UPDATE: This article, originally published on Sept. 28, 2015, has been updated with developments in the Democratic presidential race and information on tonight's debate.

NEW YORK (TheStreet) -- Should private prisons profit from mass incarceration, with taxpayers picking up the tab while profit goes to investors? Presidential candidates Bernie Sanders and Hillary Clinton don't think so.

It's one topic that may come up at Tuesday's Democratic presidential debate on which the two agree. Sanders, a Vermont senator, has introduced a bill banning such institutions, arguing that it's "wrong to profit from the imprisonment of human beings and the suffering of their families and friends." He has also started a petition seeking voter support.

Clinton says she, too, would phase out private prisons. The former Secretary of State and New York senator recently met with Black Lives Matter, a group of activists formed in response to shootings of black men by white police officers, to discuss criminal justice reform and race issues in America. 

"Our criminal justice system is out of balance," Clinton says on her website. "Although the United States has less than 5 percent of the world's population, we have almost 25 percent of the total prison population. A significant percentage of the more than 2 million Americans incarcerated today are low-level, nonviolent offenders."

Both candidates' policy proposals have the potential to inflict serious damage on U.S. corporations that have built sprawling businesses running correctional facilities for federal and state governments whose own prisons are overcrowded.

While such companies house less than a fourth of all federal prison inmates in the U.S., they bring in billions of dollars a year in revenue and note in regulatory filings that their income depends on maintaining the good will of their government customers. The largest private prison operator, Corrections Corp. of America (CXW - Get Report) , posted sales of $1.65 billion in 2014, 90% of which came from federal and and state funding. GEO (GEO - Get Report)  the second-biggest, made 42% of its $1.69 billion in 2014 sales from U.S. customers.

There's also a substantial risk from efforts to curb mandatory sentencing guidelines, a push to promote rehabilitation as a less costly alternative to putting people behind bars and the easing of some criminal laws, including those that prohibit recreational marijuana use. 

Sanders is among the advocates of rehabilitation, as opposed to longer prison sentences that resulted from so-called zero tolerance laws that gained popularity in the 1990s and helped the prison population mushroom.  The number of people incarcerated in the U.S. has grown from about 500,000 in 1980 to more than 2.2 million today, he said.

"At a time when we are spending $80 billion a year on our correctional system, it makes a lot more sense to me to be investing in jobs and education than in jails and incarceration," he said when he introduced his "Justice Is Not For Sale"  bill in mid-September. "We need to start treating prisoners like human beings. Private companies should not be profiting from their incarceration."

It's unacceptable, he argued, that private prison operators are spending millions lobbying politicians "to keep more Americans behind bars" with progressively harsher sentences. "The profit motivation of private companies works at cross purposes with the goals of criminal justice," he said.

Private prisons have been criticized for failure to keep inmates safe and provide sufficient oversight as well as for practices such as exploiting inmates and their families with high-cost banking and telephone services.

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In June, a federal judge found that the Mississippi Department of Corrections had failed to provide inmates at the state's privately operated Walnut Grove Youth Correctional facility with "reasonably safe living conditions."

U.S. District Judge Carlton Reeves refused to end a decree resulting from an American Civil Liberties Union case three years earlier -- which included a period between 2010 and 2012 when GEO Group ran the site -- that required the state to improve conditions. The lawsuit followed a critical report by the U.S. Justice Department's civil rights division

Mississippi ended its contract with GEO in 2012, according to both the state and the company.

"Most prisoners do not die in prison; they serve their sentences and are subsequently released," Reeves wrote in his decision. "How they are treated while in prison affects how they will reintegrate into society upon their release. As such, public confidence in our criminal justice and public safety systems is vital."

How successful the private-prison proposal from Sanders will be, particularly with a gridlocked Republican-controlled Congress that has struggled just to approve budgets, remains to be seen. Members are already positioning themselves for a campaign season that culminates with presidential elections next fall, and House Speaker John Boehner, who frequently struggled to corral his fractious party, recently announced his resignation. 

A successor has yet to be chosen, and the most likely candidate, House Majority Leader Kevin McCarthy of California, has withdrawn from the race.

Ultimately, the risk to prison operators from political initiatives may come more from adverse media coverage that prompts investors to sell the stock rather than reductions in revenue, said Canaccord Genuity analyst Ryan Meliker. Today, private prisons house close to 20% of federal prisoners; their inmate populations doubled from 2000 to 2010 as overcrowding in traditional institutions forced governments to search for alternatives.

Private companies are often able to operate prisons more cheaply than public agencies, he noted.

"It's unfortunate that politicians advocate against these benefits without themselves providing any solutions to the serious challenges our corrections and detention systems face," said Corrections Corp. spokesman Jonathan Burns. "Overcrowding, high recidivism rates and skyrocketing costs aren't solved with politics or posturing."

In 2013, 18 states and the federal government were operating at 100% capacity and six states -- Illinois, North Dakota, California, Alaska, Massachusetts, and Nebraska -- were at 125% capacity, Canaccord's Meliker found.

"Despite a plateau in the absolute growth of incarcerations, the privatization of the prison industry continues to gain share," he reported.

And should proposals to focus on rehabilitation rather than imprisonment gain traction, that may actually offer an opportunity to private prisons to provide new services, said Ohio State University law professor Douglas Berman.

"There's a mass opportunity," he said, and it's unlikely "that a decrease in the overall prison population is going to radically change the market potential here."

Florida-based GEO Group, the largest private provider of community-based reentry services, youth services and electronic monitoring programs in the U.S., is already taking advantage. While the company operates 106 correctional and detention sites, it also offers community supervision to 115,000 people.

"We are enthusiastic about the opportunity to expand our delivery of offender rehabilitation services," Ann M. Schlarb, a senior vice president who heads the company's rehabilitative programs, said on the company's second-quarter earnings call. "The emphasis on offender rehabilitation and community reentry programs as part of criminal justice reform will create significant growth opportunities for our company."

While private prisons often claim they can save money, University of California-Santa Cruz professor Craig Haney, who specializes in assessing prison environments and the psychological effects of incarceration, said he hasn't typically seen better services than state or federal institutions.

"The one problematic area, from my perspective, is oversight: They are more difficult to monitor and to monitor effectively, in part because they typically operate with somewhat less stringent rules," he said. "The accountability issue is a real, significant problem in the case of many private facilities."

Because the private prison industry doesn't work the same way as others, it's difficult to perform an accurate cost-benefit analysis, Berman said.

"The problem is that the entire 'customer base' is a combination of state officials who have to go through the whole budgeting process, but they don't get the services," he said. "The customer base here is the prisoners: That's where the problem lies. This is never going to be a traditional functioning market that ensures the private prisons have to compete, not just on price, but also on value for the dollar."