The Price of Policy

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1:35This is Wall Street Week. I'm David Weston bringing you stories of capitalism. The world of futures contracts tied to specific events is exploding. Whether it's predicting the outcome of the New York mayoral election or the ending of a government shutdown. What do they tell us? And do they need regulation like any other futures markets? Plus, President Trump has moved against the big Chinese clothing exporters, avoiding tariffs under the so-called de minimis rule. But what other businesses is he catching in his net? And last week, it was health care. This week, we take another look at an area where artificial intelligence is already being used to transform a critical sector, this time education.

2:18But we start with a story about putting a price on the priceless, our freedom. What happens when society concludes that some of us must lose that precious freedom? And how do we handle the difficult business of detaining people in what we hope is a safe and a humane way? It's something we've dealt with for thousands of years, but is now front and center amid new efforts to detain and deport those who are not in the United States legally. It's a story that's in the news every week. I have sent Congress a detailed funding request laying out exactly how we will eliminate these threats to protect our homeland and complete the largest deportation operation in American history.

3:04President Trump was elected in 2024 in part because of his strong stance on immigration, keeping out those who try to enter the country illegally and deporting those who have already come in outside the rules. Whether one agrees with his deportation policy or not, it is happening on an historic scale, which raises the question of how best to do it. There's a lot of money involved. Oh, this is big money at a high rate of return. Most of the money is going to private companies who run the detention facilities. What DHS does is it contracts with other entities, sometimes counties, and most often private companies, and those companies run the facilities instead.

3:50There is nothing new about private detention. The first modern federal contract dates to the mid-1980s under President Ronald Reagan. Corrections Corporation of America, today CoreCivic, helped pioneer the model. Damon Heininger, a former correctional officer, now leads CoreCivic, one of the largest private prison and detention operators in America. Our very first contract was with then INS, now Immigration Customs Enforcement. But the value proposition is to bring private sector innovation, being very nimble, being very flexible, provide high-quality solutions and outcomes at a very low cost to government.

4:33Along with the ramp-up in immigration enforcement has come more demand for core civic services. Not even a year into its second term, the Trump administration says it has deported more than 400 ,000 people, which comes at a big cost for the government. Earlier this year, Congress passed the one big beautiful bill authorizing roughly$170 billion for immigration and border operations, with$45 billion designated just for detention capacity expansion. We need detention facilities. We need beds to put them in place so that they can have their due process before they return home. Some 60 ,000 people are currently detained, with nearly 90 % of them in private facilities owned or operated by companies like CoreCivic or GeoGroup.

5:20It's main competitor, and that's helping drive profits. According to CoreCivic's second quarter earnings figures, ICE contracts account for a majority of its revenue. We don't get involved in policy, but obviously there has been a lot of discussion leading up to the campaign and the election last year and this year about getting stronger enforcement on the southwest border and also doing a fair amount of interior enforcement with DHS and turn our customer ICE. We obviously didn't know what the outcome was going to be in the election. And I've always stressed this as CEO to plan well in advance before there is an outcome on our national election, especially like the one we had last year.

6:02Investors moved quickly after the 2024 election. Core Civic's stock jumped before President Trump was even sworn in, as Wall Street priced in tighter immigration enforcement and more detention spending. The explosion in ICE These detentions may have been good for the business of companies like CoreCivic, but it's come with a fair amount of scrutiny and criticism. Margot Schleinger, a University of Michigan law professor, previously served in the Department of Homeland Security in the Obama administration, overseeing civil rights and liberties of detainees. There is a range of conditions. Some of the detention facilities are better than others, And some of them are more stressed than others and are less good at dealing with the stress of high populations or particularly needy populations.

6:52Why is it that the federal government essentially delegates this or contracts it out to private companies? Congress made a decision a while back that it didn't want to set up the Department of Homeland Security to run a large system of detention and run it itself. So the Federal Bureau of Prisons has correctional officers who run facilities. ICE does not. ICE does not have the kinds of people who just day in, day out run the facilities. So that's been its general approach since the founding of the department in 2003. Core Civic says that there are checks and balances in place to try to ensure that detainees are being treated humanely.

7:36Really, since day one, we wanted to meet all national standards within our facility. So American Correctional Association, which has been around since 1870, they set national standards on how facilities are designed, how big are day rooms, how big are cells, how big are the food service area, medical, maintenance, etc. Do those apply to ongoing treatment while people are in your custody? They do, yes. So they'll have general standards that come in, they'll calibrate the review based on our population. So again, if they're coming, you know, if we've got auditors coming in from the ACA to do a review at a facility for an ICE, and those standards have, again, kind of evolved over time, not just the standards from ACA, but also from our partners.

8:19But this is important. I'm not sure everyone knows about this. There are independent auditors from ACA that come in and monitor what you're doing, apart from DHS or ICE or anyone else in the government. Virtually all of our facilities have full-time on-site auditors and monitors. And so these are government employees where we are required by contract to give them space in the facility where they can set up offices and have space to where they can do their kind of day-to-day review of the operations. But they got unfettered access to the facility 24 hours a day, seven days a week. We've all seen reports in the press about the mistreatment of detainees.

8:53Knowing what you know, how do you respond to that? Is it, number one, the reports are wrong, or number two, it's just not CoreCivic? You know, the vast majority, I'd say 99 % of the stuff that we see in newspapers or speculated in online or on socials is incorrect or false or maybe not incomplete relative to information. We got in our iFacility like 1 ,000 government employees that have unfettered access to our operations. Now, having said that, and I often say this to investors, you have 14 ,000 employees. Not every single employee is going to make the right decision every single day. And so, and that's the case obviously with any large organization.

9:35There's also the question of where all these detention facilities will be located and whether they help or hurt their home communities. One of the largest for-profit sites in the nation is GeoGroup's Folkestone Ice Processing Center in Georgia. In June, the county commission approved an expansion from just over 1 ,100 beds to nearly 3 ,000. County Administrator Glenn Hull helped shepherd the deal. The process to expand the GEO facility and the contract with ICE took about four months. Overall, the relationship is good, not only from an operating standpoint, but from a revenue standpoint. The GEO group and the facility contributed about$655 ,000 to our tax collections, which makes about 12 % of our overall income.

10:22That is significant because as we have an out-migration of jobs and industries, we need to fill the gap in rural America. This is where the rubber meets the road.

10:36For Folkston, a city with a population of less than 5 ,000 people and few job openings, the expansion provides both tax revenues and hiring opportunities. The job count from the geo facility is 632. About 551 of those are in Georgia. In Folkestone specifically, 198 jobs. There's been a longstanding debate over whether jails and prisons and the expansion of jails and prisons, and that's what these are. These are basically facilities that are like jails and prisons. Whether those expansions actually help communities. I think the best evidence is that long term it does not. but there's definitely some short-term influx of money.

11:20Charlton County has been through many iterations. Back when US 1 was a vibrant corridor through here before the interstates in the early 70s, we had a mill here in Folkestone. Some time ago that mill closed and all of those jobs went away. When you have an economy that's based on kind of blue-collar work and those jobs go away, so do the people, so does the tax revenue. I think it's important to understand that these serve as lifelines on ground zero. Without a detention facility, we wouldn't be surviving as a county. It's not a lot to offer here when it comes to jobs, per se, and if they are, they're on a lower scale.

12:02Despite the possible economic benefits of hosting a detention center, not everyone there is happy about having one in town. Local pastor Antoine Nixon was born and raised in Folkestone and opposed the expansion. My mindset was we failed again. I think it's been a growing concern here for the citizens, especially as of late, with some of the things that our commissioners have been okay with. I'm not proud to say we have a prison here. There's no kids who are going to graduate who are going to say, I want to graduate and go work at the prison. I think we ought to start providing better outcomes and start looking at what's better for our children's future.

12:41When you look at our community, why is it here? Why did they choose Folkestone? You're not going to go in those maybe educated areas, people who are really standing up against things like that. You're not going to bring that into those areas. I think Folkestone sits as a prime example and a prime place as many other places do, where you can go in and you can dangle the golden apple in front of people and you can just make them these promises that ultimately end up being nothing. And then once they suck you dry, they move on and find other places. It's like leeches. Once they have all they want to get from you, then you're left to fend for yourselves.

13:22And so I'm not happy about that.

13:27Detention and deportation of those who have entered the United States unlawfully remains as controversial as ever, if not more so. And although there are those who, like Reverend Nixon, think it simply can't be justified no matter what the benefit, there are also those who believe this new business of detention can be a lifeline for their community. What I would say is, like, let's have real conversations with people that live in rural America as opposed to having academic arguments about what tension facility is and what it is not. It's one thing to have a human rights conversation. It's a completely another one to have an economic development conversation.

14:06And then there are those who are running a legal and profitable business and trying to do it the best way they can. I think the general view is from a policy perspective, we've done a good job. We're very important part of the solution for these jurisdictions. And I think from an investor perspective, I think the risk that may be assigned for our business in the past, maybe it's not as great. In the end, there is no simple answer to the question of how the markets can price the freedom of individuals or whether they can. But until a better solution comes along, all we can do is our best.

14:43Coming up, prognosticators putting their money where their mouth is. The brave new world of futures in events contracts. and whether they can tell us who the next mayor of New York will be.

15:06Goldman Sachs' 2026 outlooks. From global growth and regional perspectives to deep dives into asset classes and portfolio allocation, Goldman Sachs' research examines the trends shaping the global economy. For insights to help you stay a step ahead, listen to Exchanges Outlook 2026 from Goldman Sachs.

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16:39This is a story about telling the future or at least discounting it by paying attention to a whole lot of other people telling the future. The business of making a market and futures contracts tied to events is exploding. They may be fun. They may make some people some money. But do they tell us anything about what is around the corner? I think our goal with prediction markets is really to allow every person that has an opinion on something to find that market and that big event that they care about to be able to trade on. Luana Lopez Lara is the co-founder and COO of Calci, the first events contract exchange regulated by the Commodity Futures and Trading Commission.

17:20The company is currently raising funds at a valuation of$5 billion, even as the Intercontinental Exchange seeks to buy Calci's rival, Polymarket, for closer to$10 billion. While we went to MIT, the one thing we realized is that most trading happens when you have an opinion about what's going to happen in the future and you find a way to put that in the market. So you think this country is going to go into a recession, or you think this person is going to win an election or Brexit is going to happen. And you find a way to express that view in the market to hedge some risks that you have or also to get exposure to something.

17:54And what we realized was there should be a better way to do it. For us, it was why is there no direct exchange, that you can just trade directly on what you think is going to happen. Former Treasury Secretary Larry Summers sees real value in prediction markets like the ones Calci and Polymarket have created, not only for the people betting on events, but also for those hoping to learn about the outcomes. Polymarkets is probably the largest of the various prediction markets that are out there. There are a number of them. I think these are a very useful tool because what markets do, markets where people can place a bet, take a position, is they enable you to get access to a kind of consensus opinion where people aren't just talking, but they have to put their money where their mouths are and they're taking a stake in something.

18:51So let me give you an example. I don't live in New York. It's not my primary interest, but I do follow the New York City mayoralty election. There was a development. Mayor Adams withdrew. How much did that change the likely prospects of the election? One could have formed a judgment by trying to think about it. One could have formed a judgment by reading a lot of political analysts. In fact, you could just look at the prediction markets. That, I think, is the value. It helps us all be more informed, more informed about even when there isn't much information available about what's likely to happen in politics, what's likely to happen in foreign policy, what are the prospects of an agreement between Russia and Ukraine.

19:45I don't think anybody sensible would pretend that these estimates are exactly right, or these estimates are estimates that can be completely relied on. But I think there's a great deal of evidence from elections, from sports judgments, from other efforts at forecasting, that looking at these prediction markets provides what's a better and more reliable sense of which way things are going to go than talking to a single favorite expert. Do prediction markets like poly markets potentially replace polls? I mean, polls have come under some siege. It's gotten harder and harder to do them. And by the way, are they more susceptible of being gamed?

20:38David, I don't think they replace polls any more than the stock market replaces earnings forecasts. The stock market reflects earnings forecasts and helps people process what a company is worth given divergent discussions, but it wouldn't be able to function if there weren't data and there weren't analyses and projections of future earnings. So, no, I don't think that prediction markets are a substitute for polls. They are a way of processing the information in polls if you're not yourself a pollster, in a much better way. Scott Rasmussen is a traditional pollster and editor-at-large of Ballotpedia.

21:31And as challenging as the business of polling has been in recent years, it's far from clear that prediction markets can replace it. The definition of a good poll for most people is one that confirms what they want to see. And a lot of the criticism about polling is because of perceived inaccuracies or perceived biases. And a lot of that has to do with the difference between conducting a poll and interpreting the poll, between the polling and the analysis. 2016 is a year that I constantly hear people say the polling was wrong. Well, actually, the national polls in 2016 showed that Hillary Clinton would win the popular vote by three points.

22:15She won by two. On the state-by-state polls, there were 47 states where there were no surprises whatsoever. There were three states that were a shock, the big blue wall states. My point to all of this is that the analysis, the way you look at the polls and the way you read them has as much to do with the polling is or with the interpretation of the polls as anything else. Scott, how has technology changed your business, maybe made it harder, particularly in getting representative samples in, the things like cell phones as opposed to landlines? We do almost all of our work now online through different panels and text approaches and other things.

22:54Every one of those, every polling methodology you use, and this has been true forever, has certain biases that you have to correct for. When we were doing phone polling exclusively, if you had to call into an urban area, you didn't get as many people answering the phones because they were out doing other things. So we would have to consciously work to place more calls into those areas. Today I believe that pollsters can get a pretty good sample if you're careful with your methodology. if you're talking about a survey of registered voters or a survey of all adults, because we have census data, we have good models for what that should look like.

23:40Where pollsters have struggled in recent years and will continue to struggle is in the question of likely voters. Who's actually going to show up on Election Day? And as we all know, in close races, that's decisive. And now there's a new technology in town called artificial intelligence. How is that changing polling? Is it making it better? The thing that first made polling better, by the way, was having a lot more competition and a lot more pollsters because we actually had to improve our game. Right now, artificial intelligence is reshaping all kinds of industries in ways that we can't imagine.

24:16I'm working on a project with Jigsaw, which is a tech incubator inside of Google. We're going to have a national conversation with five people from every congressional district. The difference in this poll, this is not to determine who's going to win the midterms or the 2028 presidential election. We're focused on what does it mean to be an American in the 21st century. This gets to one of the core problems in polling, and this is where AI can help. We don't all speak the same language anymore. So what we're doing with this project, we're asking questions, but we're letting respondents answer in their own words.

24:58We also are seeing a rapid uptake in so-called prediction markets or these futures markets tied to specific events contracts. How do those fit into the world of polling, if at all? They don't fit into the world of polling. But I will tell you that on election night, whether I'm doing analysis or if I'm sitting at home, I watch the prediction markets because you've got a whole crowdsourced army of people out there who are looking for the latest news. And if I see a candidate going from a 70 % bet to a 40 % bet quickly, I say, oh, something has gone on here. I need to investigate and find out what it was.

25:38Leading up to election night, though, prediction markets are heavily dependent on polling. If you don't have polling, the prediction markets wouldn't be nearly as good as they are right now. What prediction markets have done is they're, in effect, another analyst. They're looking at all of the data. They're looking at the polls. They're also looking maybe at who's voting early. They may be looking at some other factors going on in the campaign. And they assemble that in a way that an analyst can't. No individual analyst could combine all of that information. So I like the crowdsourcing aspect of it.

26:20But again, it's not really a replacement for polling. There's all kinds of data that's out there today that we can look at and analyze and think about. And prediction markets are another important tool. Up next, President Trump triggers the law of unintended consequences, aiming for big Chinese apparel companies and hitting a small watercolor artist in Devonshire with sweeping tariff changes.