MLB creates economic reform committee: What does it mean for the Yankees?

Is it possible the record spending of this free agent window was a blip rather than a trend?

According to Evan Drellich of The Athletic, that might just be what certain owners desire. In response to extravagant spending by Mets owner Steve Cohen and the looming bankruptcy of Diamond Sports Group — parent company of the Bally regional sports networks (RSNs) that distribute the games of 14 major league teams — owners have created an “economic reform committee.” The group of owners, chaired by Mark Walters of the Dodgers, seeks to address concerns over revenue disparities between clubs, the future of rights distribution, and fears over rising player compensation.

Smaller market teams are apparently panicking over Cohen’s intrusion as the new bully on the playground. However, I don’t think we’re going to see some major upheaval in spending patters of those smaller market teams. In fact, one can draw an eerie parallel between current owner discontent and the discontent that led to the creation of the current “soft cap” system to curtail the Evil Empire spending under George Steinbrenner. (For what it’s worth, I think some are actually pleased now that Cohen provides them a tangible figurehead around which to legitimize their existing reticence to increase payrolls.)

Then we have the RSN mess that could strip almost half the teams of one of their main sources of revenue this season. All of this exists in a landscape dominated by the deep-seated resentment of some clubs toward the more financially advantaged organizations (though pointing to this revenue disparity rings specious the amount of revenue sharing dollars that does not get reinvested into payroll by the teams that receive them). In effect, the immediate developments of Cohen’s spending and RSN trouble are being used as a convenient smokescreen to obscure a motivation held by every owner for quite some time: the institution of a hard cap.

Rob Manfred certainly seemed to hint at this desire. He first referenced the latest CBA as “a system that lacked absolute upward limitation on what people can spend,” before continuing on to speak broadly about payroll maximums and payroll minimums. It’s not the first time we’ve heard the owners throw their support behind a hard cap, and given the creation of this labor committee, it certainly won’t be the last.

How does this affect the Yankees? A cap ostensibly reins in the spending of their two biggest financial competitors in the Dodgers and the Mets without incentivizing lower-payroll teams to spend remotely close to the Yankees’ level. Sure, this may seem like a boon for the Bombers; however, I would rather players are given the opportunity to maximize their value on the marketplace than see the Yankees receive a competitive advantage deriving from the installation of another artificial barrier to player earning.

Besides, given behavior and attitude toward luxury tax thresholds under Hal Steinbrenner’s ownership, it would be safe to expect the Yankees to operate even more strictly under a hard cap system. As fans probably remember, Steinbrenner was a leading voice on a separate owners’ committee that gained notoriety this time last winter in the midst of the lockout. That seven-man labor committee proposed a system that would lower the threshold by $30 million from the previous season to a $180 million hard cap, accompanied by a $100 million salary floor.

They’ve shown deference to the tax rates, dipping below the base threshold in 2018 and 2021 to reset offender status in an apparent three-year cycle (thus avoiding the steepest of the repeat offender surcharges). Violations of a hard cap would almost certainly carry more punitive consequences than the penalties under the current Competitive Balance Tax (CBT) system. Say what you want, at least the Yankees are fielding a payroll north of $290 million in 2023 — that would not be the case under a hard cap system.

The other element of these discussions that would concern the Yankees was Manfred’s proposal of “a more national product [that] produces more centrally shared revenue … which, in turn, we hope, would reduce payroll disparities,” as a mechanism to combat the potential RSN bankruptcies and the growing disparity in club revenues. I can imagine Yankees ownership would not be entirely enthusiastic about a new system that redistributes their YES Network revenues (in which they maintain a controlling stake and thus are better shielded from the RSN turmoil) among smaller market teams.

For now, the committee is just that: a group of people discussing ideas without the jurisdiction to implement immediate changes. If MLB eventually moves forward with the institution of a hard cap (which would be in the next CBA — following the 2026 season at the earliest), it would need to include two non-negotiables: a hard salary floor to combat teams like the A’s and running bottom-barrel payrolls and a cap that directly scales with revenue. Given the disconnect between union and owners in the previous CBA talks and the infighting that has arisen between owners, such a hard cap system remains a phantom... for now.