Salary Caps Are A Bad Idea

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.

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.

Firstly, 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.

A 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.

Parity – 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.