Corporate Welfare

Yankee Welfare

How all of us, even non-baseball fans, line the pockets of history's richest team.

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One of the biggest things people consistently get wrong about libertarians is confusing their aversion to government interference with a desire to make rich people richer by any means necessary. In fact, something closer to the opposite is true. For a textbook case, look no further than a team scheduled to start the League Championship Series tonight: the New York Yankees.

You don't have to know a damn thing about baseball to know that the Yankees have been baseball's unchallenged royalty for several decades now. Babe Ruth, Joe DiMaggio, Mickey Mantle, Reggie Jackson, Derek Jeter, and company have won a staggering 26 world championships; the second-highest total is the St. Louis Cardinals' 10. The influence is felt far away from the diamond: Broadway brought us Damn Yankees, Hollywood contributed The Pride of the Yankees, Hanna-Barbera created a fictional cartoon bear out of a factual cartoonish (though marvelous) Yankee catcher, Nestlé still sells a candy bar called Baby Ruth, and amyotrophic lateral sclerosis is still called Lou Gehrig's Disease.

As famously within the game, since the dawn of baseball's free agent era in the mid-1970s, the Yankees have been notorious for outspending all comers on talent. Thirteen out of the last 14 seasons the team has had the highest payroll in Major League Baseball, often by ridiculous margins. For instance, this year they spent $201 million, $52 million more than the second-place New York Mets.

The main source of this spending disparity is easy enough to identify: The Yankees field an elite team in the country's richest media market. According to estimates from Forbes, the team's annual local television revenue is $92 million, compared to the runner-up New York Mets' $52 million, contributing to an overall revenue of $375 million over second-place Boston's $269 million.

None of which would necessarily be objectionable to your run-of-the-mill free marketeer. But this is where the lesson in political pull comes in. In very much the same spirit—only much, much worse—that rich rock stars never have to pay for guitar strings, rich baseball owners (i.e., all of them) never have to pay anything close to full market price for their most important asset: their home stadium. Chamber of Commerce Republicans and Democrats, can-do boosters, and middle-age-crisis jock-sniffers, convince themselves that—all economics to the contrary—keeping or wooing a professional sports team will improve the local economy. Knowing that there's a sucker born every City Hall meeting, franchises play these local politicos like this nine-year-old hockey whiz plays goalies.

And the richer the team, the richer the brew of public subsidies, tax breaks, law-rewrites, and eminent domain assistance from government. And not just local government, either—the federal government, too. In other words, that money comes from Red Sox fans, Angel fans, and (most outrageously of all) people who'd rather open beer bottles with their eye sockets than have to know who Super Joe Charbonneau is.

This year the Yankees moved into a new stadium. According to baseball economist Neil deMause of the excellent Field of Schemes website, the facility cost a stunning $1.56 billion, and the total project (including replacing 22-acres of parkland that had been destroyed by the construction) totaled $2.31 billion [pdf]. Both figures are all-time records in the history of sports stadia. "Of that," deMause estimates, "the public—city, state, and federal taxpayers—are now covering just shy of $1.2 billion, by far the largest stadium subsidy ever."

The biggest three categories of government contribution were the following:

• $417 million in property tax waivers from the City of New York.

• $327 million in federal tax-exempt bond subsidies.

• $232 million worth of land giveaways from the city.

The bond subsidies can be complicated to explain. Here's deMause in the 2009 Baseball Prospectus annual, describing the Yankees' second round of bond financing (for $308 million), after an initial tranche of $775 million. Both offerings were tax exempt.

While the team would pay off the bonds, it would be saving more than $50 million by avoiding the private taxable bond market. (The subsidy would cost taxpayers, mostly through loss of federal tax revenue, about $75 million.) While using public bonds for a private project was supposed to have been made illegal in 1986—preicsely because local governments were handing out tax-exempt bonds like candy and fobbing off the cost of local projects onto the feds—the Yanks (and Mets) had obtained a so-called private-letter ruling from the Internal Revenue Service signging off on the deal, under the convoluted reasoning that the team's private construction bond payments were actually public property taxes. (Don't ask. Really. If you must know, go to fieldofschemes.com and search on the keyword PILOTs.)

Though baseball fans tend to focus on the unfair advantage that such rule-bending gives the Yankees over their baseball competition, the real scandal in this story is the unfair advantage that the team gets over any business that needs to raise $1 billion in bonds. And, by extension, the unfair advantage that $1 billion bond-seekers tend to get over people who just need $10 million. The greater the number of laws and regulations and taxes, the more that full compliance (or negotiated avoidance) become the exclusive province of the deepest pocketed, who are often—ironically!—the very same companies targeted by the initial legislation. It's true of Sarbanes-Oxley, it's true of the Consumer Product Safety Improvement Act, and it's true of prohibitions on using tax-exempt bonds for private commerce.

Ah, some tax-haters will counter, but what's so wrong about paying lower taxes, particularly on projects that might not otherwise exist? Answer: nothing! Particularly when the same rules apply to one and all, or at least don't favor the rich over the less well-off. Which is, of course, the opposite of what's going on with sports franchises.

In 2006, Daniel McGraw wrote a piece for Reason about Tax Increment Financing (TIF), which is the kissing cousin to the Payment in Lieu of Taxes (PILOT) scheme employed by the Yankees:

Although politicians portray TIFs as a great way to boost the local economy, there are hidden costs they don't want taxpayers to know about. Cities generally assume they are not really giving anything up because the forgone tax revenue would not have been available in the absence of the development generated by the TIF. That assumption is often wrong. […]

And since most cities are using TIFs, businesses…can play them off against each other to boost the handouts they receive simply to operate profit-making enterprises.

This is where the cycle gets both virtuous (for the Yankees) and vicious (for the rest of us). What did the Steinbrenner clan get for that $1.2 billion public boost, besides the $1.2 billion? A shiny new money-machine, that's what. A new stadium means new luxury boxes, more efficient/extensive/expensive concessions, and a chance to jack up single-game ticket prices into four-figure territory. The team has projected $331 million in stadium revenue for 2009 alone, up an estimated $100 million over 2008 (baseball balance sheets, more than those in most other industries, are shrouded in guesstimations and competing numbers that don't necessarily add up).

To sum up: The most successful, most opulent, and most hated baseball franchise in North America, widely known as "the Evil Empire," receives an unprecedented amount of government giveaways in a time of recession and government budget-squeezes, with which it increases its already sizeable revenue advantage, partly by charging ticket prices that only the rich can afford. With all that dough safely pocketed, the team then shells out $423 million in free agent contracts for just three players, who help vault them back into the League Championship Series for the first time since 2004.

Back in the mid-1970s, when the Yankees were re-emerging from more than a decade of uncharacteristic mediocrity, a favorite negative stereotype on the political right was the "welfare queen," living high off government largesse that had been intended for the genuinely poor. It's an enduring puzzle in contemporary America that long after "welfare reform" restructured transfer payments to individuals, the corporate welfare queens—who by any estimation have been sucking more from the public teat than all welfare recipients combined—continue gobbling hundreds of billions each year, image largely unsullied.

So root, root, root against the home team tonight. It's bad enough that they play in a fascist stadium; the real outrage is that you paid for it.

Matt Welch is editor in chief of Reason magazine.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

87 responses to “Yankee Welfare

  1. Since the jackass Democratic party controls most big city politics can we now lay aside the myth that they are somehow less accomodating to the wealthy than the GOP?

    1. No, we cannot, because this article is about NYC, where Republican Mike Bloomberg signed off on all of this.

      (He calls himself an “Independent” now, but that didn’t stop him from riding Guiliani’s coattails into office on the Rep ticket.)

      Although your point is well-taken about Dems being corporate whores, it’s not really their fault in this particular case.

      1. Bloomberg was a Democrat before he became a Republican, then independent. I think the message there is that party doesn’t matter.

      2. CH will now provbide a list of big city MLB and NFL stadiums that are not taxpayer subsidized. He can start with Detroit, where Beelzebub (D) would trounce Jesus (R) in an election.

        Or Boston, Chicago, Philly or Seattle.

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  2. Also, Derek Jeter is a little bitch.

    I’m a master of intelligent comments.

    1. I’ve never understood this. I hate the Yankees. I really do. But Jeter and Rivera play the game the way it should be played. In a world where getting a save with a 3-run lead is cause to twist and shout and give merciful thanks to God, it’s hard to get angry at a couple of professionals.

      I’m a Cubs fan. (My life is terrible.) I thought it was going to be a Cards/Yanks series. I don’t know what I would’ve done if that happened. I think I would have rooted for the Cards. As much as I hate the Cards, the AL can go fuck itself harder.

      The DH isn’t baseball. It’s bullshit.

      1. Yes, because the epitome of sports entertainment is watching an f-ing PITCHER trying to hit a baseball at least three times per game. That’s why the NFL should ask their quarterbacks to line up on defense.

        (Disclaimer: Twins fan)

        1. This just in: football is not baseball.

          And one of the more exciting parts of a game IS watching the pitcher bat. You have an inbred weakness in the lineup. You try to hide it by batting him ninth. Oftentimes games are decided by how well a pitcher can adapt to hitting. Slap a ball to the right side moving a runner over, contributing with a well-placed bunt, getting a sac fly, of if you’re Zambrano, hitting a gapper or even a homer.

          I like people succeeding outside of their element.

          And watching AL pitchers feebly try to hit is one of the sport’s most schadenfreudisch moments.

          1. Sorry, gotta agree that watching a pitcher hit does not add to the excitement of the game.

            Also, 22 AL, 17 NL, World Series wins since the introduction of the DH. That may not be statistically significant, but it clearly shows the AL is not at a disadvantage when it comes to head-to-head contests.

            OTOH, they could always look for pitchers like Dan Schatzeder, who hit for a .240 lifetime average. While he was with the Expos, he was used as a pinch hitter on a number of occasions.

      2. “In a world where getting a save with a 3-run lead is cause to twist and shout and give merciful thanks to God, it’s hard to get angry at a couple of professionals.”

        Ah, but is it ok for Rivera to give merciful thanks to Jeter instead? (God doesn’t know how to do a fist pump.)

  3. Yo, fuck the Yankees!

    And all those other corporate welfare queens too.

  4. This article would have been better if you didn’t let so much bitterness get in the way. It’s really strange that you rail on the Yankees payroll as if they were the ones creating the rules. The Yankees pay a huge luxury tax because of their payroll and are forced to share their revenues with every other team out there.

    Perhaps if MLB didn’t force the Yankees to share their revenue, they could use it for their stadium project. Perhaps if other teams invested their revenue to make their product better (ie payrolls), they would be able to negotiate better TV deals and diminish the Yankees revenue advantage. Of course, I am not sure why the Yankees should be made to feel bad about all of this since all of the league owners get to vote on these rules. The problem is that other owners would rather let the Yankees money machine make their revenue than to do it themselves.

    Now I think that the public shouldn’t be forced to pay for the stadiums of private companies, but that is a problem shared by almost every professional sports franchise out there.

    1. Bitterness? I’ll be bitter if you ever beat us in the playoffs, maybe.

      1. Who is “us”, Matt? Are you a representative of the Angels now? That team from Anaheim pulling the shenanigans with its name?

        1. what kind of monkeyfuck bullshit is The Aneheim Angels of Los Angeles anyway? They’re the Mighty Ducks of baseball either way.

      2. As a Red Sox fan, may I just say that I hope the Angels pound the shit out of the Yankees, and keep them 0-for-the-21st century when it comes to the World Series.

    2. Make you a deal. The Yankees will no longer have to share revenue, but they no longer control their “region”. In other words, the Royals and Nationals get to come to town, and any other guy with enough money to start up a team in New York gets to do so.

    3. But, of course, being as this is a new stadium and all, the Yankees are gifted yet another benefit this season: no luxury tax.

  5. It’s a problem that almost every large business out there faces in some way. Which is why most libertarians don’t oppose about the businesses that accept the subsidies (they either take the money, or it goes to someone else), they oppose the governments that cause them.

    I guess exceptions are made when it comes to bitching about the Yankees.

  6. I’d be marginally concerned about this if I didn’t have a Don Matingly autographed rookie card framed on my wall behind me… This is old hat though for nearly any development, another interesting one is the Carousel Mall in Syracuse NY, far more interesting bit on these PILOT agreements. They got the PILOT, then financial crisis hits and funding gets cut off so Syracuse if left with a half built mall and everybody is screwed. Who of all people screws Syracuse most, Citibank, all kinds of intrigue and chicanery here. Everything from unpaid contractors to, side deals, to PILOTs to phony green initiatives and grants..

    http://www.syracuse.com/news/i….._no_t.html

  7. Actually, the Baby Ruth is NOT named after Babe Ruth and has nothing to do with the Yankees.

    1. This is true, turns out.

      1. Reggie Jackson did have a candy bar (the “Reggie”)named after him because of the same mistaken belief. Before going to the Yankees he was quoted as saying, “If I played in New York they would have named a candy bar after me by now!”

      2. Well, the origin of the name is in some doubt, per Snopes, though it’s almost certain that Baby Ruth was named after Babe Ruth.

      3. Oh, they named it after the Babe all right. They just couldn’t use his name so they called it Baby and made up some BS about the president’s daughter, but no one was fooled.

        As a life-long Yankees fan, I’m too biased to comment further. See you at the World Series. The Championship flag will look nice flying above the new stadium next season, don’t you think?

        1. I will say, though, that they built the new stadium over my objections. The House that Ruth Built was the most storied venue in all of professional sports. We shoulda stayed put.

  8. The Yanks would be stupid not to accept the public largess offered them. Demanding it, or presuming to have a right to it, is another story altogether. Regardless, my burgers are seasoned, the grill is ready, the potato salad has been purchased, beer is on the way, and this ex-New Yorker is looking forward to a good series against the most ridiculously named (not to mention redundant) team in all of sport, The The Angels Angels of Anaheim.

    1. The most ridiculous name in all of port is the Utah Jazz.

      I didn’t like the unwieldy name the Angels adopted a few years ago and always preferred California Angels. But the “of Anaheim” part is just a legal requirement the owner would happily drop if he could.

      And you’re hardly the first person to recognize that Los Angeles literally translates to the The Angels. Think that might have something to do with how the team got its nickname? Considering LA is known as the city of Angles and that there was a minor league team named the Los Angeles Angels that played there for 60+ years before the AL came to town? Los Angeles obviously refers to the city, not it’s literal English translation.

      1. Even if they dropped “of Anaheim”, the name would still be redundant when you translate Los Angeles into English: “The The Angels Angels”.

        1. If they are using the city’s name should not the full name be “the City of Our Lady, Queen of the Angels Angels of Anaheim”, since shortening to “Los Angeles” is just for convenience sake?

  9. I could be wrong about this, and please let me know if I am, but to the extent that the Yankees received subsidies, they were primarily to improve the infrastructure around the stadium, and to finance a city mandate that the old stadium be converted into a public park.

  10. Baby Ruth was named after, Grover Cleveland daughter.

    1. That’s what the company claimed, but the candy bar came out in 1921, 25 years after Cleveland was President, 15 years after Baby Ruth died and when Babe Ruth was the most famous player in baseball.

    2. The same company markets Oh Henry! so maybe they were just addicted to puns.

  11. Baby Ruth isn’t named after Babe Ruth. I hope that was a joke.

  12. Also, Damn Yankees was really about the Washington Senators and only tangentially involved the Yankees.

    1. No, No, Nanette was probably the more important musical. The dumbass Red Sox owner at the time sold Babe Ruth to the Yankees to finance it.

      1. Not true. Research into Frazee’s financial records by Glenn Stoudt (“Red Sox Century”) show Frazee kept his baseball and broadway accounts separate. He sold Ruth because he was always demanding his contracts be reneogiated and would threaten to quit and become a boxer. Because of a feud in the league only the White Sox and Yankees would deal with Frazee. He took the money because that’s what you used to get players from the minors which were independent in those days. It didn’t work.
        Intellectually I agree with this article. But as a Yankee fan while I wish they weren’t getting subsidies, I’m glad it’s them. Call me conflicted.

  13. Can congress pass a law that would end sports teams extorting deals from cities? I don’t mean will they, I know they won’t, but can they?

  14. Matt Welch is an Angel fan. He was at Game 5 in ’86 and probably dropped a load in ’02. Don’t ask me how I know this… triple x agent psychic powers.

    I have to say Matt, that was the best ALCS related article and anti-Yankee smack I’ve read all week.

    Tonight’s game was a bore though.

    As for the stadium issue, eventually the stadium lease will expire in Anaheim and Arte Moreno or whoever owns the team by then will want a new stadium. I doubt the Angels will be above subsidy, especially if they continue to be successful.

  15. My favorite maneuver in sports stadium financing is when they hold a referendum on funding a new stadium, it fails, and then the city and state go ahead and finance the thing anyway.

    Gives you a pretty clear idea of what they really think about your opinion.

  16. Maybe this is not the biggest issue facing the country, but I can’t help feeling we’re making a big mistake pricing these games out of the reach of today’s boys and girls who are growing up in families of modest means.

    Bob Herbert is a fucking retard.

    1. We are talking about tax breaks for the well-connected corps here… Bob Herbert’s intellectually challenged commentary is indefensible.

  17. One, the origin of the Baby Ruth name doesn’t matter. It became associated with Babe Ruth. Two, as a Red Sox fan, I was very, very dismayed that the Angels decided not to show up Friday night, and although I generally think Lackey is a tool, I don’t blame him being pissed at his defense. Three, Posada and Cano have displaced Jeter as my most despised Yankees. (AFraud’s in a category of his own.) Four, the Angels better get moving, since they’re the only team that can prevent the Yankees from winning, which would mean I couldn’t read anything about sports for at least two months.

    1. i am a yankee fan and i hate a-rod. aside from that, fuck you. have a nice day.

    2. How do you think Angel fans feel this morning? It’s one thing to get beat playing your best. It’s another to lose playing like ninnies and making stupid 0-2 pitches to ARoid. Win Game 3 though and they’re right back in it.

  18. While we’re on the subject of big giveaways to these teams by politicians, how the fuck does MLB get an exemption from the Sherman Act? That monopoly is a huge giveaway that no other business gets and it gives these teams market power to extort taxpayer funds in the first place. Because MLB is not “interstate commerce”? Ever since Raich, everyfuckingthing else under the sun (whether it involves actual commerce or not) is “interstate commerce” for the purposes of federal authority – why not a multi-billion dollar business?

  19. While technically correct, I think the Yankees serve to teach the libertarian lesson that the best man or team should win, and that parity–such as they have in the NFL where two championships in a row is a dynasty–is merely sports’s version of communism.

    Lets go for 27!

  20. Baby Ruth was not named after Babe Ruth:

    http://en.wikipedia.org/wiki/Baby_Ruth

    Every baseball fan knows this.

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  25. As for the stadium issue, eventually the stadium lease will expire in Anaheim Discount Cordless Screwdriverand Arte Moreno or whoever owns the team by then will want a new stadium. I doubt the Angels will be above subsidy, especially if they continue to be successful.

  26. When you look at a trade agreement like NAFTA, it’s about that thick (holds his hands about?

  27. “I’m going to take a couple of days and talk to (wife) Shelly

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  29. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books. In other words, there’s more to the books of the Bible than most will ever grasp. I’m not concerned that Mr. Crumb will go to hell or anything crazy like that! It’s just that he, like many types of religionists, seems to take it literally, take it straight…the Bible’s books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on…the Bible’s books were written by people with very different mindsets

  30. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane.

  31. When you look at a trade agreement like NAFTA, it’s about that thick (holds his hands about?

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  34. Who is “us”, Matt? Are you a representative of the Angels now? That team from Anaheim pulling the shenanigans with its name?

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