Free Lunch (10 page)

“The pride and the presence of a professional football team is far more important than 30 libraries,” Modell
said. He spoke without a hint of irony or any indication that he had ever upon a midnight dreary, pondered weak and weary the
effect of his greed on the human condition. How many Baltimore children who might have become Mayor Bradleys will instead end
up on the other side of the law? That may not be measurable, but that some will because of Modell's greed is as certain as the sun
rising in the east.

We starve libraries—and parks, bridge safety, and schools—to enrich
sports-team owners. Yet that industry does not produce a profit from the market, although some teams may. This would not
surprise Adam Smith. Likewise, he would not be shocked to learn that instead of adjusting the pay of the employees who labor in
the field to reflect market realities, player wages have soared. The average baseball salary is more than $2 million annually, and a
few make 12 times that much. Subsidies, Smith wrote, embolden the imprudent and encourage waste:

A few team owners have, however unintentionally, acknowledged that
building new stadiums and arenas is not a viable investment.

In Seattle, Howard Schultz, the
billionaire chairman of the Starbucks chain of coffee bars, wanted taxpayers to spend $202 million to expand Key Arena, where his
Seattle Sonics basketball team played mediocre games. Schultz was not a pure beggar, unwilling to risk any of his own money like
so many other team owners. He offered to put up $18 million of the estimated $220 million cost. In effect, he was seeking a 12-to-1
return on his money. But at least he had some of his money in the game. Sonics president Wally Walker explained that the team
needed the taxpayers to pick up 92 percent of the cost because the team simply could not afford it. “I wish there was a way for it to
work privately,” Walker said.

Schultz threatened that his Sonics would fly off to Oklahoma City
if he did not get this bounty. The tactic, which had worked so well for Modell and others, failed Schultz. Local voters
overwhelmingly rejected his demands in 2006, a sign that at least some citizens have grown weary of making gifts to billionaires
whose sports teams cannot turn a market profit. Schultz then sold the team to a group of Oklahoma investors.

Threatening to move a team unless the public pays up has become a finely developed enterprise. Arranging
to collect this legal loot employs lobbyists, economists, and marketing firms, all charging hefty fees for their help in digging into the
pockets of taxpayers. When Modell was playing Cleveland off against Baltimore, Betty Montgomery, then the Ohio attorney general,
came up with a one-word description of this tactic: blackmail.

Such tactics work only because
of one of the great economic ironies of our time. Commercial sports games are about competition, but the leagues themselves are
exempt from the laws of competition.

The baseball, football, basketball, and hockey leagues
control entry into the market, including who can buy a team and where it can play. The leagues deny membership to any team
taken over by local government, effectively nullifying the constitutional power of eminent domain for any city that wants to buy its
team to make sure it stays put. The power of eminent domain to force the sale of property is, however, used to acquire land cheaply
for new stadiums, as we shall see in the next chapter.

Normally these restraints on trade would
be a crime under the antitrust laws. But the Supreme Court in 1922 and again in 1953 exempted Major League Baseball from the
laws of competition. The other three leagues—basketball, football, and hockey—are effectively exempted from most of the laws of
business competition, as well. This exemption from the laws of competition is crucial to their power to extract subsidies. Without
their power to control who can own a team and where it plays, the ability of team owners to extract subsidies would weaken and
perhaps even evaporate.

The sports leagues are also exempt from the tax laws, although the
individual teams are not.

In a free market anyone with the necessary capital could start a team
and compete. That is just how soccer works in Britain. It also explains why Britain has so many more teams, 13 in greater London
alone at last count. Their admission prices are much lower than American commercial sports teams. Even in the mega-market that
is New York, commercial sports consists of just two teams each for baseball, basketball, and football, and three ice hockey teams.
In a free market there would be many more.

The value of the leagues' exemption from the laws
of competition is illustrated by the odd fact that Los Angeles, the nation's second-largest city, has no football team. So long as that
city remains teamless, the owners of football franchises use the threat of moving to the nation's second-largest market to extract
money through public financing of new stadiums, rent rebates, and other official favors. Surely this would seem incongruous to the
settlers who called their community El Pueblo de Nuestra Señora de los Angeles de la Porciuncula.

The Town of Our Lady the Queen of the Angels of Porciuncula is named for a small chapel run by Francesco
di Bernardone, the son of a rich twelfth-century textiles merchant. As a young man sporting about with the sons of noblemen he
came upon a beggar. The others refused alms, but young di Bernardone emptied his pockets and gave all that he had, following
the admonition of Jesus in Luke 18 to “go and sell that thou hast, and distribute unto the poor.” This generous man came to be
known as St. Francis of Assisi, the founder of the Franciscan order devoted to serving the poor, which began in his little chapel,
called Porciuncula, or “little piece of land.”

In New York City, the new economic order of taxing
the many to give to the richest few drew sustained support from Rudy Giuliani, who likes being called America's mayor. Giuliani cut
and trimmed the budget for parks and libraries. Over the years he slashed the very amenities and tools that enabled people to enjoy
urban life and rise above their circumstances. Giuliani showed no such need for restraint when it came to funneling taxpayer
money to George Steinbrenner, who made sure the mayor always had the most visible seats in the house. Giuliani, a self-described
Yankee superfan, pressed for a new Yankee stadium in Manhattan, despite the economic reality that land in midtown is so valuable
that all new buildings there are skyscrapers.

While high-rise office buildings create economic
activity year-round, sports stadiums drain public resources while creating economic dead zones around their edges. Stadiums are
to urban economies what surge tanks are to rivers.

Surge tanks are a byproduct of nuclear
power plants, which generate electricity at a steady rate 24 hours a day. In the dead of night and morning, when demand for power
is low, surplus electrical power is used to power gigantic pumps that lift vast amounts of water from rivers to storage reservoirs
and tanks, like those on the Hudson River Palisades upstream from New York City. On hot afternoons and evenings, when demand
for power peaks, the water is released, spinning turbines to generate electricity as the water flushes back into the river. Sucking
water up and then flushing it back creates dead zones because fish and fowl cannot survive the fierce artificial currents. In the
same way, having 50,000 or so people flow into a ballpark and then rush back out again 81 times a year kills economic activity in
the immediate surrounding area. The logical place for a ballpark is where the foreseeable uses for the land are very low in value,
like the edge of a city or a spit of land off the beaten track. Proposals for a ballpark in midtown Manhattan, or the downtown of
almost any major city, are best filed away under “economic idiocy.”

Teams seeking subsidies
come up with reports purporting to show huge economic gains if a new stadium is built. Often the claims are uncritically accepted.
The crucial issue when a subsidy is proposed is the impact on the finances of the local government, known as
fiscal impact.
Unless the annual flows of tax revenues more than pay for the bonds being
issued, then some other part of the municipal budget will suffer. Even then it will probably suffer because people's budgets for
recreation are limited. A dollar spent at the ballpark is a dollar not spent at a restaurant, bar, or other place of leisure time activity,
thus transferring the jobs and economic effects from many businesses to a single sports team.

Joyce Hogi laughed when she read the reports claiming that the city would be tens of millions of dollars
ahead, and her neighborhood would experience big economic gains.
You don't have to be an
economist to figure out that this is nonsense,
she thought. “The Yankees have been here for almost a century.
Look around at how they have made the South Bronx prosper,” she chuckled. Hogi grinned at the thought that anyone would
believe Steinbrenner. Besides, she noted, the new stadium would have fewer seats than the old one. And while the luxury boxes,
fancy restaurants, and sports memorabilia shops might create more jobs, they were low-wage and seasonal, with no benefits or
future.

New York City's Independent Budget Office, which analyzes city spending, did review
the Yankee numbers. The experts could not find any hard underlying facts to support some of the Yankee figures, which grew
larger in each new report. Ronnie Lowenstein, who ran the office, concluded that any gains from a new stadium were minor, if not
imaginary.

Most of the news about Giuliani savaging the budgets for public parks while
working to lavish money on commercial ballparks came as discrete events in separate stories. But a few writers started connecting
the dots, like Charles V. Bagli in
The New York Observer
and later in
The New York Times
, and the team of Neil deMause and Joanna Cagan writing for an
irregularly published Brooklyn zine. Soon deMause made commercial sports subsidies his specialty and began tracking stadium
deals for the
Village Voice
, eventually pulling the public record together in
Field of Schemes
. Much of that record is cleverly obscured so that few have an appreciation
of how thoroughly market principles have been trounced by this form of socialist redistribution to the richest.

One of the most interesting tidbits deMause dug up involved an unannounced gift of $25 million of public
funds that Giuliani gave the Yankees during his last days in office. The mayor gave the Mets baseball team the same gift. What the
mayor did was to let each team hold back $5 million a year on their rent for Yankee and Shea Stadiums, which the city owns, and
use the money to plan new stadiums. The economic effect was the same as if Giuliani had ordered the New York police to stop
every city resident at gunpoint and demand six bucks.

What Giuliani kept secret, and deMause
uncovered, was that the Yankees used some of this money to hire lobbyists to arrange a further taxpayer subsidy for their new
stadium. The team even billed taxpayers part of the salary paid to Randy Levine, the Yankees president. During Giuliani's term in
office Levine was his economic development deputy, in effect the city official whose job was to arrange gifts from the taxpayers to
rich investors who had curried favor with the mayor. Whether the Mets did the same is unknown because the city has spurned
requests for records detailing how the Mets spent their $25 million.

The chutzpah required to
bill taxpayers for lobbying against their interests was just one sign of how giveaways for the rich erode moral values. While our
cultural myths include imaginary welfare queens driving Cadillacs, the reality is that many of our nation's richest take from those
who have much less without losing a wink of sleep.

Levine, the mayoral aide turned Yankees
president, revealed one aspect of this truth in 2006, as the city council prepared to formally approve the new Yankee stadium
subsidy. Levine asserted in an interview that there was no subsidy. Reminded that the Independent Budget Office for the city had
concluded that public gifts were the equivalent of immediately writing the Yankees a check for $275.8 million, Levine smoothly
shifted gears. He said the budget office was not competent to measure the subsidy, which he valued at “only $229
million.”

I asked Levine about the morality of this gift, whatever its size, and its coercive nature.
Levine said he agreed that taxes are taken by threat of force, that they are not voluntary. So how did Steinbrenner the billionaire
justify taking tax money from people with so much less? Levine, not missing a beat, replied that gifts from taxpayers to those who
invest in big projects “are the way government works today.”

There it is, plain as day, what
subsidies for the richest are doing to America. Levine said he did not see any other dimension to the question. The government
rules say that the rich can take from the poor and the middle class, so some among the rich do, and without qualms. To those
doing the taking, that's that. Since the rules allow it, what's the beef?