What would you do to reduce incarceration rates?
I would start with a reform of drug laws inspired by Portugal [1]. We're not sure if the same solution can scale to the size of the US, but we can introduce reform incrementally, starting with the decriminalization of Marijuana. (Which I think most would find agreeable.)
Education reform is important too. Obama is pushing reform to get states to increase the age of required education to 18 [2]. This sounds like a good idea on paper...we'll have to see how it pans out. His push for increase utilization of community colleges also makes sense, since they provide a decent education for the increasing number of Americans who can't afford college.
1: http://en.wikipedia.org/wiki/Drug_policy_of_Portugal 2: http://www.washingtonpost.com/blogs/answer-sheet/post/obama-...