I thought The Wire's "Hamsterdam" episode was a great parable on what would happen in America if an influential politician fought inertia and tried to implement socially responsible drug policies: http://en.wikipedia.org/wiki/Hamsterdam
Much more influential are the prison guard and police unions and organizations. In California alone they oversee more prisoners than all the private prison operators combined and they are very active in strengthening sentencing[1].
But as stated by others the main problem is the politics. There are real problems and politicians can score points with naive voters by "doing something". On the other hand reducing sentences is a very risk position for politician to take.
Blame the politicians and voters as it is their responsibility to set the rules of the game. All the other parties are simply acting in their self-interest.
[1] http://www.policymic.com/articles/41531/union-of-the-snake-h...
I don't think it's as easy as blaming the voters. The political system seems caught in a negative feedback loop, greased by lobbyist money and with no clear offramp.
[1] http://www.propublica.org/article/by-the-numbers-the-u.s.s-g...
* Many politicians, like most people, are idiots. Partly because many voters are also idiots.
* Politicians don't have strong incentives to stop problems. (But they don't have strong incentives to preserve problems, either. They're only incentivized to be popular.)
* Principal-agent problems. Even if a politician comes up with a brilliant solution, the people lower in the chain won't execute it well, because they often don't have strong incentives to.
Anyway, there was a conspiracy to preserve problems, any particular politician could start solving problems. This would likely place him above his peers. Then his peers might backstab him, but they also might join him, since he'll have increased popularity. Essentially, we have a sort of iterated n-player prisoner's dilemma; or rather, at each step we choose m people (non-randomly) to together participate in an m-player prisoner's dilemma. It might be interesting to try to model this mathematically.