The NBA’s collective bargaining agreement (CBA) is commonly construed as a messy tradeoff between a salary cap on the one hand and guaranteed contracts on the other. The players union wants salaries to be guaranteed, the thinking goes, while the owners want salaries to be capped. This thinking is flawed. Let’s explore who really benefits from each of these politically charged attributes.

Who Benefits from a Salary Cap?

                                         
Philip Maymin
Basketball News Services  

The NBA’s collective bargaining agreement (CBA) is commonly construed as a messy tradeoff between a salary cap on the one hand and guaranteed contracts on the other. The players union wants salaries to be guaranteed, the thinking goes, while the owners want salaries to be capped. This thinking is flawed. Let’s explore who really benefits from each of these politically charged attributes.

There are two main sets of participants in the CBA: owners and players. There are also various hangers-on such as the referees but their contribution is minimal and could easily be extricated into a separate agreement.

Among the owners and players, however, there are internal factions. There are spendthrift owners such as the Knicks, Lakers, and Mavs, and there are frugal owners such as the Spurs, Pistons, and Clippers. There are superstar players such as Shaquille O’Neal, Kevin Garnett, and Tracy McGrady, and there are veterans who are out of the league or who subsist on 10-day contracts and minor leagues.

A salary cap by definition hurts most those players who, but for the existence of the cap, would have earned more money. In other words, it hurts superstars. Guaranteed contracts by definition hurt most those owners who players have stopped performing, and it helps most those players who are not superstars.

In other words, the CBA as written rewards mediocre players the most relative to what their value would be in a free market setting. Anecdotal evidence abounds, particularly this offseason when otherwise non-stellar players get long-term, high-salary deals.

What would be the right thing to do instead? Before we throw the talented and entertaining baby out with the dirty and polluted bath water that is the current morass of basketball’s collective bargaining, let’s see how the real, substantive issues of both sides could be addressed.

Underlying the guaranteed contracts demand by the players union is a real nervousness about young athletes sacrificing alternative careers to join the sport only to get injured and never paid. That would be a sad state of affairs, of course, but is it sadder than a doctor getting brain damage just after he lands his first job? Is it sadder than a concert pianist losing a finger the night of his first performance? Not necessarily. On the other hand, if there’s a way to address the issue without going to extremes, perhaps that would be more palatable to all parties involved.

Here’s one solution: instead of guaranteed contracts, insist that all multi-year deals (including first round draft picks) must include health insurance that pays an annuity on the event of the player’s further inability to play. It wouldn’t have to be a huge annuity, since clearly the player is no longer worth the mega-millions he would have been worth could he play, but enough so that the player could live.

What about the owner’s desire for a cap on maximum salaries? The real issue there is when a player becomes a hometown favorite and a legend, he can hold the team up for a huge ransom, essentially removing all profit from the owners. Then the owners have no interest in paying that much to the player and the fans are angry when they leave for higher-paid employment elsewhere.

No, that’s not really the issue, is it? That’s a mirage painted by the thrifty owners to convince people to sign on to the salary cap. The above scenario has a contradiction: the player is most valuable to the team he is currently on, yet another team is willing to pay him more. That doesn’t make any sense. If another team is indeed willing to pay more, then tough luck to the small-market town where the player is currently stationed. He could be the best player in the world but if no one is coming out to watch him, and hence pay him, why shouldn’t he move to where he’ll be more appreciated?

Restricted free agency in fact solves most of these sorts of problems. If Kenyon Martin isn’t getting the money he needs in New Jersey, it is a direct consequence of the fact that over the past three years, not enough people have paid enough money in ticket and television revenue to justify paying him that much to stay. Apparently Denver fans are willing to pay more for their entertainment than Jersey fans, on an overall gross level. Alternatively, the Nets had just too much salary still on their hands, which they couldn’t cancel because the contracts were guaranteed.

It’s time for a change in the CBA. Hopefully it will allow the market to breathe a little freer, and let fans watch a sport where the superstars, and not the mediocre second tier, are the most rewarded.