Much scholarly attention has been paid to the school-to-prison pipeline and the sanitized discourse of "death by education," called the achievement gap. Additionally, there exists a longstanding discourse surrounding the alleged crisis of educational failure. This article offers no solutions to the crisis and suggests instead that the system is functioning as it was intended--to disenfranchise many (predominately people of color) for the benefit of some (mostly white), based on economic principals of the free market. We begin by tracing the economic interests of prisons and the prison industrial complex, juxtaposing considerations of what we call the "educational reform industrial complex." With a baseline in the economic interests of school failure and prison proliferation, we draw on the critical race theory concept of "racial realism," to work toward a theory of educational and penal realism. Specifically, we outline seven working tenets of educational and penal realism that provide promise in redirecting the discourse about schools and prisons empowering those interested in critically engaging issues of racism that permeate U.S. orientations to education and justice.