Prison monopoly threatens Michigan jobs
http://detnews.com/2002/editorial/0204/16/a13-466062.htm
Tuesday, April 16, 2002
By Lawrence W. Reed / Special to The Detroit News
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 it out of business
before it got off the ground, probably before government regulators even
found out about it.
Yet such a firm does exist. 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 more than 100 of the nation's correctional
facilities make up the captive work force of FPI. They make clothing,
electronic and vehicle components, industrial items and dozens of other
products including one of crucial significance to the economy of west
Michigan -- office furniture.
The idea of convicts working at something while serving their time is a
laudable one. 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 road sides free of litter.
But FPI is controversial because there's much more to it than prisoners
keeping busy and out of trouble.
FPI enjoys preferential treatment in government contracts. Indeed, the
status it enjoys would more aptly be called a "monopoly."
Federal law since 1934 designates 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,
unless FPI itself grants a waiver.
This monopoly status puts FPI in an extraordinary position. It determines
whether its products for sale and its own delivery schedule actually meet
the needs of the purchasing agency. If a federal agency wants something, and
FPI makes it, FPI sets the terms. Agencies are even prevented from
conducting market research to find out if private industry can supply them
with a better and cheaper product.
U.S. Sen. Carl Levin, D-Mich., points out that "many federal agencies
have been forced to purchase products that cost more, and perform less well,
than products that are available to the rest of us in the commercial
marketplace." He cites the General Accounting Office (GAO), which compared
FPI prices for 20 representative products with prices for identical or
comparable products in the catalogues of private vendors.
The GAO found that for almost half of the products reviewed, FPI charged
a higher price than most or all of the private vendors -- which, unlike FPI,
must pay taxes to governments, dividends to shareholders and market wages to
employees. When federal agencies made those costly purchases, they did so
with taxpayer dollars.
Such poor policies and practices do harm even to the federal government's
core responsibility -- providing efficient and effective national defense.
The U.S. Navy testified that what it buys from FPI is "inferior, costs more
and takes longer to procure" than comparable goods produced by the private
sector. When the armed services have to spend more than necessary for desks
or electronic components for weapons systems, they have less to spend for
planes or bullets.
FPI's heavy-handedness has hurt companies and workers who sell goods to
the government. For example: An Alabama company supplying military field
jackets to the armed services was forced to close a plant and fire 300
employees when FPI decided to dramatically increase its share of that
market.
Without congressional intervention, FPI is poised for significant
expansion. It now claims, without citing any statutory authority, that it
can offer its goods in the private marketplace to firms that do business
with the government. FPI also claims it can sell services (like packaging or
data entry) in the private marketplace without limitation.
West Michigan furniture makers, already reeling from a soft economy, are
rightfully up in arms about Federal Prison Industries. More than a third of
what prisoners make is furniture, and the agency's policies and plans
represent an unjustifiable threat to the health of the industry and
thousands of west Michigan jobs.
Legislation offered by Congressman Peter Hoekstra, R-Holland, would
address the problem by requiring FPI to compete for federal contracts and
prohibiting the agency from selling in the private marketplace. His bill, HR
1577, would also enhance public oversight of (and tighten the standards for)
any future FPI expansion plans. It is set for a vote in the House Judiciary
Committee later this month.
Unfair competition from privileged agencies of government is nothing new,
but when it comes from prisoners doing time because they broke the law at
the expense of taxpaying, law-abiding citizens, both fairness and economics
demand that something be done about it.
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Lawrence W. Reed is president of the Mackinac Center for Public Policy, a
research and educational institute in Midland. Write letters to The Detroit
News, 615 W. Lafayette, Detroit, Mich. 48226, or fax to (313) 222-6417 or
send e-mail to [EMAIL PROTECTED]
