Wednesday, January 5, 2022

For-Profit Prisons

Are for-profit prisons a good idea? Maybe not!

A reader writes:
Your article on stock options is timely. Just this weekend, I was having dinner with a friend who is a prison warden for a large corporate outfit that has a contract with the State. He has been a warden for almost 10 years after working up through the ranks as a lowly correctional officer many, many years ago.

He was telling me that he has the "honor" of the most inmate deaths for the entire system for 2021...9 total of which 8 were homicides. The prison he runs has nearly 3,000 inmates and is short by over 200 correctional officers. As you might guess, there are lots of lawsuits (rightfully so) and it is costing the company a lot of money in legal fees and settlements. They start the COs at $17.00/hr whereas you can start down the road at Hobby Lobby for the same wage...but without the "customers" trying to murder you. The friend had asked to increase the starting wage to at least $18.50 to try and help the issue, but the folks on the board said nope...that will have too much of an effect on the bottom can bump the wage by 35 cents. Yeah.

ANYWAY, the friend would REALLY like to quit and do something else, but guess what? Two new car loans (a fancy new Bronco...SNATCH (as you would say)) and "generous stock options" keeps him imprisoned; no pun intended. If I recall, his latest contract was for X number of shares, but only 1/3 of them vested per they are worth nada until at least 365 days after his contract was signed and then only a third of the shares per year. How miserable.
There are some things that are not better off under the free market.  As some wags have pointed out, the Post Office is a service not a profit-center for the government.  Should it be run better?  Always.  But to privitize it or abolish it would mean we would be at the mercy of private enterprise for basic communication - which could be withheld or priced out of reach at a moment's notice.  Government exists, in part, to do things that private enterprise can't.

We have regulated utilities and, back in the day, a regulated monopoly phone company.  The reason for this was simple - you can't have competing utility companies stringing wires all over the place.  It just gets messy and inefficient.  Government-sanctioned monopolies are inefficient as well, but far more efficient and convenient that competition in the marketplace.

Since those days, we have deregulated the phone system and no one has a land-line anymore.  We have two competing technologies for wireless, offered by a number of companies.  Funny thing, their prices all seem to be in lock-step, and although they are making record profits, prices never seem to come down.  This is not to say we should go back to the days of  "Ma Bell" (no relation) but that "free market" isn't necessarily the answer to everything or a panacea.

In the electrical utility marketplace, we have offered "competition" in the form of energy supply.  People still use the wiring provided by the regulated utility, but have the option of purchasing their "energy" from a number of sources.  How the electrons know which wire to go down, I am not sure, but there you have it.

The result? The free-market bringing down costs and lowering prices and providing better service to consumers?  Hardly.  Some of these "alternative" electrical providers are little more than billing scams.  Others may save you a few dollars throughout most of the year and then screw the crap out of you the first time you go over a "cap".  Whatever savings there are have been trivial and far outweighed by the suffering caused by others.

Things like our police force, the courts, and yes, our prisons, are not something that lends itself to free enterprise.  These are governmental functions and are not subject - or should not be subject - to cost/benefit analysis.  For example, many opposed to the death penalty argue that it is more costly to execute someone (what with the appeals and all) than to incarcerate them for life.  Still others, who think all criminals should be let out jail, make the economic argument that jailing someone is more expensive than providing them with a free house and guaranteed income.

What these arguments fail to take into account is that we don't arrest people for profit (or at least we shouldn't be doing that) but to improve our society.  Yes, it is a staggering expense to run a criminal justice system, but we do it to preserver civilization, keep our streets safe, and enable all of us to live in peace and harmony.  Well, that's the goal anyway - sometimes it actually works out that way, too.

Using cost/benefit analysis for government actions is short-sighted and will always generate the wrong conclusions.  For example, consider our military.  Why pay money for all these bombers and air craft carriers and missiles and salaries?  Just use that money to bribe our enemies into not attacking us.   Granted, we likely already do this with "foreign aid" but the point is, it just wouldn't work after a while, and at that point, we'd be defenseless.   This is not to say our military budget couldn't be pared, only that it is not something the "free market" can fix.

Prisons are a horrific example of how this goes wrong.  If the for-profit prison company is paid X dollars by the State for each inmate, they are deeply incentivized to cut expenses to the bone to boost profits.  The only way to make more money is to either get more prisoners (cram them in as much as possible) and to cut expenses for security, food, medicine, and whatever else.  It goes without saying you don't want to lose any "paying customers" so if you can allege a prisoner has been behaving badly, well, he'll be denied parole and stick around longer as a profit center for you.

Sick, sick, sick!  But that's the motivation and with stock options for the upper management, the incentive is to goose the stock price using any means available.

Now imagine how our "imprisoned" warden must feel when Biden signs an executive order banning the Federal use of for-profit prisons.   Even if this doesn't affect the company he works for, it may depress the stock price as investors may get nervous that States will follow or that Congress may step in and write legislation outlawing private prisons.   Our friend now has stock options that are utterly worthless - and after going to all that effort to serve baloney and raman noodles to the "clients" too!

How did we get here?  The road to hell is paved with good intentions.   Prisons cost a lot of money to run.  Government employees get paid fairly well and have health benefits and generous pensions - which were largely unfunded as politicians wanted to keep taxes low.  So years later, we have a huge cost burden as guards retire.  And we have to hire more guards as the prison population keeps going up with the general population and a "war on drugs" puts more and more people away.  We incarcerate more people than any other country, per capita, even China.  Well, according to official reports from the Chinese government, anyway.

Maybe there are some things the "free market" wasn't meant to address.  We kind of went on this "privatizing" binge here in the US and worldwide.  Granted, in many countries, whole industries were nationalized, with disastrous effects.  It was almost comical how the British nationalized their auto industry (well, consolidated it anyway) and the aviation industryBoth are pretty much dust at this point.  Privatizing things like that might make sense - government officials are not necessarily keen on making good market choices.

But the post office? The police?  The courts?  The prison system?  The military?  Well, why not just privatize Congress?  Hire professional legislators who will vote based on the polling of their constituents.  Maybe we're already there.  And yes, you are right, many government agencies have contracted-out a lot of support services, including the post office, the police, the courts, and yes, even the military (often with disastrous results).

Privatized NGO's are perhaps one reason we stayed in Iraq and Afghanistan far too long. We weren't building democracy, we were protecting the lucrative billion-dollar contracts that companies had to "rebuild" the infrastructure we bombed to pieces.

Sadly, I am not sure this trend will reverse itself.  Privatization is or was a buzz-word for the Democrats as well as Republicans, at least since the Clinton era.  Clinton laid-off many GS-2 and GS-3 government employees, who were hired back as "contractors" at lower wages with fewer benefits.  It allowed him to say that he shrank the government to the smallest it has been since the Kennedy administration.

But of course, it was Reagan who got the ball rolling on privatization.  Free market solutions was the mantra of the 1980s - replacing failed government programs with privately run programs that also failed, and ironically, ended up costing more money in the long run but lined the pockets of political supporters who got these government contracts.

Yea, yea, yea, the GOP whines about "big government" but that is only lip service.  Sadly, the rank-and-file still believe this to be true, so they vote Republican for "small government" even as it gets larger year after year.  Both parties lie about this.  But one more than another.

Sadly, I doubt that for-profit prisons will go away anytime soon.  In "Red States" I am sure they are popular, as the governor's nephew gets the contract to run the prisons (act shocked).  And I doubt the Supreme Court will view them as "cruel and unusual punishment" as such a case would be hard to prove.

But the system sucks, and it seems all we are doing is creating a permanent underclass of people, who, once they are sucked into the system, usually on minor drug charges, are locked into it for life, as their opportunities for jobs are basically nil, once they have that first arrest.   After a few infractions, they are pretty much "in the system" forever, with parole or eventual release a sad joke, as there is always some infraction or crime they are alleged to have committed (or commit just to survive) that keeps them inside.

Government should not be a for-profit industry.  It is an expense we all have to pay for.

Civilization isn't cheap.  Pony up!

UPDATE:  This article illustrates the inherent conflict of interest in private prisons, or in this case, youth detention centers.  Thousands of children, illegally incarcerated, right here in the USA, without even a fair trial or right to legal counsel, all so some Judges could get $2M in kick-backs - of taxpayer money!  Worse yet, We lived 100 miles away from there when this all blew up, but I don't recall reading about any of it in the paper or seeing anything on the television.  Scary!