All Commentary
Sunday, November 1, 1998

Major League Losers: The Real Cost of Sports and Who’s Paying For It and Home Team: Professional Sports and the American Metropolis

Do Taxpayer-Financed Stadiums Accrue Economic Benefits to Cities?

Raymond Keating is a contributing editor to The Freeman, chief economist for the Small Business Survival Committee, and a columnist with Newsday.

From the late 1980s into the first years of the 21st century, perhaps more than $15 billion will have been spent on new stadiums and arenas for teams in the four major league sports. Hundreds of millions of dollars more will have been expended for minor league facilities. On average, taxpayers foot at least 60 percent of the costs for major league venues and almost 100 percent for the minors.

This spending binge has resulted in a recent spate of books examining the politics and economics of professional sports. Leading the charge have been Major League Losers by Indiana University professor Mark S. Rosentraub and Home Team by Princeton University professor Michael N. Danielson. The final score on each is mixed at best, pleasing at times but ultimately unfulfilling and often frustrating—similar to watching a hockey game that ends in a tie.

In Major League Losers, Rosentraub is torn on the issue of taxpayer-financing of ballparks, stadiums, and arenas. He indignantly and accurately labels this a “welfare system.” Rosentraub understands that subsidies pad the bottom lines of team owners, boost player salaries, and encourage owners to move their teams in search of bigger subsidies. No real economic benefits accrue to the cities.

His criticism of a sales-tax hike in Arlington, Texas, for the Rangers’ new ballpark is on the mark: “It is still welfare in a state that abhors life on the dole; it is still a subsidy in a state that defends capitalism and the spirit of the free market.” He also recognizes that sports are simply one part of a much wider entertainment industry: “Sports can provide entertainment, but so do movies, concerts, nature trails, bicycle paths and countless other activities.” So far, so good. Unfortunately, Major League Losers is flush with statements and analysis flying directly in the face of such common sense.

For example, while Rosentraub denigrates this sports welfare system, he offers a multitude of suggestions on how governments can get better deals when undertaking such ventures, and even goes so far as to outline the best taxes for financing new facilities.

Rosentraub completely falters when he analyzes the St. Louis Blues’ effort for a new arena. This section carries the subtitle “Saving the Blues: Doing Sports Right!!” According to Rosentraub, “doing sports right” means providing taxpayer subsidies, but not “excessive subsidies.” Golly, the total taxpayer tab for the Blues’ new hockey rink only came to $69 million, along with risk exposure on another $62.5 million in bonds. To the many people who are not interested in hockey, any subsidy is excessive.

Rosentraub’s problem is that while he ably attacks the most egregious forms of sports welfare, at heart he favors industrial policy and so-called public-private partnerships. In his view, as long as the government has a plan and gets a piece of the pie, then it’s okay for some taxpayer dollars to be used in building new sports facilities. Rosentraub calls this “municipal capitalism.” Some of us still call it welfare.

Michael Danielson’s Home Team amounts to a survey on the broader subject of professional sports teams and their relationships with cities, with primary emphasis on team movements and subsidies. Danielson writes well and provides a wealth of information and history on movements, stadium financing and lease deals, league structures, and revenue plans.

However, Home Team falters in the late innings as well. For one, the author displays an ignorance of market economics. He writes: “A market political economy legitimates private ownership of professional sports, promotes public investments in playing facilities that benefit private sports businesses and other powerful economic interests, and fosters aggregations of economic influence that often dominate the politics of professional sports.” He’s correct about private ownership rights, but fails to see that the other points have nothing to do with free markets.

From such a view of the market economy, Danielson then naturally offers little resistance to the sports welfare game. It’s part of the system; he takes it as a given. So when addressing the idea of privatizing sports ventures, he is almost dismissive in tone, though offering little substantive criticism. For example, the author merely notes that team owners may not want to build their own stadiums (shocking!); that cities seeking teams may not wish to rely on private enterprise to get the job done; and that “almost all private arenas and stadiums built since World War II have involved significant governmental participation.” Danielson does no more than point out the current state of affairs, offering no justification for the sports welfare system other than that team owners want it.

One of the most useful points made in Home Team is that in the early years of professional sports, government kept out: “In cities dominated by private enterprise, sports offered another opportunity for profit seeking. Teams were privately owned; they were organized into private leagues; and they played in private ballparks.” Nothing in the book will convince the reader that we cannot and should not go back to the old days.

Both Rosentraub and Danielson largely place the blame for taxpayer subsidies on such misnomers as sports “cartels” or “monopolies,” when in fact they are another outgrowth of our massive welfare state. Big government is alive and well in the wide world of sports.