The Federal Prison Industries Empire

By Reed, Lawrence W. | Ideas on Liberty, September 2002 | Go to article overview

The Federal Prison Industries Empire


Reed, Lawrence W., Ideas on Liberty


Imagine a company that pays its workers as little as 25 cents an hour and often charges more for its goods than any of its comPetitors, even though it pays no taxes or dividends. The marketplace would put such a firm out of business before it got off the ground, probably before government regulators even found out about it.

Yet an outfit that does all that really exists. It's not a private one operating in a free market. It's a half-billion-dollar government enterprise that wants to get bigger, at the expense of taxpayers and the jobs of workers in the private sector. Welcome to the world of Federal Prison Industries, Inc., or FPI-a unit of the U.S. Justice Department.

More than 22,000 inmates in over 100 of the nation's correctional facilities make up the captive work force of FPI. They make clothing, electronic and vehicle components, furniture, industrial items, and many other things-nearly 300 different products in all.

The idea of convicts working at something while doing their time is laudable. States often employ them to maintain and refurbish the very facilities that house them, or to produce goods and services for sale to each other, or to keep roadsides free of litter. An argument can be made that as an alternative to idleness, putting inmates to work, educating and training them for skilled jobs when they leave prison, is a good public investment-and some of that happens in federal prisons right now. But FPI is controversial because there's much more going on than just keeping prisoners busy and out of trouble.

When the proceeds of inmate work are used for restitution in behalf of victims or for covering the costs of their incarceration, some good accrues. But for practical reasons, there's pitifully little in effective restitution in our judicial and penal systems. And FPI income is not earmarked for the costs of incarceration at all. The taxpayerfunded Bureau of Prisons (BOP) picks up the tab for food, housing, recreation, education, health care, and security. Federal rules also prohibit the use of FPI revenues for the construction or acquisition of prisons. BOP (read: taxpayers) provides all the land and buildings for FPI facilities, rent-free, and even provides free power and water. When FPI wants to expand, the funds to do so don't come from inmate work; the BOP simply uses your tax money and mine to pay for it.

Economist David Martin explains some of FPI's other advantages: "It pays no social security tax nor does it pay for unemployment insurance or workers compensation. It carries no insurance for property damage, product liability, or other customary business loss exposure.... It is exempt from all federal and state income taxes, gross receipts tax, and property tax.... It doesn't have to deal with federal and state regulations of such things as occupational safety and health, pollution, employment discrimination, and the hiring of illegal aliens." This isn't the first instance of Congress exempting itself or the entities it creates from its own rules, but the special privileges for FPI don't end there.

FPI enjoys preferential treatment in government contracts. Indeed, "monopoly" more aptly fits its status. Federal regulations since 1934 designate FPI as a mandatory supplier to the federal government, which means that federal agencies must purchase from FPI, and private firms that sell the same or similar products are cut out altogether, unless FPI itself grants a waiver.

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