Gulag nation.

Photographer: Chantal Valery/AFP/Getty Images

Fewer Prisoners, a Better Economy

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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Imprisonment imposes a huge burden on the U.S. economy. First, it can cost more than $30,000 to keep a person in prison for a year. Next, there is the forgone income that prisoner would have earned had he or she been outside and working. Some of that gets made up in the form of forced prisoner labor, but even if we put aside the moral problem of using prisoners as slaves, it must be the case that this labor is being used suboptimally.

But the biggest cost may be the impact on the prisoner’s lifetime earning capacity. It’s extremely hard to get a good job after you get out of prison. The economic scar that even a short prison term leaves on a person’s life represents productivity that is lost to the rest of the nation. It also provides a powerful economic incentive for ex-inmates to turn back to lives of crime.

The U.S. has been paying these costs for many years now. Although the U.S. has just 5 percent of the world’s population, it has 25 percent of the prisoners. Autocratic states such as Russia and China don’t keep anywhere near the same percent of their people locked up. In 2008, incarceration cost U.S. taxpayers almost $75 billion -- about as much as the food stamp program in 2014.

Of course, these costs don’t take the benefits into account. Getting criminals off the street almost certainly reduces crime, which is a drag on the economy. Also, prison serves a very important deterrence function. But could it be that the U.S. is way past the efficient level of incarceration? Does keeping almost 2 1/2 million Americans behind bars really pass a cost-benefit test?

Fortunately, some states are beginning to experiment with de-incarceration. My home state of Texas -- hardly a wimp when it comes to criminal justice -- is  one of these. In the last five years, Texas’ imprisonment rate has fallen by 10 percent, reaping big savings for the state government. It was cost considerations that motivated both Republicans and Democrats in the Texas legislature to begin imprisoning fewer people -- in 2007, new projections showed that if the state remained on its high-incarceration path, it would have to spend $2 billion more a year by 2012. If there’s one thing Texans like less than being soft on crime, it’s having to pay high taxes.

Anyway, Texas started reducing its prison rolls. How did the experiment turn out? Well, since 2010, crime in Texas has dropped by a staggering 18 percent. If reducing the incarceration rate has caused a bump in crime, it sure isn’t showing up in the statistics.

Texas’ experiment doesn’t prove that reducing incarceration rates cuts crime. But it does tell us something important about crime and punishment in the U.S. during the past half century.

In the 1960s, crime began to skyrocket -- not just in the U.S., but in other rich nations around the world, though it was most severe in the U.S. The crime wave peaked in the 1980s and early 1990s. About 1980, the U.S. finally got tough on crime -- the percentage of people behind bars soared by almost 400 percent.

Mass incarceration was just one of many things the U.S. did to try to stem the seemingly unstoppable tide of crime. The U.S. also put more police on the street, increased anti-drug education, and did a whole lot of other things. Given that at the crime wave’s peak, more than 20,000 Americans were being murdered every year, it made sense to try everything, even if that meant locking up millions of people.

 But the great crime wave is over. Crime has plummeted since the early '90s -- it is now back down to early 1960s levels, and continues to fall. And, belatedly, the U.S. is starting to lock up fewer people. Incarceration rates have fallen by about 10 percent from their peak. And, just like in Texas, national crime rates continue to drop. Putting former criminals back on the street is simply not turning the U.S. back into a violent urban jungle.

This trend needs to continue. Many of the billions the U.S. spends on incarceration could be better spent on things like roads, bridges and scientific research -- or assistance for the poor. Or tax cuts. And the U.S. workforce will be more productive when millions of people who could have been put behind bars are instead put to work. One way of accomplishing this may be to rein in overzealous district attorneys. But whatever the method, the goal is clear -- the U.S. experiment as a gulag nation has run its course, and needs to end.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Noah Smith at nsmith150@bloomberg.net

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net