Corrections Corp - Intriguing Value, But Will Inmates Roam The Streets Soon?

CXW is a private prison operator, running around 70 high-security and temp holding facilities for federal and state governments. Bull thesis, which has been working up until recently, is simple: number of prisoners in the country is growing (2.3M now, 5% CAGR from 1980, although slowed down to 2% recently), government prisons are overflowing (running at 105%+ capacity), and with no capex in sight utilization will continue to be tight. In come the private operators, who can run the facilities cheaper and construct them faster - why not just outsource to them? In fact, that's what has been happening, as private operators share of new "beds" (fun industry term) has climbed from 10% in 96 to 30% in 2007. They're still at low levels of penetration though: 160K beds for the industry (or 7% share), so assuming the # of inmates in the U.S. grows at 2%, and private institutions get ~30% market share of new beds going forward - that's 8% growth! CXW is the leader with 47% share of private market, and with barriers to entry high - states don't just want to send inmates to a non-proven operator, they can expect to get their fair share of the pie. So 8% growth long-term - not bad, right? Couple of hiccups though.
A) States have huge holes in their budgets. With this they may try to cut pricing.
B) Obama, in spirit of his mj-smoking youth, may decide to ease up on drug abuses, which account for 20% of U.S. inmates, which would be a huge hit to utilization of the industry.

I think B is scarier than A (doubtful that states would just let everyone roam free, if CXW resists price cuts), but B is more difficult to assess, and is a longer-term threat. Overall, the valuation at 10x P/E is attractive, and I would expect to grow to ~14-15x, implying 50% upside. For the moment, I'm staying away though.