River Avenue Blues

River Ave. Blues ยป Salary Cap

Reinforcing a point: Baseball does not need a cap

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Yes, we know some baseball owners have been whining and moaning about the need for a salary cap in the wake of the Yankees’ winter spending spree. Brewers owner Mark Attanasio was the first to stand on the soap box and declare: “At the rate the Yankees are going, I’m not sure anyone can compete with them.” Astros owner Drayton McLane offered similar sentiments. A’s owner Lew Wolff tried to pass off his support of a cap to the betterment of the sport: “Parity is what we’re looking for.”

I’d estimate the chances of baseball adopting a salary cap at zero. The owners wanted it back in 1994, and we all saw how that turned out. There’s no chance they risk another labor stoppage over the cap issue. It’s dead and buried, despite a handful of owners crying about the big, bad Yankees. Yet it’s an issue that’s sure to come up plenty this season, especially if the Yankees get off to a hot start.

A few baseball writers have joined the small chorus in favor of a salary cap, but the San Francisco Chronicle’s Bruce Jenkins makes a compelling case against a cap. He brings up a number of old arguments, but he lays them out in an easily digestible manner. It means a lot coming from a guy who writes about the Oakland A’s, a team with a relatively low budget. He notes the parity we’ve seen in baseball over this decade:

This decade has given us the very essence of baseball parity. Recalling the seven World Series matchups prior to Rays-Phillies, we find Boston over Colorado, St. Louis over Detroit, White Sox over Houston, Boston over St. Louis, Florida over the Yankees, Anaheim over the Giants and Arizona over the Yankees.

In other words, seven different winners in eight years, and only three teams even appearing twice over that span. Do we see the Yankees winning any of those World Series?

Jenkins also isn’t afraid to call out owners on their own foolishness. I couldn’t agree any more with this paragraph:

But let’s not hear owners – people who, ostensibly, built a fortune through smarts and good sense – crying, “Oh, somebody save me from my mistakes.” Teams fail because of their own stupidity and ill-advised transactions, not because they’re short on cash. What the Rays pulled off was no miracle, nor was it an aberration. That was just a flat-out superior team, built on dimes, nickels and guile.

He then goes onto compare baseball to the NBA, where they have a (largely ineffective) salary cap. Teams often trade contracts, not players. Their trades are also more complicated than necessary due to the cap and the rules regarding salary swaps. He correctly notes that only a handful of teams really compete in the NBA each year, and that in the past 30 years baseball has seen 20 teams win it all, while the NBA has seen nine. Yes, nine, as in, can count them on two hands.

I think Craig at Shysterball has a nice take on the issue:

Sure, no matter what the economic situation is, the Royals would never have been able to sign CC Sabathia. But without a salary cap in place at least there is an enemy to complain about in the Yankees or their skinflint owner or their brain dead GM or what have you. What do Kansas City bargoers complain about if there is a salary cap? Section 1.5(A)(1)(i)?

Such a discussion wouldn’t even be worth the beer.

Me? I think that the lack of a cap allows teams a greater flexibility in building their teams. Using Craig’s example, if the Royals think they’re one piece away from a serious title run, they can break the bank and bring in a big-name superstar, either via free agency or a trade. With a cap you can be one piece away and stuck right there, because the cap prevents you from make a team-benefitting move.

There’s also something to be said for playing to your strengths. We heralded the A’s after the release of Moneyball because they used their strength in statistical analysis to find inefficiencies in the methods of evaluating talent. That strength is considered by some to be more virtuous than that of money, since many of these teams can never have a level of capital equal to the Yankees. Yet it’s still a strength the Yankees posses. They pay the price for it, too. As many have noted, signing CC Sabathia, A.J. Burnett, and Mark Teixeira guarantees nothing for the Yanks. They have to pay dearly, in terms of money, in terms of long-term commitment, and in terms of draft picks. Since their greatest strength is the dollar, they’ve chosen to use it in the best possible manner. If they chose to focus on the draft, but didn’t have a particular strength in drafting amateur players, that would be a mistake.

I know we’ve harped on this topic a lot this winter, perhaps too much. Yet I think it’s a topic worthy of robust discussion. There are some in favor of a salary cap in the name of parity, but an overwhelming amount of evidence suggests that no further parity would be created by instituting a cap.

The small-market argument against a salary cap

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As the Yankees have gone on something of a spending spree this winter, netting the team three of the top free agents around, small-market clubs bemoan the spending. The Brewers were unamused with the Yankees. The Marlins’ David Samson voiced his concerns, and the Astros have grumbled about the spending as well.

So with all of these complaints come the inevitable discussion about a salary cap. If the luxury tax, designed to penalize the Yankees, isn’t reining in the spending, should baseball adopt a spending cap? While the Players Union would never agree to a cap, a few good baseball minds feel that the smaller market teams wouldn’t be so keen to take on a cap either. The problem arises not on the upper bounds of the cap but on the lower.

Shawn Hoffman, writing at Baseball Prospectus, elaborates on this argument:

Using 2008 as an example, the thirty teams took in about $6 billion (not including MLB Advanced Media revenue), for an average of $200 million per team. Forty-five percent of that (the players’ share) is $90 million, which we’ll use as the midpoint between our floor and cap. If we want to make the floor 75 percent of the cap (a low-end figure, relative to the other leagues), we can use $77 million and $103 million, respectively.

With a $103 million cap, nine teams would have been affected last year, and a total of about $286 million would have had to be skimmed off the top. Since total salaries have to remain at existing levels, the bottom twenty-one teams would have had to take on this burden, which had previously been placed on the Yankees, Red Sox, et al. On the other end, fourteen teams would have been under the payroll floor, by a total of $251 million. Even discounting the Marlins’ $22 million payroll, the other thirteen teams would have had to spend an average of $15 million more just to meet the minimum. Some of those teams might be able to afford it; most wouldn’t.

Imagine being Frank Coonelly in this situation. Coonelly, the Pirates’ team president, has publicly supported a cap. Had our fictional cap/floor arrangement been instituted last year, the Pirates would have needed to increase their Opening Day payroll by $28 million. Not only would the team have taken a big loss, but Neal Huntington’s long-term strategy would have been sabotaged, since the team would have had to sign a number of veterans just to meet the minimum payroll.

It’s clear to imagine a situation in which teams would not be able to support a minimum payroll. Just look at the economic turmoil that has descended upon our nation and its impact on the sport.

Hoffman notes that the best system is one that redistributes revenue and creates opportunities for more teams to make the playoffs. In fact, his proposed best system is the one baseball currently employs, and he’s right. The current playoff system works.

In any situation, some teams will always emerge at the top of the spending pile. New York City is bigger and wealthier than any other city in the country, and the Mets and Yanks will have a natural advantage that they should embrace. But baseball has developed ways to spread the money around, and smart GMs can put together very competitive teams with limited resources.

In the end, a cap discussion is mostly just sour beans. Other teams are envious, and they’re not as good at putting a roster together under the Moneyball approach. Meanwhile, a salary cap makes for some nice January discussion, but it will never happen.