Yankees' Spending Spree Defies Laws Of Economics

The time between Christmas and New Year's Day is usually a quiet period in the world of Major League Baseball. Perhaps this year, the industry will need that time to process the signing spree undertaken by the New York Yankees — a team that has spent well over $400 million to sign three players. It seems inexplicable during this period of economic austerity, but there is an explanation to the seeming excess.

Basketball fans used to wonder if Michael Jordan defied the laws of gravity. Now, baseball fans are wondering the same thing about the Yankees and the laws of economics. The Yankees have signed slugger Mark Teixeira to a contract worth $180 million over eight years, pitcher C.C. Sabathia for $161 million over seven years, and A.J. Burnett got $80 million for five years.

For the record, the Yankees are trying to win the American League pennant, not single-handedly stimulate the U.S. economy. But their enormous outlay seems to serve up a Ruthian asterisk on every statement you've heard over the past few months about the world financial crisis.

One is now tempted to amend the words of the president-elect, "We are facing an economic crisis of historic proportions."

*Not the Yankees.

"Most experts now believe that we could lose millions of jobs next year," Obama has said.

*The Yankees won't.

"Right now, our economy is trapped in a vicious cycle: The turmoil on Wall Street demands a new round of belt-tightening for families and businesses on Main Street," he has said.

*But 161st and River Avenue in the Bronx is pretty safe.

That's the address of the new Yankee stadium, which will open next year. The stadium cost between $1.3 and $1.5 billion, and is the driving force behind the Yankees' spending spree, says Mike Cramer, who teaches sports business at New York University.

Cramer, former president of the Texas Rangers, says the Yankees simply must pack the House That Ruth Built (And George Refinanced). And the free agents they signed will go a long way to ensuring the team is at or near first place in the standings. Of course, if fans choose to watch the Yankees on TV, that's not the worst thing for the team, because it owns its own cable network.

Though unavoidable, disclosing the details of the contracts does make it seem like the Yankees aren't just fighting the Rays and Red Sox, but striking out against the entire zeitgeist.

The day after the Teixeira signing was announced, New York's three tabloid newspapers ran roughly 39 economics-related stories. From "Madoff Vic Commits Suicide" to "GDP Falls" — all were negative or neutral, with the exception of one item about the concert business being up.

But the back pages were dominated with the image of this one New York business flush with cash, spending freely, forecasting good times to come. Kenneth Shropshire, director of Wharton Sports Business Initiative at the University of Pennsylvania, says fans should feel better about paydays for athletes than a lot of the executives they've been reading about.

"I think it sends a message that baseball's OK," Shropshire says. "There aren't the same questions when you hear about bonuses being paid to execs."

Yes, baseball fans know the names Jeter, Rodriguez, Sabathia, Teixeira and Burnett, and can debate if they're worth, on average, more than $20 million a year. But the Goldman Sachs murderers' row of Blankfein, Winkelried and Cohn, who each made over $70 million in 2007, still took a piece of the government's multibillion dollar bailout.

So even if the Yankees seem recession proof, they do stick to the economics law of supply and demand. They supply a great storyline for baseball, by demanding that every non-Yankee fan has at least one deep-pocketed nemesis team to root against.

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