Does MLB Need a Salary Cap? A Looming Labor Struggle Is On The Horizon

Erik DianaCorrespondent IDecember 24, 2008

Yes, the rich just got richer. The New York Yankees just stuck their middle finger up at the establishment again and sent shockwaves throughout Major League Baseball. The signings of A.J. Burnett, CC Sabathia and Mark Teixeira really have separated the Yankees from everyone else in terms of payroll. And the Yankees will claim this is good for baseball.

The Yankees now have the four highest paid players in baseball: A-Rod, Jeter, CC Sabathia and Mark Teixeira. Is this good for baseball? Well, let's examine this thoroughly.

The Yankees are all the rage in baseball right now. Everybody is talking about this signing. The NFL is about to have its last week before the playoffs and the Yankees made another huge splash in December.

George Steinbrenner would be proud of his sons Hank and Hal. They've made their big splash. They followed in their old man's footsteps and cut checks that have their fans talking and giddy with excitement.

Brian Cashman also looks somewhat smart here because he still can claim that the Yankees are being frugal (as much as the Yankees can be) because their payroll threshold will be markedly lower than last year. He also avoided a potential Manny vs Girardi showdown that could have raped team chemistry. The Yankees also still keep their 1st and 2nd round draft picks.

The reason that the Yankees can indulge in this type of excess and put player development on the back burner (again) is because Yankee Stadium is going to be a cash-cow! For Star Wars fans, the New Yankee Stadium represents the Death Star!

Seriously, the Yankees just leaped past every team, including the Red Sox, in the amount of revenue they have coming in now. Between the New Yankee Stadium and YES Network the Yankees have shown how they can be recession proof. Or they'll give the appearance that they are insulated from a recession.

What makes the new stadium even more palatable for New York is they can write off any and all maintenance on New Yankee Stadium against the amount of luxury tax they'll pay. And this is fair. If you have a mortgage you get to write off the payments when it's income tax season.

The Yankees just paid a $26.9 million tab because of the amount of their payroll. Them being serial offenders of the luxury tax threshold they were taxed at a 40% level.

Now, the Yankees can bring in a lot more revenue to sign free agents and they get to write some of this money off they pay to other teams for spending their own money. The Yankees get two huge victories here. Other teams got reliant on the Yankees' money that they had to dole out every year for going past the luxury tax threshold.

The Rays, Pirates and Royals definitely enjoyed the revenue. Now, that stream is drying up a bit. Small market teams may not have enough money to subsidize signing their free agents as they pass through arbitration onto their free agent years. This perpetuates the gap between the Yankees and everyone else.

What else is frustrating for small market teams is that a team like the Tampa Rays gave hope to baseball and its fans that it is possible to win with a small payroll. But what if the Rays don't make it to the playoffs next year? What happens when their core of players like Longoria, Upton, Garza, Pena, Shields and Kazmir all become free agents? The Rays had to do a lot of losing to get a farm system and organization that became loaded the way it is.

What also makes this maddening for the Boston Red Sox is that they now have to adjust their model of doing business because the Yankees are going to be light years ahead of them financially. Their respective markets are just too far apart for things to remain status-quo for Boston. John Henry has even admitted that the Yankees are significantly ahead of the Red Sox in terms of financial capabilities again.

If you remember correctly, the Red Sox blew everyone, including the Yankees, out of the water to sign Matsuzaka. Their posting bid for the star pitcher was over $50 million dollars. The Yankees looked cheap compared to Boston in the process.

Because the Yankees didn't have the money rolling in from a new stadium they couldn't afford to pay the luxury tax, their bad contracts and a myriad of other things they had to contend with. The Yankees appeared to be in a quandary with their payroll and players with their respective performance on the field.

The team was bloated and inflexible by 2004 and they had no prospects they could deal to trade for talent. And the Yankees certainly couldn't step back and rebuild. The Steinbrenners never would have gone for that, especially George himself.

It's also the biggest reason why the Yankees didn't sign Carlos Beltran and the Mets did. The Yankees had to choose between Randy Johnson and Carlos Beltran. If this situation were to happen today, the Yankees could have their cake and eat it too.

The Red Sox have done their business diligently. Adding seats and improvements to Fenway park, most notably seats on the Green Monster. They created NESN that brought in much-needed revenue to fulfill their quest of being an A+ franchise. This still might not be enough to lure in certain free agents.

If the Yankees can blow them out of the water this is going to be a problem. Luckily, if you're a Sox fan, they have a very deep farm system that will need to churn out propsect after prospect. But it is still a problem.

All of this will create a problem in the next couple of years. You and I both know that the MLBPA is ecstatic about the Yankees spending over 420 million on players' salaries. And their is going to be a testy negotiation period coming in two years.

Lest you and I forget the Players Union opened up the Basic Agreement and amended a collaboratively signed labor agreement twice to test for steroids. This is no small matter when one thinks of the history of the Union in baseball. Marvin Miller built the powerful union in the world and was a master at winning public sentiment and making the owners look like fools. 

The other owners are enraged by the Yankees' spending may decide to try and put a hard salary cap on the game. The Yankees have already signaled that they will spend whether the country is in a recession or not. They're not afraid to stick their middle finger up and cut a check. They've even been called "drunken sailors" by their counterparts in ownership.

In 2002, there was a 29-1 vote to put a luxury tax on teams that spent over the allotted threshold. Guess who had the lone dissenting voice? Yep, you guessed it. The Yankees voted against it! Did that stop them from spending maniacally? No, George Steinbrenner plowed ahead with his middle finger raised high.

The acquisitions of Gary Sheffield, Kevin Brown, Alex Rodriguez, Raul Mondesi and others proved his point: The New York Yankees play by their own rules! It still wasn't enough. The Yankees signed Johnny Damon, Andy Pettitte and Roger Clemens to exorbitant contracts after that. Again, it was the Yankees flexing their financial might.

Now, there could be a movement to reign in the Yankees massive spending by putting a hard salary cap. The only team that would have a problem with this would again be the New York Yankees.

This was the biggest point of contention in 1994 when there was strike. If the owners decide to try and place a salary cap on the game the MLBPA will have a major problem with this.

The Players Union is already going to have a litany of issues to bring about at the bargaining table. There are many issues that will come up in this contentious process and now the very thought, whisper or even murmur of a salary cap could sound the alarm for a strike.

The Players Union has suffered their first significant setbacks in the last few years ever. And no, it wasn't because the owners were smart enough to pull the wool over their eyes. It was because they got taken through the ringer by Congress over the steroids issue. The Players Union was so combative that they lost sight of the fact that the public opinion differed markedly than their stance.

Bud Selig, a former owner whose job it is to work for the owners, delivered the heads of Gene Orza and Donald Fehr on a platter to Congress. It was his only play and he almost didn't play that correctly. To further alienate the Players Union he had George Mitchell, a man who profits from the Red Sox launch an investigation into steroid abuse. Needless to say the Union did not greet the situation with alacrity.

But to the credit of Bud Selig and the Players Union they did negotiate a much tougher steroid policy that also included amphetamine use. Congress was pleased with the progress and Bud Selig's Mitchell Report may have saved even more Congressional oversight. Trust me, the Players Union will not forget this.

Also, what sticks in the craw of the Union is the fact that Barry Bonds is not employed. Many players from Bobby Abreu, Jason Giambi, Manny Ramirez and Derek Lowe are still unemployed and their market value is declining day by day. The owners were already found guilty of collusion once under the leadership of Peter Ueberroth. Many players still have never forgot what the owners did and will never let them forget it either. 

What also makes things interesting is the fact that Alex Rodriguez only had one offer on the table. Granted, it was highest offer ever in the history of baseball. The Yankees ended up bidding against themselves and gave A-Rod a 10 year deal worth $275 million and added clauses that will escalate the contract up to the $300 million after he hits milestone homeruns. But still one offer nonetheless!

So this is the landscape that a new Basic Agreement must be forged with. A process that is painstaking for years will be made tougher because of a recession and the steroids issue. The Yankees are going to have to fight against other owners in the game wanting to place a hard salary cap on the game of baseball.

If the owners are persistent and want to put a cap on the game it could spell another painful, terrible and lengthy strike. Let's not forget that the homeruns that steroid users were belting out of the parks were the reason why fans started to embrace the game of baseball again. And Bud Selig sat back and termed the Steroids Era a "Renaissance."

If baseball has another strike it may deal a deadly blow to the establishment of Major League Baseball.

It's weird the Yankees excess is both good and potentially bad for baseball. This is why the Yankees, not the Red Sox, not any other team, are far and away the most important entity in Major League Baseball.


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