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Private Prisons: A Reliable American Growth Industry

Aug. 21, 2009 9:05 AM ETCoreCivic, Inc. (CXW)48 Comments
Carneades profile picture

With the exception of the government's borrowing and spending activities, there are hardly any segments of the US economy that appear to have been inoculated against the recession which began in December 2007. There is one aspect of society however, that has continued to expand despite the difficult economic circumstances: the prison population. Additionally, and contrary to what many believe, the construction and management of jails and prisons are not functions exclusive to the government. In fact, the fourth largest correctional system in the nation is owned and operated by the Corrections Corporation of America (NYSE:CXW) - only the federal government and two states operate prison systems containing more bed space than CCA. As you can see from the chart below, the United States prison population has consistently risen since 1980 (earliest year I could find available data).

Total US Prison and Jail Population 1980-2007
Furthermore, over the same 28 year period, the total US jail and prison population has represented an increasingly larger percentage of the total US civilian population.
Prison/Jail Population as % of US Civilian Population
Regardless of whether the US economy has technically bottomed or not, the reality is that cities and States across the country are dealing with substantial budget gaps that will require difficult decisions. (The same is obviously true at the federal level, with the exception of the difficult decisions part; Washington tends to avoid those). The situation is unlikely to improve in 2010, as continued property reassessments will diminish the property tax base even further. That being said, the decision to privatize prison construction and operation should appear ever more attractive to States looking to save money.

Let's assume for a moment though that, for whatever reason, the growth of private prisons does not deviate from its current trajectory, and CCA simply continues doing what it has over the past 5 years. Construction Corp. of America has clearly demonstrated solid revenue growth over

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Carneades profile picture
I am a financial analyst for a private real estate investment firm. I maintain several professional licenses. I have a B.S in Political Science, and am in my first year of business school. I am happy to field questions via email at Carneades2009@gmail.com.

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