Corrections Corporation of America: In the last few decades, the United States has witnessed an explosion in the number of people behind bars. This move towards mass incarceration is an anomaly that began in the 1980s, prompted by the War on Drugs and a slew of tough-on-crime laws which were adopted nationwide. Over that period, the national prison population grew so quickly that federal and state governments simply ran out of space for offenders. As a result, government agencies began contracting with newly-established private prison operators to handle the overflow. More on Corrections Corporation of America below.
Having seen mass incarceration as an opportunity for profit the private prison industry grew rapidly, in lock-step with the US prison population, to the multi-billion dollar industry it is today. And leading this industry is Corrections Corp Of America (NYSE:CXW), a publically-traded prison operator with a history of horrendous prison conditions and human rights abuses.
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In the process of building the largest prison system in the world, state budgets have exploded into anunmitigated disaster as correctional spending has become the fastest growing area of expenditure,behind Medicaid. As a result, all stripes of government have been forced to undertake sweeping reforms to reduce their prison populations and cut their corrections spending.
The US prison population peaked in 2009. Since then, states have embraced a cascade of criminal justice reforms designed to reduce incarceration rates and dismantle 30 years of over-criminalization and draconian sentences, which were once popular, but now only seen as a burden on taxpayers. Most incredible of all is that these reforms have been the result of bipartisan action. Where historically the illsof mass incarceration were a liberal issue, conservatives are joining the fight on financial concerns.
The damage these reforms are causing Corrections Corp Of America (NYSE:CXW) is obvious. For example, CCA has halted a major construction project, is experiencing a glut of empty beds, and is expected to report its first-ever annual revenue decline this year. In fact, a number of Corrections Corporation of America’s customers are terminating some or all of their contracts with the Company. Notably, California which represents 12.2% of Corrections Corp Of America (NYSE:CXW)’s revenue base is expected to cancel all its contracts with the Company in the next few years.