The phony economic case for taxpayer-funded stadiums
I've seen a professional baseball game in person just once, and the memory of the boredom lingers. Still, I understand that many Americans not only find the game interesting but are passionate about it. What I don't understand is why the government needs to subsidize a form of entertainment that is so obviously popular and profitable.
If the local politicians who compete to attract teams by throwing other people's money at them were honest, they'd say they do it for the prestige, for the ego boost that comes from presiding over a city that has a Major League Baseball franchise. But that would be unseemly. So instead they insist building a stadium is a wise use of public money because it will generate jobs and tax revenue.
Although economists have torn such claims to shreds, politicians still reach for them in an attempt to cover their naked baseball envy with something resembling the public interest. This pathetic masquerade is currently on display in Washington, D.C., where the city council is on the verge of approving plans for the luxurious new stadium that Major League Baseball has demanded in exchange for moving the Montreal Expos to the nation's capital.
"This is our moment, our time to write history," says Mayor Anthony Williams, whose desperate yearning for a baseball team would be touching if he weren't forcing other people to pay for it. The city's chief financial officer says building the 41,000-seat stadium for the Expos-cum-Nationals will cost more than $500 million—and that doesn't include the money Williams has promised for council members' pet projects in exchange for their support of his.
Williams portrays the stadium spending, to be covered largely by a new business tax, as an investment that will yield $1.1 billion in economic benefits. To give you a sense of how realistic that projection is, it includes 360 new stadium-related jobs "earning an annual total of $94 million"—more than $260,000 a job. Even if we average in the salaries of the ballplayers, that seems like a stretch.
Equally iffy is Williams' prediction that the stadium will revive the poor riverside neighborhood in Southeast Washington where he plans to build it. "From a quiet, dirty, forgotten waterway," he says, "the Anacostia can flow into a vibrant, bustling center of residential and commercial life."
The effect on the neighborhood probably won't be quite so dramatic. Since baseball is seasonal, local businesses won't see a year-round increase in demand. And since the stadium will include shops and restaurants (with the profits going to the team), visitors might not even leave the building.
A more fundamental problem with the economic case for taxpayer-financed stadiums is the assumption that spending associated with a ballfield will be new spending, as opposed to spending shifted from other parts of the city or the metropolitan area. If people who used to go to nightclubs in D.C. start going to baseball games instead, for example, the city's economy won't be any stronger as a result.
"Most studies find that new sports stadiums do not increase employment or incomes," 80 economists said in a recent letter to Williams and the D.C. Council. "The reason appears to be that sports stadiums do not increase overall entertainment spending but merely shift it from other entertainment venues." They said "a vast body of economic research" indicates a new D.C. stadium "will not generate notable economic or fiscal benefits for the city."
In fact, as economists Dennis Coates and Brad R. Humphreys note in a recent Cato Institute paper, there's evidence that sports stadiums can hurt local economies. Looking at the economic performance of 37 cities between 1969 and 1996, they found "the presence of pro sports teams had a statistically significant negative impact on the level of real per capita income." The lack of empirical support for Williams' vision of a baseball-induced economic renaissance helps explain why he argues that, because the city plans to tax large businesses, "our residents will not be asked to pay one dime of tax dollars toward this ballpark." But as Coates and Humphreys note, "this tax increase will touch D.C. residents in some way," whether "in the form of lower wages for workers, lower asset values for corporate owners, or higher prices for consumers."
For someone who does not hesitate to trumpet every stadium benefit, no matter how uncertain, Williams is curiously shortsighted when it comes to the project's costs.