A thought about payroll

The Terrell Owens fiasco got me to thinking about the difference between football and baseball contracts.

The Eagles signed Owens to a fat contract (not fat enough for Owens, obviously), but now have to eat that contract because they've essentially kicked TO off the team. They have to pay him $1 million for the rest of the season, and then they'll have to deal with the rest of his contract. Fortunately for the Eagles, there are no (or almost no) guaranteed contracts in the NFL, meaning that the financial hit to the Eagles will be a lot less than the face value of TO's contract.

Baseball has a completely different financial structure because guaranteed contracts are a fact of life. If the baseball version of TO had pulled a similar stunt with the Nationals, the team couldn't get out of the contract (or a substantial portion of it). (Yes, there might be situations in which the team could get out of the contract, but let's not get bogged down in the legal mumbo jumbo.) The Nats would have to carry the contract, and it would count toward the team's payroll and a calculation of whether the team had to pay a luxury tax.

In other words, a baseball contract carries a lot more risk for a team than a football contract. That means that a baseball team should be much less willing than a football team to enter into a long-term, high-priced contract. A rational team (i.e., one with sane management) with a budget (i.e., nearly every team other than the New York Yankees) should reserve such contracts only for the most valuable and consistent players. Given that a team must enter into a guaranteed contract, it makes no sense to invest scarce dollars over a period of years in a player who hasn't demonstrated the ability to perform at your expectations on a consistent basis. This is because a baseball contract for a team on a budget is a nearly zero-sum game--a dollar invested in Player A is a dollar that can't be invested in Player B--and money invested in a player who fails to meet expectations is a losing investment.

This has important effects on a team like the Nationals. A rational team would enter into long-term, high-priced contracts with only a few players and would give itself more flexibility with nearly every other player. That means that there will be times when a team like the Nationals has to opt out of bidding that gets out of hand. For example, the Nationals would opt out of an absurd free agent market like the market that developed for starting pitchers last year, in which merely above-average pitchers were being signed for ridiculously high prices. In that situation the Nationals would have to invest their money elsewhere or hold their money until the market returned to a rational state.

All of this means that a team like the Nationals has to be patient, and we as fans have to be patient with it. The Nationals should invest for the long term because guaranteed contracts make nearly every investment a long-term investment. So, the Nationals probably should say goodbye to Esteban Loaiza, a good pitcher who will command a ridiculous contract in the free agent market. And they should never have invested in Cristian Guzman, who would not have earned his contract dollars even if he had performed at his historic level. On the other hand, the Nationals should be willing to invest large sums of money in the highest value free agents.

The Nationals need to become a team that invests capital wisely. Let's hope they hire management who can do that.