The Yankees' recent signings of the top three members of the 2008 free agent class (Sabathia, Burnett, and Teixeira) has left many Yankee haters in a tizzy. The Astros and the Brewers have already publicly called for a salary cap after the Yankees doled out more than $400 million in total contracts for these free agents. Brewers owner Mark Attanasio, “At the rate the Yankees are going, I’m not sure anyone can compete with them...Frankly, the sport might need a salary cap.”
So, is Yankee spending once again ruining the competitive balance in baseball? Further analysis is needed.
First, according to River Ave. Blues (and many other sources) the Yankees payroll has not changed dramatically from last year despite signing these three free agents and trading for Nick Swisher. This is because they've shed $59 million in payroll when the contracts of Bobby Abreu, Jason Giambi, Andy Petitte, and Mike Mussina expired. Even with previous commitments, and projected arbitration raises, "the net change in team payroll will be negligible relative to the massive dollar figures connected to those three new contracts."
Second, there is no guarantee that these contracts will result in a World Series for the Bombers, let alone an AL East crown. In fact, Resultsdisorientied calculates that replacing Mussina, Giambi, Pettitte, and Abreu, with Sabathia, Teixeira, Burnett, and Swisher will only net the Yankees 2.1 more wins. Unless the Rays or Red Sox significantly falter, this will not be enough to capture the AL East crown. On top of that, in 2008 the Yankees were outspent per win by only two teams, the Tigers and the Mariners, not exactly good company. The Rays, Twins and Marlins spent the least per win. So, which type of team do you want to be a fan of, ineffective big spenders, or efficient penny pinchers?
Is this the watershed moment that should lead toward a salary cap in major league baseball? Baseball Think Factory reveals some interesting facts that lead me to answer, no. To begin with, while revenues have increased dramatically since 2003, the players' salaries have actually decreased by 11% in that time. Is that difference felt by Joe fan, with lowered ticket prices? No way. (According to Peter Gammons, in Boston, the average price for a family of four to watch the Red Sox from the grandstand and buy concessions was $250!) Also, if MLB were to institute a salary cap similar to the NFL's, it would probably set somewhere around $100 million. Of the thirty teams in Major League Baseball, only 11 had payrolls north of $100 mil. in 2008.
Finally, ironically Yankee spending is actually good for baseball. In 2008, only two teams paid the luxury tax, the Tigers and the Yankees. The Tigers paid $1.3 mil. and the Yanks paid $26.8 mil. Along with the luxury tax, the Yankees paid over $100 million in revenue sharing. On the whole, all thirty baseball teams put over $300 mil. in the revenue sharing pot, to be redistributed to the poorest teams with the Yankees portion comprising about a one-third of this money. Does this discourage Yankee spending? No, although the Steinbrenner boys aren't happy about it. And what became of that $300 mil. Well, how many free agents have we seen the Kansas City Royals, Pittsburgh Pirates, Florida Marlins, Minnesota Twins, or Tampa Bay Rays sign?
Oh yeah, remember Mark Attanasio, owner of the Brewers, who called for a salary cap. His profits totaled $40 million in 2006 and 2007, and those are sure to rise as Milwaukee attendance increased in 2008. But please, hate the Yankees.
Update (01-26-09): " Small-market teams love salary caps. Or rather, they think they do." If a salary cap were imposed in major league baseball, the poorest 13 teams would have to spend an extra $15 mil. Check it out.