This article from 2007 does a great job of re-iterating (well, pre-iterating, I suppose) the problems with the fact that we don't have a functioning mental illness infrastructure in this country. As we've said in this space before, it takes a lot more money to imprison the mentally ill than it does to treat them: "Taxpayers in Miami-Dade County spend $100,000 each day to house the mentally ill in prison; moreover, studies show that people with mental illness stay in jail eight times longer than other inmates, at seven times the cost."
It also includes a short history of policy in the United States that goes into a little bit more detail than "Reagan closed the state hospitals in the 1980s," including the nugget that President Kennedy signed a bill in 1963 to create the first national network of mental health facilities. But then he was assassinated, the Vietnam War distracted us, and the project was never funded.
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