Paying for Crime and Punishment: The Turbulent Economy Is Causing Economic Havoc, but It Also Promises to Bring an Unfortunate Side Effect-A Rise in Crime. How Will Cash-Strapped State and Local Governments Pay for the Law Enforcement to Cope with the Growing Number of Criminals and the Prisons to House Them?

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While the nation is preoccupied with its current economic woes, crime is taking a sizable bite out of the average American's wallet. In 2007 per capita income in the United States was $38,611, according to the U.S. Bureau of Economic Analysis, while the annual economic impact of crime was, by one estimate (described below), $5,125 per capita. In other words, more than 13 percent of Americans' income is allocated to crime-related expenditures.

These expenditures ranged from increased retail prices to offset shoplifting losses, to crime prevention measures like security cameras and surveillance systems, to funding the nation's prison and law enforcement industries. Perhaps the most visible of those expenditures is law enforcement, including the costs of making arrests and running prisons.

With the crime rate expected to increase while the economy sags, states in the Southeast face not only the challenge of funding space to house a growing number of prisoners but the even more pressing challenge of paying for more law enforcement officers to deal with the rising crime rate.

Crime trending upward?

The $5,125 annual per capita cost of crime cited earlier is an estimate--adjusted for inflation using the consumer price index--of a statistic originally calculated by David Anderson, a professor of economics at Centre College. In 1999, Anderson's study "The Aggregate Burden of Crime," published in the Journal of Law and Economics, set the cost at $4,118. According to the National Center for Policy Analysis, Anderson's research was a landmark because it considered costs not included in previous studies. Some of the new factors were opportunity costs of time lost by victims, criminals, and prisoners, as well as the cost of private deterrence (such as home security systems) and losses related to the fear of being victimized. His model also included decreases in property values of real estate and buildings because they are located in high-crime areas as well as the costs associated with commuting to the suburbs to avoid crime in the city center.

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In the decade since his study was initially published, Anderson said he doesn't think the numbers have changed much--with one exception. "My study was pre-9/11 and doesn't capture anti-terrorism expenditures," he said. But even if domestic crime expenditures have not risen, Anderson feels that one statistic--the crime rate--is probably …