Tuesday, June 30, 2009

Cap & Trade

At the suggestion of a reader, Within Reason has decided to tackle the topic of a potential salary cap in Major League Baseball. This is a hot topic in the world of sports talk, and pops up every time the Yankees, Red Sox and Mets set new payroll records while low payroll teams like the Pirates, Royals and Nationals continue to dwell in their respective division cellars.

For this topic, I decided to reach out to my friend Randy, a knowledgeable source for all things sport, and fellow Fantasy Baseball addict.
Please feel free to weigh in by posting a comment, and enjoy.

Within Reason: It was suggested by a commenter that I write about the issue of a potential salary cap in MLB - where do you stand on the issue?

Randy: Oh my. My neighbor and I had a huge discussion on this. He knew more about the compensatory draft picks than I do, but we both fell on the side of wanting a cap. However, I will say that I also want a minimum team salary number as well.


WR: Is there a particular reason you think a cap is necessary?

R: I tend to like competitive balance and while there are examples that this already exists (the Twins, A's, etc.), I think those teams are extreme exceptions. And don't get me started on Tampa...they were AWFUL for all those years and are finally reaping the benefits of all those drafts because the new owner decided to spend some money. A team should not expect to get top 5 picks every year for a decade.

Anyway, my main issue is that this pattern looks to be taking over for some teams:

1. Team with under $60M in salary ends up below 0.500
2. Team then drafts early, but can't pick a top pick for fear of signability/long term costs
3. Even if they do sign their top picks, they often have them for their 1st contract only
4. So unless you can have your young guys sign a "Longoria" contract (and not all will do this), they have, in essence, become the minor leagues to about 8 teams
5. And if you can't sign "your" guy, you get the reward of a compensatory pick that you can't afford...ouch!!!

WR: All good points.

Let me ask a hypothetical: If you had to choose between a salary cap OR draft reform - wherein a rookie cap would be put in place, and teams would be given the opportunity to trade future picks (which they cannot do now), which would you pick?

R: Good question.

My gut response (and I will think more about this) is that I would choose the draft reform that you spell out below. But I really want a minimum team salary number too. I think some owners take the luxury tax "check" and just pocket it. I think that is junk!

As an aside, I think the NFL needs a rookie cap too.

WR: Okay, another hypothetical:

Should the luxury tax be redesigned so that the revenue it generates must be applied to the payroll of the recipient teams? This would have a two-fold effect: First, it would aid the payroll of the lower tier teams that draw your concern. Second, it would bring about a situation where the Yankees are actually funding a portion of the Rays salary - which may cause them to think twice about oh, say, A.J. Burnett...

I know it sounds too simple to work, and - as anything more than a hypothetical - it is. However, you brought up the NFL, just as I was about to. Here's why I think the NFL is a nice example of why a salary cap may not be all it is cracked up to be: Realistically, you have the same number of contenders now as you did pre-1994, the year the cap was put into place. Remember, salary cap does not mean "required payroll" - it's just a cap. The management of personnel is the biggest factor in manufacturing and maintaining a successful franchise.

Since 1995 17 different MLB teams have appeared in the World Series. In that same span, only 2 more NFL teams (19 - if you're keeping score), have appeared in the Super Bowl. If the NFL has used a salary cap to achieve "parity" - it could be argued that this sort of parity already exists in MLB.

R: 2 follow-up points for me:

1. How could you distinguish between salary tax money and owner money? Better stated, an owner could spend "xxx" less than normal (where "xxx" is the salary tax money)...this is why I want a minimum team salary.
2. In the NFL, every fans thinks that within a 4 year span, anything is possible (see Seattle, Arizona). I don't think Kansas City or San Diego or Pittsburgh baseball fans have that feeling)

WR: On your first point - you're totally right. That's why it will stay a hypothetical, destined for the bargain bin sports domain of talk radio and blogging (I feel dirty). Your second point I have a bit of an issue with, because I do not think that if I ever get around to completing my time machine, and go back to N'Orleans in 2004, I could convince Saints fans that they were 3 years out from a shot at the NFC Championship. For that matter, I could not go back and convince the August 2001 version of myself that The Patriots were 6 months away from a Super Bowl championship.

There are a few things that make this analogy less than rock solid - the most important being the proportional impact that one player can have on a football team as opposed to one player having on a baseball team, but surprises still happen in baseball, and I still feel comfortable saying that in all sports, talent management is at least as important as team's salaries - and the discrepancies between them.

R: So if you live in Kansas City and both of your teams are awful as of today. Who do you think has the best chance to turn it around in the next 3 years...and actually WIN a title?

I do agree with you on the talent management side of things with baseball, but like we discussed yesterday, the small market teams need to win on almost every early draft pick. And baseball is far and away the hardest sport to draft in. Just think that there are 7 rounds in football, 2 in basketball, and 30+ in baseball (where a much bigger percentage of the players are under the age of 20)...

WR: If I had to gamble, I'd go with The Chiefs. Matt Cassell is a definite upgrade over Thigpen and Croyle - Vrabel will add leadership to the defense, Larry Johnson has a year or two left in the tank - all good positive signs. Pair that with the fact that they play in a sub par division - won last year by an 8-8 team - and you can't count them out.

As far as the Royals, who saw Zack Greinke having the kind of season he's having? Who saw Luke Hochevar developing into a solid #2 outside of Kansas City (excluding fantasy geeks - of whom plenty probably went with Hochevar over Greinke anyway - but that's another discussion)? Point being, they're a bat or two away from contending. If they can develop some talent through their farm system, they may be able to do so without breaking the bank, and enjoy a run like Detroit did 2 years ago. Or they'll just just stink.

Saving the biggest point in my argument for the Chiefs for last - I'll point to their most important off-season acquisition: Scott Pioli. Having a GM like that will perk the ears of even your most pessimistic fans for 1 or 2 off-seasons, while Pioli brings in "his guys." This is the case regardless of sport - get a solid GM, and wins will come.

R: Agree that Pioli was the Chiefs biggest addition, but even if you are considered to be a great GM (see Billy Bean), you need to spend money to keep a team together. Here is my best broken record interpretation...baseball needs a salary minimum.

There definitely are examples where great management overcomes cheap/poor owners, but if you spend money, you are almost guaranteed to be in the mix (unless you are the Mets). To be fair, I think the Giants and their limited bankroll are a real threat this year. But I really think that is due to one draft pick that they hit on...Timmy (Lincecum)!

WR: Okay - I think we agree. There should be a minimum team salary. However, I would not put it past certain owners (and by extension, their GMs) to use 1 or 2 high profile, fan attracting free agent signings to gobble up too much of that $$, and keep the team sub-.500 for years.

Let's say MLB institutes a $54 million salary minimum for 2011. Kansas City gives aging, embattled slugger Manny Ramirez - coming off 2 decent years in L.A. - a 2 year, $28 million contract, and signs closer Jonathan Papelbon to a 4 year, $60 million deal. However, they lose Greinke in the process, because The (insert Mets, Yankees, Red Sox or Angels here) offer him a staggering 6 year, $148 million. That leaves roughly 46% of the salary to account for the remaining 92% of their roster - this assumes tthe Royals are going to keep it close to the minimum, so the figures are give or take a few million.

In "example land" - where every other roster in the game remains unchanged (we'll say Bowden or Tazawa turns into a closer for the Sox) - do the Royals compete?

R: Like the example...interesting.

So, for me, I want a minimum of 60-75M, but that is splitting hairs isn't it.
If this example plays out (and it might), 2 things should happen:
1. The GM should be run out of town
2. The fans would lose interest watching (or not watching) a high-profile closer sit in the bullpen.

At least it would be a fair fight. We can't solve the issue that some owners would rather look good and lose...but it would be a start!

WR: Agreed. There will always be owners looking to turn a buck at the expense of winning. I guess it just comes down to how much of our own personal values we place on, or within, the sports we love to watch. If it's just entertainment, then you'll enjoy Mannywood, the Favre saga, and don't really care about steroids. If you look to sports as an outlet within which to validate your beliefs in hard work, integrity, and honest emotion - well, lately you're S.O.L.


  1. Nice blog I enjoyed hearing both sides of the coin but I still think a salary cap for baseball is a good thing. No league has a salary minimun to my knowledge so I don't see MLB being the first to do that. Until there is a cap the Royals,Pirates, and a few other teams will never see the playoffs never mind world series.

  2. Having been completely disillusioned by Major League Baseball, I'm left wondering what system of player compensation would be best for the sport. How do you keep it the purest? As is, players have guaranteed salaries and many have bonuses if they hit certain statistical benchmarks. Sounds good, but you still see Manny Ramirez underperforming when he wants to be traded. I don't think there are enough incentives for teams to succeed. You allude to the idea that some owners are passing on expensive prospects and pocketing luxury tax payouts (I'm against baseball welfare but we can save that topic for another day) to the detriment of the teams' success. This is no good. How about a modified PGA-style compensation system, wherein players/teams play for prize money?