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In the wake of the free agency splurge conducted by the New York Yankees, there seems to be a new wave of uproar among baseball fans, writers, and even a team owner regarding the spending habits of the Steinbrenner clan.

Steinbrenners

Collectively, the Yankees will be dishing out $423.5MM for the services of Mark Teixeria, C.C. Sabathia, and A.J. Burnett, which would be excessive even if the global economy wasn’t going through the worst downslide in history.

But guys, I think we need to take a deep breath here and be rational.

ALCS Red Sox Rays BaseballFirstly, the idea that you can “buy a championship” has been disproven. We shouldn’t be having this conversation right now since a) the Rays and Red Sox still have a good shot at leaving the Yankees home in October once more, b) the Yanks haven’t won a World Series since 2000 despite the fact that they’ve had the highest payroll in baseball every single year since 1999, and c) we’ve been talking about this same topic for way too long and we’ve gotten nowhere.

Salary caps are not the answer and I don’t understand why we want to make the owners any wealthier than they already are. If they can’t spend the money they make, they’re going to keep it. And no, this won’t mean that ticket prices will go down because the market’s already been set. People are willing to shell out X amount of dollars for a seat so that’s the price. It’s unrealistic, and quite frankly, anti-capitalistic to expect anything else. Plus, if there’s even a whiff of a pending cap, the MLBPA will shut down baseball for god knows how long. And who does that benefit?It doesn’t help the owners, the players, and certainly doesn’t help the fans.

carl-pohladA steeper luxury tax is a possibility, but really, it’s Yankee-proof. Why? Because unlike many other owners, the Steinbrenners actually spend the money they earn to make it worthwhile for the fans. Say what you will about the family but they are not exactly cheapskates. According to Forbes Magazine’s annual list of the 400 richest people in America, George Steinbrenner’s net worth ($1.3B) trails those of Carl Pohlad (Twins – $3.6B), Ted Lerner (Nationals – $3.5B), Mike Ilitch (Tigers – $1.6B), Drayton McLane (Astros – $1.6B) and Tom Hicks (Rangers – $1.4B).  And this doesn’t even include the major conglomerates like The Tribune Company (Cubs), Liberty Media (Braves), Rogers Communications (Blue Jays) and Nintendo (Mariners).

And in 2007, the Yankees spent roughly $190MM on payroll – and reported an operating deficit of $47.3MM, by far the worst return in all of baseball. So what did they do in response? RAISED their payroll to $210MM in 2008. Of course, the Yankees do not want harsher luxury taxes. But their past behavior indicates that they will not compromise their on-field talent as a result of it. On the flipside, 27 of the 30 teams profited in 2007. The Nationals, Marlins, Mets, and the White Sox all made over $30MM a piece.  So all that will end up happening in a luxury tax scenario  is a redistribution of wealth among the owners – from ones willing to spend to the ones that don’t. This doesn’t sound like it’s in the best interests of baseball.

So let’s consider what the fans are demanding here.

richierich1Parity – the idea here being that if payrolls were more evenly spread, teams such as the Pirates, Royals, Nationals and Orioles will be competitive. This is wrong.  All of these teams have internal personnel issues that prevent it from succeeding. They’ve made bad decisions, plain and simple. The Orioles have gotten better and restocked their minor league system that should bear fruit over the next few years. But the others are still hopeless and have no one to blame but themselves. The A’s, Rays, Twins, Indians, Marlins, Rockies, and Brewers are just some of the small market teams that have competed over the last couple of years primarily through their farm systems.

Affordability – to an extent, this one may end up fixing itself, at least temporarily. Baseball owners know how to make money. And no matter how high atop a mountain their residences may be, they know that those below haven’t been raking in the dough. They’ll do what’s best for the organization and either stabilize or even lower the cost of attending games. Whereas the Mets and Yankees will be raising them due to their new stadiums’ abilities to generate additional revenue. This is capitalism (by the way, it’s kind of funny how people who were so afraid of socialism embrace the idea if it benefits them).

I know that this makes me sound like a blue-blooded jackass. Trust me, I’m no blue-blood (but I cannot prove that I am not a jackass) and only have a very rudimentary knowledge of economics. But the alternatives just don’t make sense to me. Why shouldn’t the most popular teams be able to reward their fans’ loyalties with a winning product? Why do we attack the Steinbrenners for spending their income to do so? Shouldn’t the Nationals fans (all four of you) be angry that their team had a 2007 payroll of $37MM when the organization made $43.7MM? To me, that’s far more offensive than what the Steinbrenners are doing.

Who knows how the 2009 Yankees will perform. They may end up winning the World Series, they may end up out in the cold, or somewhere in between. But if someone bet you $100 that the Yankees will win their 27th championship next year, wouldn’t you be pretty confident? I mean, that’s 29 other teams that could net you $100. Baseball’s a funny game. The best teams don’t win as often as we think. No matter how much money exchanges hands.

51 Responses to “Salary Caps Are A Bad Idea”

  1. “Certainly a large payroll will never guarantee anything, and there are plenty of examples of small-market teams having success, but is there anyone who would argue that the Twins wouldn’t be better if they could afford to keep Johan Santana? Again, that isn’t to say that keeping him would have gotten them to the Series, but it almost certainly would’ve resulted in at least one more regular-season win, which would have put them into the playoffs.”

    This is the kind of illogical thinking that tends to fuel these debates, and I’ve never understood how they persist. Let’s first clarify that in the NFL, they use a HARD salary cap, and in the NBA, they use a SOFT salary cap, contrary to what commenters keep saying. The difference is that in the NFL, if you exceed the max, you pay an exhorbitant fine, I believe, every day you are over that number. On the other hand, in the NBA, you can go over that number to pay your players, but you still are charged a more reasonable luxuary tax. The fines in the NFL are so harsh that it makes it economically impossible to break the ceiling, but in the NBA, a team like the Knicks can be over the cap every year while fielding a god-awful team.

    What this poster and most others have been asking for is a HARD cap, like the NFL has. Great. But what makes you think that will allow the Twins to keep Santana? First of all, Pohlad (or now his heir) is in no way required to go anywhere near the maximum allowed. Second of all, even if he wanted to (highly unlikely), if he is fielding the kind of team that is primed for a WS, and you think payroll confers quality of players, it’s not unreasonable to assume that the Twins payroll would already be high in such a situation. This happens to NFL teams all the time, which is why good, even great players, often play for multiple teams. Teams MUST cut quality players year after year to keep themselves from hitting the cap, or else to operate where the owner prefers. Cheap owners DO exist in the NFL, and if you look at the payroll breakdown between all the teams, you will see that some teams have no qualms about being near the cap, while other teams act as if the cap is 40 or 50 milion lower than it really is. The Marlins will still central fund money in any system you put them in.

    So you say, fine, a soft cap then. But if you say that, how is that different then what we have now? The biggest difference is that the Twins would make a bigger profit while demanding Minnesota pays for its new stadium, and the Yankees pay their luxuary tax as usual.

  2. “The Marlins will still central fund money in any system you put them in.”

    That should be, they will STEAL central fund money in any system.

  3. A couple other reasons I can add:

    -Teams (okay, the Yankees) have money committed to long-term contracts, and it’s really not fair or logical to establish a cap until those contracts expire. That means a salary cap couldn’t go into effect until 2018 (when A-Rod’s deal will finally be done).

    -I really don’t think the arbitration system would work with a cap…teams would need to know what they’re paying a player next year (or at least a ballpark figure) to be able to manage their cap.

    -I really don’t see any reason for MLB to step in and demand a salary cap, revenue-wise. The most popular (and, I assume, richest) league in the world is the EPL, which is the worst example of parity that you could come up with (only four teams ever have a chance at the title).

    http://blogs.timesunion.com/whitaker/?p=463

  4. Coley Ward says:

    Paul says fans want parity and affordability, but I think they want one more thing: familiarity. Look at the Marlins. They’ve won two World Series titles. They were competitive in 2008 and will be legit contenders in 2009. As for affordability, I’m going to go out on a limb and guess Marlins tickets are some of the cheapest in baseball. Yet the fans don’t show up. Why? Ownership will tell you it’s because the team plays in a crappy stadium, but I think it’s because every time a Marlins player makes an all-star team, they trade him. Maybe that’s what you’ve gotta do as a small market team to compete with the big market teams. But it obviously doesn’t do much to encourage fan loyalty.

  5. Paul Moro says:

    Why does BP do everything better than me? Oh wait. That’s right. They’re smart.

  6. Detroit Michael says:

    The Yankees didn’t report a $47.3M loss in 2007 and then raised payroll. They have not publicly reported their financials ever that I know of. Perhaps you are picking up the Fortune estimates, but those exclude their affiliated ownership of the YES Network. Given that the Yankees’ ownership is rational, they wouldn’t raise payroll if they were losing tons of money. Given that teams’ resale value rises over time, that’s even better evidence that they are not losing money.

  7. The Yankees and Mets can afford to pay out more in salary than other teams because they split the biggest baseball market in the world. To level the playing field, a third team in NYC is an answer. Would the Mets and Yankees allow it? Of course not. They’re all for free enterprise, but only if it’s free for them, and them alone.

  8. To Brad: Getting beyond whether the Mets or Yankees would “allow” a third team, I’m curious as to why you think that would change anything? You know NY used to have three teams before the 60s, right?

    Further, you mention NYC is the biggest market in the U.S. This is true. But then a reader like you might turn around and refer to a place like Florida as a small market. I don’t know by what standards you are determining market size, but you should know most of the teams labeled as “small market” actually operate in fairly big markets.

  9. We can always complicate the salary cap argument by saying the Nationals are poorly run, a cap is anti-American or the “look at the Twins” argument. Every one of those points can easily be countered, but that only complicates things further.

    However, its not that complicated. I think everyone would agree that having more payroll than anyone else is an advantage on the field. That perpetual advantage is unfair – its as simple as that.

    Advantages should be born of superior scouting, evaluation of talent, on the field managing and the play of the players. These advantages should not come from the balance sheets of their corporate owners or from the TV networks allowed by their geography. While 99% of Yankee fans think a cap is not needed now, if Bill Gates decided to devote his wealth to a baseball team those fans’ opinions would quickly change.

    Extra payroll is not just about getting the next big free agent, but its the ability to recover from mistakes (Pavano, Brown), spend in a pinch (Clemens) and outspend others by so much the player can’t say no (CC). Extra payroll gives your fans off-season excitement of the hot stove league, and every reason to think your team will compete next season.

    Baseball is broken. Its not destitute, but its broken. Like the boiling frog, MLB is slowly sliding into obscurity in smaller markets throughout the country.

    Check out http://WWW.BANBASEBALL.COM for salary cap news and comments. Its a pro baseball site that just wants to be sure baseball stays around.

  10. Sarah Green says:

    Hi Jesse. Funny that you should mention Bill Gates. While he did make a lot of money (despite famously dropping out of Harvard) Microsoft is now under fire from Google — a company that started out as very “small market” about 10 years ago. You say that the arguments against salary caps are easily countered, but that Yankee fans (and presumably, fans in other “big market” areas) would switch their arguments if a richer owner took over a competitor. I could just as easily claim that you would change your argument if your team’s owner started spending more money.

    As Karl pointed out, even teams called “small market” teams operate in fairly large markets. I mean, Florida is pretty damn big, yet both Florida teams are considered small-market clubs. Meanwhile, Boston is not even one of the 20-largets cities in the US, and yet all of New England supports the Red Sox enough to grant them a huge revenue stream. Why? Because we love baseball. And we loved it even through 86 years of futility.

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