It's all a matter of perspective.

Thursday, August 29, 2002

Master economist Larry Kudlow has an piece on NRO concerning the economics of the baseball strike. While Keith Olbermann reports this morning that the two sides are close to an agreement, Mr. Kudlow makes it very plain who you should be rooting for.
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.

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.

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.

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