What If the U.S. Economy Operated Like NFL?
Tuesday, May 14th, 2013
On one hand, we have the U.S. economy where President Obama and Congress draft laws and regulations to oversee economic activity. Then there is the National Football League (NFL) and the English Premier League (EPL), who each have administrations that develop policies and rules to regulate their respective brands of football or ‘futbol’, as known by my soccer aficionados. When looking at the U.S. economy, one could argue that the U.S. government has more closely reflected EPL over the last couple of decades, rather than the NFL. Is that ideal or should they look to the NFL as a better model for governance?
When examining the EPL where access to player talent is controlled completely by the free market with no draft rules enabling weaker teams to acquire quality talent and no mechanism to share revenues among clubs. Then compound that with vast differences in ownership wealth and local TV markets and it should not be a surprise that there have only been five clubs that have tasted the English Premier League championship since 1992: Manchester City, Manchester United, Chelsea, Arsenal, and Blackburn.
On the other hand, consider the NFL, whose rules favor more equality. Within their system, TV revenues are shared equally among all 32 members. Lack of success is rewarded with a draft system that places a greater reward for futility with poor teams gaining exclusive rights on elite talent. There are also constraints on player salaries and movement through a salary cap and delaying a player’s capacity to test free agency. Not surprisingly, there has been much better balance in teams reaching the pinnacle of success with almost triple the number of Super Bowl winners since 1992: Washington Redskins, Dallas Cowboys, New York Giants, Green Bay Packers, New Orleans Saints, Tampa Bay Buccaneers, San Francisco 49ers, St. Louis Rams, New England Patriots, Baltimore Ravens, Pittsburgh Steelers, and Indianapolis Colts.
Imagine the elite graduates of Ivy League MBA schools. They are able to sell their talents to any corporation and are free to move to any market. Isn’t that similar to the EPL? However, what if NFL-style rules were imposed and an actual talent draft where chief executive officers in struggling metropolitan areas were able to acquire exclusive negotiating rights to top talent over high growth areas?
Consider what a boon that would be to Detroit, whose seasonally unadjusted metro unemployment rate of 10.2% ranks 48th out of 49 metro areas exceeding 1 million in population. Would that be fair? Maybe not to the Harvard MBAs, but what about Detroit residents, who could benefit from their ingenuity and innovation to create employment for a depressed metropolis. There are some, who believe that is un-American, but those same individuals applaud restrictions on football players all in the name of equality where small communities, such as Green Bay, can compete at a higher level than Dallas, a much larger market.
Both the EPL and the NFL are highly successful, but in distinct ways, that show that pursuing equality or efficiency can lead to ideal outcomes. However, it is ironic to see that the United Kingdom, whose politics lean more toward equality, has a sports league that is truly a free market. Whereas the NFL unabashedly request subsidies from cash-strapped city and state governments, but embrace capitalism in their other enterprises. Then they also shrug their shoulders when TV revenues are distributed the same to the Buffalo Bills, a chronic underachiever, and the New England Patriots, whose sustained excellence is respected by all.
Where is the motivation for the Bills to put a quality product on the field, when their franchise value is estimated at $805 billion. Contrast that with the lowly Wigan Athletic Club of the English Premier League which must annually compete at a high level or risk relegation to the minor leagues. Yes, you heard that right. The bottom three teams in the EPL are kicked out and shuttled to a lower classification. You can breathe easy Kansas City Chiefs fans as the NFL provides a sturdy safety net for awful performers. That is one reason why Wigan’s net worth is a fraction of the Bills at $30 million. (Note: I converted British pounds into U.S. dollars.)
Economic theory suggests that too much income redistribution will distort work incentives and discourage innovation, but what about excessive market power? Isn’t it possible that too much wealth accumulation inhibits competition? Consider the fates of Wigan, Reading, and Queen Park Rangers in the English Premier League. They are hopelessly overmatched in competing with their well-heeled competitors, regardless of their management acumen. Conversely, couldn’t a similar argument be made about the U.S. economic system where social mobility is low relative to their peers.
Consider the student, Grace Gifted, who is an excellent student in a low-performing, high poverty urban school district. She is at a significant disadvantage when compared to an Allison Affluent, who has good, but not superior, intelligence, and resides in a rich school district where abundant resources are available to give her an edge over Grace. For instance, Allison can attend an AP course, which is taught by a teacher that is dedicated to all AP students, while Grace takes a AP course, whose classroom is split with regular and AP students. Then there are differences in resources of parents where Allison is able to access various test preparatory materials, which are not affordable for Grace’s parents.
With the EPL mechanism, there would be no allowances given to Grace. On the other hand, an NFL-type solution would force affluent parents to distribute more property taxes away from their district to Grace’s poorer school district. In that way, Grace’s school could get more funding, so that she could get dedicated teaching for her AP class and close the preparatory gap with Allison. Isn’t that the same as the San Francisco 49ers sharing a portion of their ticket revenue to the Arizona Cardinals, where fans certainly are not attending to watch the passing talents of inept Cardinals QB Ryan Lindley.
Even though the current U.S. tax code is considered more progressive than most of Europe, it does not have a consumption tax like Europe’s value added tax, which is essentially a tax on consumption. However, a look at marginal income tax rates shows that the U.S. has among the lowest rates among advanced economies with only Canada rating lower. Though when looking at Canada, they have a universal health care program, so that the less fortunate have better access to care.
Maybe the U.S. economy should be more like the NFL. It’s not like they are starving for business on Sundays.