Fixing Baseball's Salary Problem Without a Cap

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Fixing Baseball's Salary Problem Without a Cap

With the Yankees' recent signing of Mark Teixeira there has been a lot of criticism from the baseball world as to the wild spending of Hank, Hal, and Cashman over the last month. The problem is obviously not the Yankees, if you have money why not spend it? The problem is Major League Baseball.

They don't regulate spending, they don't help out small market teams with nearly enough revenue sharing, and they allow the Florida Marlins of the world to draw 700 fans, spend $15 million, and get a nice, new, shiny stadium. When people see a spending problem their first reaction is to put in place a salary cap.

Salary caps have had mixed results. It worked in the NFL. No, not every team competes every year, but the Lions and Cardinals have bad management. It's not like they are being terribly out spent by the Patriots and Colts of the world. The NBA's salary cap however is a joke. No one cares about it. If they have money, they just pay the fines. In a star driven league owners will pay to get big players on board.

But a salary cap would be even more disastrous in Major League Baseball. It would set the league back a couple of decades, and would completely decimate the baseball economy. A lockout would follow, most likely for more than a year, and baseball would never be the same again. 

Lets look at what happens if we put a low ($90-$100 million) cap in place. Of course MLB couldn't do this in one year, even the most extreme cap supporters have to realize that, but say they put it in place over five to 10 years. And let's, for a second, pretend they don't have to get it past the MLBPA.

As the cap slowly went down, teams would be forced to renegotiate contracts or buy players out. The market value for the average Major League player would go way down. Instead of a few teams out there reinvesting most of their money back into their teams all owners would be forced to pocket a good deal of their revenue. This is what players fought to prevent during the '60s in the lead up to the first MLB free agent.

Teams controlled players, there wasn't much money in the market, and owners got rich while players were paid far less than they should have been. Now we have to look at the MLBPA. I don't think the organization who's job it is to get the most money and the greatest quality of life for it's players would like this salary cap.

Think about how it would devastate player contracts. No team could sign Mark Teixeira for eight years, $180 million guaranteed. The MLBPA holds a lot of power because, quite simply, they can stop baseball until they get what they want. They did it in 1994, and that was for far less than an $80 million salary cap. A lockout could go on for years, baseball would not recover. 
Now lets look at what would happen if we put in a reasonably high ($175-$200 million) cap. First of all the MLBPA would appose it. It doesn't matter if every team was bellow the cap, the PA wants to raise payrolls and get the players paid. Even if they could somehow get the PA to sign off on this, what is it going to do? There are still few MLB teams willing to spend $100-$150 million in payroll, even if they make that much in revenue.

The Yankees would max out their cap, and the lower teams would be about $150 million bellow. This would just exaggerate the problem. MLB teams would begin paying full salaries just so smaller market teams would take on their big contracts for injured or aging players so they could continue to approach the cap. This would just make the problem worse. Small market teams would be LESS likely to compete and baseball would become a joke.
There are also those who would like to see a payroll range. Somewhere in the $80-$100 million range. I have a major problem with this. Teams operate differently, and the only way to compensate with that would be a $50 million or great difference between the cap and the floor.

Because we have seen how un-pleasant that would be, I just don't see it happening. Maybe at some point in the future MLB can elect a committee to put forth a salary cap at the start of each off season based on the current revenue in the league. This however would be assuming that league revenue continues to grow.

In a league with guaranteed contracts, there is no such thing as lowering a salary cap. That just doesn't work. 
But what do we do about it? My proposal is simple. Share revenue so that everyone has a chance to sign a few big name players. Then enforce a salary floor so that teams will not be able to take this revenue and hand it to the ownership group. This would create a semi-level playing field. I don't think MLB will ever by completely fair, but I'll tell you, there would be far more teams in it for Sabathia and Teixeira if they were getting forced to spend $75 million anyway.

Owners, seeing they had to spend, would go after big name guys in hopes that they could fill a few more seats and make more money. The PA would be thrilled. Instead of three or four teams able to offer Teixeira that kind of a contract, now all 30 teams would theoretical have a shot. They would all have enough money, and they would HAVE to spend it on someone. 
There are a few more important economic issues baseball should work on. First free agent compensation. The Brewers traded Matt Laporta for CC Sabathia in July. They got a few months and a playoff birth out of him, and for that their fans are happy. But he has gone to sign a $160 million contract with the Yankees and the Brewers are left with the Yankeees second round pick.

Guess why? Because their first round pick is going to the Angels for Teixeira. You see Elias sports Burrow has come up with a stupid formula for ranking free agents. Sabathia was less than a point bellow Teixeira, but it doesn't matter. First, get rid of Elias. They have been nothing but trouble ever. They held on to the traditional scorecard and refused to share information with the public in the '80s and '90s. Put STATS Inc. or Baseball Info Solutions in charge. Both would do a FAR better job. Next we need to fix the compensation it self.

The Angles should have gotten the 27th pick, but the Brewers should have gotten number 28 (or 27a and 27b). The Yankees then should have given up later round picks to compensate teams that didn't get the Yankees first first round pick. 
Next Major League Baseball has to get some kind of slotting system in the draft. 

Boras runs the thing and teams are afraid to pick the best players because they might refuse to sign. There should be regulations as to what kind of bonuses you can pay latter round picks, forcing players to accept being drafter earlier if they wanted their money and to accept a reasonable sum once they are drafted.

We also need to somehow incorporate Latin American players into some kind of draft. Again, these guys are signed by agents and go to the highest bidder. Smaller market teams rarely have the resources to compete in this area. 

Something has to be done, however I don't really expect Major League Baseball to think about a lot of these things. Major League Baseball is a business, and as Bud Selig likes to say it's doing better than ever (or was). Fans will get pissed that the Yankees and Tigers spend 10 times as much as them, but in reality the real problem in this league is poor revenue sharing and greedy owners.

I doubt anything is done to level the playing field for a long time, small market teams can and do win, and I think the likelihood of anything extreme ever happening is slim to non. Selig already has steroids on his resume, he's not going to take on another strike on top of that.

Don't expect anything to be done until he is gone. However if something is done the worst thing it could possibly be is a cap. A cap would ruin baseball, it would kill the player market, and it would send them into a lockout they might never recover from.
Alex Geshwind is a sabermetric baseball analyst for Fantasy Bullpen
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