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A Bronx Cheer For The Owners
The ugly roots of the threatened baseball strike.


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Larry Kudlow

Yankee hating has long taken a slice out of our national pastime of baseball, especially when the Bronx bombers dominate the game — as they have since the mid-1990s. Recall an earlier time of pinstripe excellence during the 1950s when the best-selling book, The Year the Yankees Lost the Pennant, was followed by the smash-Broadway musical Damn Yankees and a hit movie with the same name. Yankee hating was in vogue 50 years ago too.

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Today’s threatened baseball strike is all about the Yankees and their great success. The baseball owners, guilty of class-warfare thinking, would love to take actions that would severely damage the great Yankee franchise. In the process, they would also cripple the standing of the game and the game’s players.

Owners want a new revenue-sharing plan that allegedly would take more money from the rich teams and redistribute it to the poor ones. They would also institute an unbelievable 50 percent luxury tax on teams with high payrolls.

Step back a moment and think about this. In today’s soft economy, if anyone in Washington proposed a 50 percent tax on luxuries the general public would instantly label them out of their minds. Yet the owners carry on with just such a tax-the-rich campaign. It’s a scheme that would make Al Gore blush.

In so doing, the owners would do to the baseball economy what a similar luxury tax would do to the gross domestic product of the United States. They’d cripple it. Don’t forget that George Bush the elder raised a luxury tax in 1990 that doomed his presidency and made a mild recession even worse. Instead of sticking it to the rich, the tax threw millions of blue-collar workers — those who produced the goods and services qualifying as luxuries — out of jobs. Major League Baseball players are dead right to oppose this crazy plan and the owners are completely wrong to favor it.

More, if anyone cares to look at the facts, the rich teams they would tax frequently fail. Yes, the New York Yankees and Atlanta Braves have dominated the game in the last decade, but that’s a result of good management on the field and in the front office. Plenty of other “rich teams” have fared poorly.

Think of the major-media-market Los Angeles Dodgers. Or the Boston Red Sox. Or the other perennial losers in prime locations like Philadelphia, Baltimore, Detroit, and Chicago. The Cubs and the White Sox fail miserably each year, but it’s the owners and management — and not the Yankees — who are to blame. The Cubs, in particular, report poor economic performance. But that’s a sham. The team’s excess revenues are upstreamed to the Tribune Company, which owns the Cubs, rather than back into the team.

League-wide, teams use phony accounting that would make former Enron executives proud. They depreciate stadium-related assets although the taxpayers financed the stadiums. They use phony accounting for minor-league team expenses. And they never open their books for full disclosure — the exact same sin that has sent many corporate CEOs to jail.

Why should poorly managed teams be subsidized in the first place? When sinking companies in Japan and elsewhere in the Pacific Rim were subsidized the economists labeled it industrial targeting. In baseball, it’s nothing more than crony capitalism.

Texas owner Tom Hicks, perhaps the most vocal opponent of George Steinbrenner and his Yankees, is a crony with his hand out. He took excellent advantage of the annual free-agent crop when he brought phenomenon Alex Rodriguez on board. But he has only himself to blame for giving A-Rod a burdensome $250 million contract that has translated into another last-place finish for the Rangers. Here, and elsewhere, owner ineptitude is the culprit — not player salaries that luxury taxes and revenue-sharing socialism intend to limit.

It also seems that the income-leveling baseball owners would risk economic contraction rather than continue losing to the well-run Yankees. In fact, the owners would not even rule that luxury-tax revenues must be reinvested in their teams. Instead, they’re grabbing a quick buck at the expense of the game.

This is a key point with respect to the Yankees. This franchise has built a phenomenal farm system that has produced current stars in Jorge Posada, Alfonso Soriano, Derek Jeter, and Bernie Williams. That’s what wins championships — vision and player development. Not luxury taxes. For all his idiosyncrasies, George Steinbrenner should be a model — not a goat.

And since when does America punish success? Taxing success will generate less of it, both for the Yankees and the other teams. For example, when the Yankees go on the road they routinely draw crowds much larger than the home team usually brings to their ballpark. In places like Tampa Bay and Chicago, Yankee magic rubs off on all concerned, including local TV viewers and radio listeners. That the poorer franchises don’t build on this success is not the fault of the Yankees. Blaming the Yankees in this way is akin to blaming rich Americans for injecting capital in start-up businesses that in turn create new jobs and greater wealth.

And what of the players who have only 12 or 15 years to earn a lifetime’s living? Is there no injustice in capping their wealth and prosperity? This is especially the case for the league’s growing number of Hispanic players. Of the 849 players in Major League Baseball, 222, or one quarter of the league, were born abroad. At the top of the list is the Dominican Republic with 65 players, followed by Puerto Rico and Venezuela with 38 each. Most of these players will not go on to lucrative advertising contracts or high-paying front-office jobs after retirement. The lily-white-bread baseball-owner fraternity seems never to think about this, or about the money that Latin players send home to their families and their downtrodden countries.

A dearth of taxes is not what ails baseball, but the selfishness of owners. They’d prefer to pick the pockets of players and fans than let poorly managed teams go under. If the baseball economy were based on free-market capitalist principles, poorly-run teams would indeed go under — and rightly so.

Today there are six small-market teams in contention for the playoffs. The newly created Arizona Diamondbacks could well take a second straight World Series. Or perhaps the Yankees will reign supreme again. “You’ve gotta have heart,” went the old Broadway song. That plus good management and a free-market playing field is the equation for success in baseball — and the rest of the business world for that matter.



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