skew toward older people, and would probably also skew somewhat male. Neither of those biases is a problem if other methods of establishing residence remain robust. But will they?

The best-case scenario is that the U.S. offers a gold card and expands (or at least does not limit) cheaper ways of getting into the country. Replacing the $1 million investment with a $5 million flat fee, on its own, seems like an upgrade. A lot of people who can afford $1 million can also afford $5 million. And due to America’s success in technology generally and AI in particular, the value of living and working in this country has risen considerably. It is realistic for an immigration fee to reflect that.

The less favorable scenario is that the federal government gradually eliminates or curtails cheaper options for establishing residency. America’s immigrant population would then skew older and wealthier. That may work out fine for the short run, but it is far from ideal for the longer term. In effect, a gold card program would serve as a form of deficit spending, favoring the current period over the more distant future.

In short, the concept of a gold card idea is a good one. But a lot depends on the execution.