Why the NBA Needs a Hard Cap
By Tim Donahue
If you have read any significant portion of my work on the NBA’s Collective Bargaining Agreement then you’ve probably come to the conclusion that I favor a hard salary cap. That’s a pretty fair conclusion, as I basically believe that a hard cap is the most important starting piece of a sound economic model for the NBA.
It’s about time I told you why.
As someone who is a fan of a small market team, I favor more competitive balance. And as someone who has been working as an operations/financial analyst for the better part of the past two decades, I favor a simple, sensible system for cost containment.
The hard cap is the most direct means to both of these outcomes.
It’s true that, by itself, it would fall short, but it’s still a good the best start.
It goes farther and is more stable than just revenue sharing alone for competitive balance – though more revenue sharing is certainly needed. Neither revenue sharing nor luxury taxes do anything at all for cost containment.
In the comments on my Spending & Success follow-up post, Alex noted that what he found striking was that “the Heat have a salary $20 [million] lower than the Mavs and are in the same place.” My initial thought was that the Heat’s current payroll was little misleading, as they’ve committed over $327 million to their three stars over the next six years, only $3 million less than the total the Indiana Pacers had paid their entire roster over the past five seasons.
But the more I thought about it, this conclusion crystallized: Dallas is probably the closest parallel there is to either the 2004 Pistons or the Pacers of the ’90s and early ’00s. Is Dallas — and their payroll — actually the closest thing to a “non-superstar” model that is possible under the current system? Nowitzki is a great offensive player, but he’s not a presence on LeBron or Wade’s level. If you were to swap Dirk out for Danny, do you really see the Pacers winning more than say, 45 games? Beyond that, Dallas is a collection of good – but not great – players (at this stage of their careers).
The Pistons of a few years ago have been held up as a beacon of hope for “building a team of good players that contends.” But they really were incredibly fortunate. They collected a number of flawed players who were either already on or soon-to-sign reasonable contracts before they’re stock rose, so to speak — and timing is everything. They won their title early in the run — in a major transitional period in the league, it should be noted — but then fell short in subsequent years.
Under the current system, if I’m not willing to tank until I luck into back-to-back jackpots like, say, Kevin Durant and Russell Westbrook, then what do I do? I have to try to put together a strong, deep team, and that means I have to spend — most likely well in excess of the tax. Even if I tank, or get lucky like Oklahoma City, I still have to hope that I get good before I get too expensive. By the time everything starts to gel, there might be an odd man out simply due to the fact that the owner has one too many players to sign to extensions. Kendrick Perkins and O.J. Mayo, for example, both will (likely in O.J.’s case) no longer play for the team that drafted them, at least in part, because the team can’t afford to keep them around.
Enter the alternative: start with the hard cap, get rid of max contracts, enhance revenue sharing — then get the out of the way. Put the emphasis on discipline and good management. Move the focus away from deep pockets and inflationary spending. End foolish practices like fully guaranteed contracts or signing Keith Van Horn’s corpse to a $4.3 million guaranteed contract so you can trade for Jason Kidd.
More attractive than anything else is the simplicity of it. This is what you can pay — and that’s it. No more poison pills, no more base-year compensation players, no more trade exceptions, no more mid-level exceptions, no more bi-annual exceptions, no more Bird rights. No more convoluted loopholes of any kind in which rich teams can flaunt the very spirit of a salary cap or have-not teams can foolishly squander their financial future because they just couldn’t keep their hands out of the oh-so-tempting cookie jar.
Under a hard cap, it comes down to only one thing: do I have the money or not?
This doesn’t fix everything. There’s nothing that can overcome the fact that there just aren’t enough LeBrons to go around. And the owners absolutely need to make significant improvements in their revenue sharing system as a close follow-on to this.
But I just don’t know how this league can even begin to address either competitive balance or cost containment without a hard cap.