Yankees payroll

Just how egregious is the Yankees payroll this year? The Yankees have always been rich, but the A-Rod deal seemed to set everyone off. Fans to general managers have lamented that this time Steinbrenner has gone too far, that baseball's competitive balance has reached its logical end.
But, as some analysts have noted, the Yankees have always had one of the top payrolls in baseball. It's only now that they're winning that people are griping. A massive payroll is no guarantee of victory.
Still, a payroll of nearly $190 million seemed outrageous. I was curious how far overboard the Yankees had gone this time so I went back to compare Yankee payrolls against the total MLB payroll for every year since 1977 (the first year free agency in baseball really took off), using data from Doug Pappas's website and, for 2004, from Dugout Dollars (both are great sites for this type of data; this Internet thing might just catch on). Click on the image below to see a larger image of the graph.

A few things I learned. One is that the Yankees haven't always had the highest payroll in baseball. For a stretch from 1989 to 1993, not only did they fail to have the highest payroll, they ranked as low as 10th among all teams. It's important to note, however, that from 1990 to 1993, Steinbrenner was banned from baseball by Fay Vincent over the Boss's dealings with gambler Howard Spira. Is it also a coincidence that the Yankees had a losing record from 89 through 92, four of only five seasons in which they've had a losing record since 1977?
Steinbrenner returned as Yankees GM in 93, and that would be the last time the Yankees weren't the highest paid team in baseball. They've also had a winning record every season since and captured four World Series.
This season, however, their payroll is high even by Yankees standards. The Yankees currently make up nearly 10% of all of MLB's payroll (9.5%, to be exact), the highest percentage since 1977. I'm guessing it's the highest of the modern era. Their payroll is 43% larger than the second largest payroll, that of the Red Sox. The Yankees are taking their lavish spending to new heights.
Despite that, it's difficult to conclude that it's the end of competitive balance in the sport. Though the Yankees have four World Series titles in the last 11 years, you could argue that the team with the highest payroll should have more than that. After all, the Bulls won six NBA titles in eight years, and basketball has a salary cap. I suspect that competitive parity in football has more to do with the number of players required to field a team than with the salary cap in that sport.
And, as plenty of other teams have shown over the years (A's, Marlins, Angels), it's perfectly possible to field competitive teams with modest payrolls. In the playoffs, in a short series, anything can happen. The Yankees are a very old team, and their farm system is weak. This sudden spike in their payroll might be the desperate thrashing of a franchise trying to stave out some lean years on the horizon. They rode an unusually strong nucleus of homegrown talent (Derek Jeter, Mariano Rivera, Bernie Williams, Jorge Posada, Andy Pettite) to a couple of World Series victories, but unless they want their payroll to continue to mushroom, they'll have to grow from within at some point.
The Yankees are also playing by the rules laid down in the last collective bargaining agreement which all the other owners signed off on. As long as the population of cities follows a Zipf distribution, the Yankees will likely always swim in the biggest pond and have the largest treasure chest of revenue to spend. The Yankees bring in more money to baseball than any other team, and it floats the boat higher for all the teams on board. That some small market team owners choose to take their share of the pot and put it in their back pocket rather than investing it in trying to field a more competitive team is a loophole in the system. As Baseball Prospectus noted in their Yankees introduction this year, since the luxury tax was put into place, the Yankees have actually stepped up their spending while all other teams have treated the luxury tax threshold as a de facto salary cap. Bud Selig can argue until he's blue in the face that he helped to negotiate an agreement that restored competitive hopes to all teams in baseball, but if anything the payroll disparity between the largest and smallest teams has only increased since the CBA.
The players certainly aren't going to argue for a salary cap. You don't see players from other teams complaining about the Yankees free spending. That's because a salary cap would hold down the collective salaries of all players in baseball.
What free agency and the lack of a salary cap has done is give the Yankees a higher margin of error than other teams. When you can afford more players than other teams, you have a larger talent base from which to select. You can offload player development to other teams and then pick off stars when they hit free agency and are valued at market prices that other teams are unwilling to pay (e.g. Jason Giambi, Mike Mussina, Gary Sheffield). Steinbrenner's "payroll-is-no-obstacle" attitude has managed to stave off the Yankees down cycle.
My jealousy of the Yankees is no different than the envy I felt of kids whose parents spoiled them silly and purchased them the box of 64 Crayola crayons in grade school when I had to settle for a sorely inadequate palette of 16. The Yankees are spoiled, and if they are healthy, they will field the strongest lineup in baseball.
I admit to a certain fascination with seeing just how far Steinbrenner is willing to go. If he fails to win a World Series this year (oh, let us hope), what will he do next? I do admire his competitiveness. If his team starts to flounder, will he start calling players into his office like his friend Donald Trump and fire them on the spot? The sheer volume of joy/schadenfreude that Yankees struggles would bring to baseball fandom in 2004 is staggering. It's a magnitude of happiness that no amount of Steinbrenner's money could buy.