"Income Inequality" and the Tax Code

In their regular swoons of late about “income inequality” it appears that many editorial writers are only now discovering these two facts about economies throughout history and throughout the world: (1) People do not all make the same amount of money; (2) there are far fewer rich people than not-rich people.  I assume that when they talk about income inequality, they understand that its opposite is income equality –  a state of affairs in which all people make the same amount of money. How they think that would work, and why they think it would be desirable, is anybody’s guess.  (If that’s not what they mean by the term, then they should let us know what they do mean.  Please be specific.) *

Anyway, my suspicion is that in their finely honed sense of moral superiority, what they’re really doing is conflating what they call income inequality with unfairness in the tax code. And the latter might well be a legitimate beef.  We citizens pool our money in the form of taxes to buy for ourselves collectively things we want and need but which would be impractical to buy individually, including national defense, schools, roads and bridges, police and fire protection, libraries, parks, sewers, dog catchers, air traffic control and much, much more.  There’s a big difference between being skeptical of big government, which is sensible, and being anti-government and inflexibly anti-tax, which is childish. 

When taxation is understood as a burden -- one that needs to be shared as equally as possible --  in the absence of a carefully graduated tax code, and one that’s free of the sorts of loopholes that only a certain segment of the population can take advantage of, the burden is impossibly heavy for some and nearly non-existent for others, even though everyone shares more or less equally in what those taxes buy.  Understood that way, the fact that people who make above a certain income pay, in the aggregate, a certain percentage of the total tax bill has little meaning.

Net: Income inequality isn’t the problem and railing against it just muddies the waters.  Fairness in taxation, on the other hand, is something that always needs scrutiny.

* While acknowledging that interest groups from all sides offer up opinions based on various sets of "facts," I would submit that it's sensible to at least examine the statistical evidence -- to rely on at least some semblance of a factual basis -- in discussing this issue. There is considerable evidence that the perception (and condemnation) of income inequality is driven by ideology and class resentment and operates in a fact-free zone. It is in this spirit that I offer the following article by Bill Knapp, a managing director at the political consulting firm SKDKnickerbocker:
 

Middle class is moving forward, not backward

By Bill Knapp, Published: January 15

Bill Knapp is a managing director at the political consulting firm SKDKnickerbocker and has been a media strategist to five presidential and numerous other political campaigns.

As the presidential election heats up, we’re hearing a lot about what’s wrong in America. But the rhetoric doesn’t match reality. Amazingly good things are happening in our country. Let’s consider just a few of the topics that people typically point to as “problem areas” — jobs, inequality, education and poverty — and see why there is cause for hope.

First, America is a job-creation machine. From 1950 to 2010 the number of full- and part-time workers in the United States rose by 92 million. Over that period, while our population doubled, our workforce increased 2.47 times. Essentially, we are creating more jobs than people.

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But here’s the amazing fact. Our job market has accommodated over 40 million more women in the workforce since 1960. The number of full-time, year-round women in the workforce has grown more than 350 percent, to 42.8 million workers, according to 2010 Census data. And the median income for year-round female workers has increased to $42,839, about $5,000 short of full-time, year-round male workers at $47,715. Since 1967, the year the Census Bureau started to report these data, women in the workforce have grown by 27.7 million jobs, men by 19.7 million. Women are the big winners in terms of job growth.

Yet we barely notice this remarkable job growth record and transformative social phenomenon.

There is a lot of talk about the “99 percent” vs. the “1 percent.” The rich have always been disproportionate owners of the total wealth. But an entire intellectual and political infrastructure is used to exaggerate and distort income disparity. A fact from the 2010 Census: Since 1967, median household income has grown in all income levels above $75,000 and has decreased in all income levels below that threshold. The largest increase is among those making $100,000 to $149,999 a year — a threefold increase. Those in the highest quintile account for 50.2 percent of total U.S. household income, with a mean of $169,633. That share of household income was 43.6 percent in 1967 and in 2001 broke the 50 percent mark. Should we be concerned by this consolidation of wealth? Maybe. But we’re not quite in need of the French Revolution. Another often-cited “proof” of inequality in America is the share of national income earned by the top 1 percent. In 1968 it was 11 percent; in 1988, 15 percent; and, according to the IRS, in 2008 it was 21 percent.

As of 2009, it had fallen to 17 percent. There is widespread misunderstanding about whom the top 1 percent of earners really means. According to the Urban-Brookings Tax Policy Center, in 2011 the 1 percenter made $532,613 in annual cash income. In 2004, the 1 percent made $459,247 cash income. When you adjust for family size, the top 1 percent made, on average, $335,779 a year. This is not small change, but it’s a far cry from the Robber Barons and the inequality of the Gilded Age.

If there is an income divide in America it is over education, and this makes sense: People who are better educated should make more money. The 2010 Census shows that since 2002, among those 25 or older, the number of people with a bachelor’s degree rose 16 percent, to 47.7 million. The median income for a male with a bachelor’s degree or more is $63,265. That same cohort with full-time employment increases the median to $71,778.

Education pays. In 1979, the median income of college graduates was 36 percent more than high school graduates. In 2010, the median income for a college grad was over 79 percent more than his high school counterpart, according the Census Bureau. And here is the real, hidden optimistic point: As a nation we have never been better educated. In 1940, only a quarter of Americans 25 and older had achieved a high school degree or higher. In 2009, that number was close to 90 percent. The increase in the percentage of Americans who have had some college experience rose from 10 percent in 1940 to 56 percent in 2009.

College enrollment as a whole was projected to be 20.6 million in 2010, higher than any previous year. The real growth, however, is in online education, which has become an affordable alternative to typical brick-and-mortar colleges. According to a 2010 report by the Sloan Consortium, the number of students enrolled in online learning increased 21 percent from 2009 to 2010, compared to 2 percent growth of the overall higher education enrollment. The Western Governors University, a private, nonprofit online college based in Salt Lake City, is growing 20 percent every seven months. The University of Phoenix, a for-profit, open-admission online college, reached a peak enrollment of almost 500,000 students in 2009-10. This growth stems partly from the ease with which students can enroll and complete courses but is mostly due to price. Despite 30 percent annual growth in enrollment, Western Governors U. has increased its tuition only $200 over the past four years.

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The pessimism industry is focused on inequality and poverty. Politically incorrect as it sounds, poverty is driven by a lack of education and by single-parent households. Married couples have a median income of $72,751. Female-headed households with no husband have a median income of $32,031. Some will say that the number of female-only households living in poverty has doubled since 1965, to more than 15 million Americans. But among this cohort, the raw numbers tell a different story: The population of this group of women increased from 16.4 million in 1965 to 46.4 million in 2010 — and the share in poverty decreased from 49 percent to 34.2. We’ve made some progress, though more needs to be done.

In an effort to find a more accurate and complete measure of poverty, the Census Bureau tried an experimental formula last year, in addition to its standard measure, that showed 1 million individuals had pushed up from extreme poverty into near poverty. The poverty rate for children declined from 22 percent to 18.2. That’s 3.2 million children who are no longer living in poverty, according to newer, more-inclusive standards.

Now, let’s look beyond IRS and Census data to other telling facts about our economic growth and future. According to Pew Research Center, 83 percent of American adults owned a cellphone last May, up from 66 percent in January 2005. In 2008, 71 percent of teenagers had cellphones, up from 45 percent in 2004. This is a telling statistic because when more teenagers own luxury electronics, it means there are more families with disposable income — indicating a stronger and wider middle class. In 2008, 77 percent of teens also owned a video-game system, 74 percent owned an iPod and 60 percent owned a computer.

The struggling middle class is getting their teenager cellphones, video-game systems and computers, and they’re going to schools in neighborhoods that have gotten safer in a world that is, broadly speaking, less violent. Steve Pinker’s “The Better Angels of Our Nature: Why Violence Has Declined” estimates that deaths caused by war, genocide, purges, war-caused famine and disease counted for only 3 percent of all deaths in the 20th century. The latest FBI national report showed that the estimated volume of violent crimes in 2010 fell 6 percent from 2009. Not bad.

Another sign of health is broadband Internet access. In 2000, shortly after broadband became available, about 4.7 million households had access. By 2009, about 75 million households had access. That’s an amazing accomplishment for the 1 percent and the 99 percent.
These positive trends are present across almost every indicator of a successful middle class. As persons per household is decreasing — from 3.16 in 1969 to 2.66 in 2009 — the number of vehicles per household is increasing, from 1.16 to 1.92, or 66 percent, across the same period. Even accounting for population increases, the growth in number of vehicles owned outstrips the growth in the amount of new drivers by 1¹ / ₂ times. By 2009, there were 1.39 cars for every worker in America.

The bottom line: America’s middle class is still successful. More families own their homes than in any other decade and are by far the best-educated middle class in our history, with ever-expanding access to technology. They have the opportunity to educate their children and prepare them for a great life in a country with a great future. So take that, pessimists.
 

Let's, like, demonstrate

"Occupiers" are coming to the forefront again, and in the predictable life cycle of these uprisings, have entered into their bomb-throwing phase.  Early on in that cycle, the tactics, as is always the case, quickly and permanently supplanted whatever purpose may have been originally envisioned, if one was.  Almost immediately, it became not about the achieving, but about the doing, and predictably devolved into Bill and Ted's Excellent Adventure.  This is okay if you’re a kid; it’s what kids do.  But not if you’re an actual grown-up.  (Movie stars are generally in the former category and so they, too, can be forgiven.) Establishment support for such purposeless and juvenile acting out is mystifying.  What exactly do they think is wrong with Wall Street and "Big Business" that can be addressed by this communal rant? And do they really think it’s a popular cause that has the implicit support of some silent but restive majority out there? The reality is this: Most of the relatively few people who are aware of it in any meaningful way don’t care about it.

The core tenet of the demonstrator/occupier religion is the conviction that something, somehow is being done to them, and if it weren’t for that something, their lives would be better. That’s about it. Their m.o. is to be hostile to, and in high dudgeon about, people who are in some unspecified way connected to money.  And that being the case, the things they say, and shout, and paint on their signs are difficult to refute. “I'm plenty mad, about money things, and, well, a whole bunch of other stuff, too” isn't the sort of thing you can really debate.  Not that they actually want to debate anything, as that would force them to suspend, if only temporarily, their primary activity: the care and feeding of their grand sense of moral superiority and the nurturing of their sense of mission, conveniently unspecific though that mission may be. (This lack of specificity is in vivid contrast to to the moral, and urgent, underpinnings of the causes that gave rise to past major and ongoing demonstrations/occupations -- civil rights for tens of millions of disenfranchised citizens and an end to the disastrous war in Vietnam. Those people were crying out. These people are whining. Big difference.) It's one thing to give them their space and let the thing play itself out. How supportive editorial writers and others see this as being in any way substantive or productive, though, is a mystery. But many apparently do.

Although it’s true that some bankers, lenders, and “Wall Streeters” have played fast and loose with our money – my money – in the recent past, and feloniously in some cases, the demonstrators would do well to keep in mind that it’s not a zero-sum game; money that “greedy” Wall Streeters take in does not come out of the pool available to wage earners and others. They are free to improve upon their circumstances regardless of what Wall Street is or is not up to. They're not poor because other people are rich. As for Big Business, it’s good to remember that it employs tens of millions of people and puts trillions of dollars into the economy, contributing mightily to the general prosperity; and it is owned, in the main, not by moustache-twirling villains but by shareholders, a huge percentage of whom are ordinary folks whose life savings are in those shares.

Speaking of moral superiority, one of the themes it extends to is the idea of inequality of income.  The demonstrators are, apparently, against this, meaning they are presumably for equality of income – or, put another way, they believe everyone should be paid the same amount of money; that it’s “unfair” if some people make more money than other people; that it’s morally wrong for a company president to make more than a cab driver; that there’s a small number of rich people and a large number of not-rich people, and that’s no good. Is that, in fact, what they believe? If not, then what? What does “inequality of income” actually mean? Please be specific.

Although attempts were made to characterize the Wall Street demonstrators as the left’s answer to the Tea Party, what’s striking is not how different these two groups are but how alike they are.  “I don’t have what I want – the job I want, the money I want, the life I want -- and it's somebody else's fault.”  That’s what every placard at the Wall Street protests should read and it’s what every placard at a Tea Party rally should read.  For the protesters, the fault lies with financiers and big business.  For the Tea Party, it’s “the government.”

Tea Partiers believe that their problems – and everybody’s problems – are caused by things the government is or is not doing, and so they want the government to cut it out.  Cut what out, exactly, isn’t clear except, perhaps being “big.”  But as has been the case with political parties and their constituents since the beginning of the Republic, what they really object to is not how big the government is but how it spreads that bigness around.  In other words, they’re in favor of the government spending they’re in favor of, and against the government spending they’re against.  The former category generally includes government spending that directly benefits them, and the latter category spending that does not.Taxation and government spending is not a commie plot.  We citizens pool our money in the form of taxes to buy for ourselves collectively things we want and need but which would be impractical to buy individually, including national defense, schools, roads and bridges, police and fire protection, libraries, parks, sewers, dog catchers, air traffic control and much, much more.  There’s a big difference between being skeptical of big government, which is sensible, and being anti-government, which is childish.

By the way, also included, by way of the will of the people, in the list of things we buy for ourselves through taxation are social security and Medicare.  If the Tea Party is against these programs because they believe them to be “socialistic” then they should step up to that and call openly and vigorously for their repeal -- and take that position to the polls in the next election.  If not, they should cooperate in finding ways to keep the programs healthy instead of confining their contribution to coy references to socialism and Ponzi schemes. 

Most of us working stiffs view the machinations of Washington and Wall Street as curiosities that don’t really affect our ability to live and prosper.  We simply get on with our work and our lives.  The chronic complainers of the left and the right should try it. They are free to improve upon the circumstances of their lives regardless of what “the government” or “Wall Street” is or is not up to, and electing their heroes – shameless demagogues, for the most part – isn’t going to help them at all.

Gingrich and Bain

The last few election cycles, topped off by the increasingly inane jabber of the folks now running for the Republican nomination for president, have removed all doubt about the veracity of this statement: The job of president, or, for that matter, any other elected office, especially at the federal level, is such a desirable one because of the wealth accumulation that goes with it, that people will do anything, say anything, and pay any price to get it. Still, in the hypocrisy sweepstakes, it seemed like the bar couldn’t be set any lower than it had been in recent months by the GOP candidates.

Wrong. With their ganging up on Mitt Romney for his association with Bain Capital, they’ve knocked it down yet another notch. Particularly so Newt Gingrich, who, in the service of his eye-popping ego and relentless ambition is leading this charge. You don’t have to support candidate Romney and his policy ideas generally (whatever they may be) to bristle at the clueless characterization of Bain – and the more than 2,000 other U.S. companies just like it – as nothing more than a pack of predatory Gordon Gekkos whose mission is to throw hard-working American out of their jobs. For Republicans, of all people, to embrace that characterization is ironclad evidence that this campaign has gone through the looking glass.

The function of Bain and others like it is to invest in companies that have underlying value – good and profitable products and services – but which, due mainly to poor management, have underperformed and are in danger of underperforming themselves right out of business. People – investors – wish to put their money at risk in the belief that such companies can be rehabilitated and that their underlying value can thereby be unlocked. It’s hard to quantify this, but there’s certainly reason to believe that this process is a net job creator, not destroyer. That’s because companies that go belly up throw all of their employees out of work, not just the relatively small number that need to be cut to keep the company in existence and to make it the company it could and should be. That may be a bit of an oversimplification, but what private equity companies like Bain do is one small part of a much larger process of continual corporate endings and beginnings -- of death and renewal -- that keeps the big wheel turning and makes the U.S. economy by some distance the most prolific creator of jobs in the world.

It’s not always easy to tell what Mr. Gingrich does and does not stand for, but historically he has been nothing if not a capitalist, a card-carrying free-enterpriser who therefore understands capitalism’s processes, particularly the ongoing and altogether natural one of corporate birth, life, and death. And so he knows what he is saying about Bain is a crock. And yet he says it anyway.

Now comes the "open marriage" discussion, and there has always been something about Mr. Gingrich's carriage and demeanor that makes the idea that he lobbied for such an arrangement totally plausible. (Predictably, he excoriated "the media" for his own mind-bogglingly self-serving treatment of his several spouses, pronouncing himself "appalled" -- not that he did it or that his ex-wife outed him on it, but that people asked about it.) The man absolutely sets some kind of record for unctuousness -- his pious condemnation of behavior of which he himself is demonstrably guilty, his contemptuous dismissal of indisputable evidence of his post-congress lobbying shenanigans, his exquisitely mindless political/historical disquisitions that reveal him to have much more in common with Professor Irwin Corey than with anyone who has serious ideas about statecraft. And on and on.

It's well understood that most voters favor the candidates they favor not because of what those candidates believe and say but because they "like" them, in much the same way that people "like" movie actors -- what they look like, how they talk, how they present themselves -- the aforementioned carriage and demeanor; and that's why politicians get away with candidacy by bumper sticker. If I "like" you, and your slogans sound about right, then I'm in your camp.

None of which explains the appeal of Newt Gingrich.

Egging on the Unhinged

The heartening recovery of Gabrielle Giffords and her recent to decision to leave congress recalls last year's discussion -- pretty much the same discussion that follows each of these horrific developments -- about guns in the hands of the mentally incompetent. Various members of the chattering and political classes got plenty huffy over suggestions that the things they say were in any way connected to the acts of Jared Loughner, arguing that Loughner is in the grip of an indecipherable but politically-neutral mental landscape. And that much seems to be true. The shooting apparently wasn’t the direct result of the exhortations of some media shouter-hater, or of a general climate of incivility. So the shouter-haters are, it seems, off the hook. This time.

The problem: Yes, Loughner is unhinged, but it is exactly that group – the unhinged – who are most likely to come under the thrall of mass media types who characterize others as traitors and enemies of America, and who recommend “second-amendment remedies.” When the delusional hear those words, taking up arms might seem to them – or just one of them, but one is all it takes -- a perfectly reasonable response, just as taking up arms for other “reasons” seems reasonable to the Loughners of the world. What are the chances of that happening – of some wing-nut hearing “treason” and “enemy of America” as a call to arms? Well, there are 300 million people in the United States, and if just .05% of them are in that category, that’s well over a million people who could conceivably think it sensible or even imperative that they get a gun and kill a traitor.

One obvious remedy is for the ranters to shut up. Voluntarily. Pay no attention to their agonized cries of free speech infringement. No one – certainly no government – is trying to censor or muzzle them. The request is that they do the good thing: State the case for their beliefs without characterizing people with whom they disagree as dangerous enemies of right-thinking people, intent on bringing down the Republic – a characterization that is obviously inaccurate and, in the end, infantile. The fact that they say these things not out of conviction but for money undoubtedly makes this remedy a bit more difficult to swing, but one can hope. Maybe there’s a conscience in there somewhere.

Beyond that, and without getting into the ins and outs of firearms legislation, can there be any doubt that we have to find a way to keep the unhinged and guns separate? In a political cartoon by Steve Artley a gun store proprietor says to a prospective gun purchaser, “This pistol is capable of firing 9MM rounds at a rate of 20 rounds a second…do you feel competent to handle a weapon of this magnitude?” Buyer: “Gov’ment toothfairy immigrant applesauce grammar toilet brush.” Proprietor: “Sign here.”

It won’t be easy and we won’t always be successful. Different laws apply in different jurisdictions. For a variety of reasons – poor record-keeping, inaccessibility of records, health-status confidentiality – the mental health of a given individual is difficult to determine, waiting period or not. And the sellers of guns, despite their pious pronouncements to the contrary, don’t care.

But it has to happen.

Reassurance for the Tea Party

A Tea Party sympathizing writer opined recently that “the government controls all aspects of our lives and freedoms,” and this sort of sentiment does seem to capture what worries the movement most. So, to members and sympathizers of the Tea Party, and to all others who share the party’s worries regarding the state of the union and its future, I offer the following reassurances:

If you have the brains, guts, talent, and desire it takes to get moderately to extravagantly wealthy, nothing the government is doing, or not doing, is going to get in your way. That has always been true in America, it is true now, and it always will be true. We do not practice socialism here, and we are in no danger of taking it up. There are trillions of dollars in private hands in the U.S., and free enterprise – capitalism – is thriving. If you are dissatisfied with your general circumstances, you are absolutely free to improve upon them. “The government” is not stopping you. Politicians who argue otherwise are just opportunists who wish to gull people into believing that their problems were made by politicians and are therefore solvable by them.

Some people would argue that health care is a thing we ought to do collecitvely -- i.e. buy it by pooling our money in the form of taxation because it can be more sensibly and economically done that way. Many disagree, though, and would look upon such an arrangement as “socialized medicine.” Whatever. The Affordable Health Care Reform Act, however, is not evidence of Bolsheviks on the loose. Reasonable people can disagree about any or all of its provisions, but to characterize it as socialistic, much less a government “takeover” of health care, or as socialized medicine, is nonsense. So, health care reform isn’t socialism raising its ugly head. It’s a piece of legislation some people are for and some against. State your case – and quit characterizing ideas with which you disagree as being sponsored by Satan.

Government, no question, can be intrusive, involving itself, by way of massive bureaucracies, in areas where it’s not needed or wanted. But any discussion about government size – and presumably Tea Party criticism is directed primarily at the size of federal government -- is going to have to confront national defense, social security, and Medicare/Medicaid which together account for about 60 percent of the federal budget. As for other federal expenditures, we shall see how loud the Tea Partiers squeal when federal dollars that benefit them are cut. But – and here’s the reassurance part – they probably won’t be cut. Anyone who thinks that because their heroes, Democrat or Republican, got themselves elected, government is going to get appreciably smaller and is going to spend appreciably less money, does not understand how things actually work here on planet earth. The GOP's pledge to cut $100-billion from the federal budget is laughable.

As for deficits, many people see them as troublesome, while others do not. The latter category would include GOP and Tea Party icon Dick Cheney who said -- echoing another Tea Party icon, Ronald Reagan -- “deficits don’t matter.” But we can say the following things, which should be understood by Tea Partiers as reassuring: (1) Whether they matter or not, deficits are not unusual; since 1940 the federal government has run a multi-billion-dollar deficit in every year but twelve. (2) They go up and down, and occasionally disappear altogether.

What Tea Party folks have to come to grips with is that despite their enmity for government and their free-floating hostility for things in general, whatever problems or dissatisfactions they may have with the circumstances of their life are by and large of their own making. They are free to improve upon them regardless of what “the government” is or is not up to. Best they quit worrying about what government is doing and get on with their lives.

Show Me the Money...and Show Me Other Stuff, too

Many years ago, I had a chance to upgrade my family’s financial picture by moving to Detroit, but it was a move that neither I nor my wife were interested in making mainly because it would mean abandoning things that mattered more to us than money – primarily, but not exclusively, family, friends, and general comfort and familiarity. Our decision was perhaps not the one that would most often be made in those circumstances, but neither was it anything like unheard of. People do exactly that all the time – assign various weights to various factors in deciding whether to change employers. Those factors would almost certainly include money, but it wouldn’t be abnormal if they also included a wide range of other considerations: projected job security and job surroundings, school quality, housing stock, climate, and on and on – including the aforementioned concern about abandoning a friends/family comfort zone.

Net: Yes, It’s about the money – something we like to say when we want to come across as a guy whose opinions and decisions spring from cold hard facts and not from squishy emotions – but it’s almost never only about the money. Most people probably go for the dough, but far from all. People in all walks of life decide to stay put – and forego money – because other things are more important to them. And if an ordinary joe for whom a raise in pay actually matters can make a decision in that fashion, then surely so can an extraordinarily well-paid joe for whom the bump would be from, say, $9-million to $9.25 million. In short, it is and always has been nonsense to say it’s just about the money. It may be cool to say it, but it’s not the reality.

Which brings us to, first, Lance Berkman and then Albert Pujols. Berkman, seemingly a thoughtful fellow and certainly a congenial one, said recently about Pujols’ salary negations that, in the end, it was about the money only, it was always about the money, and “the money” would ultimately decide Pujols’ fate. But then, something like 24 hours later, Berkman signed a contract with the Cardinals which he himself said, or at least seemed to say, was for less, in terms of cash and duration, than he could have gotten elsewhere, but that he liked and was comfortable with his situation in St. Louis. I point this out not to gig Berkman but to demonstrate that a person of his baseball stature can freely make a decision about his job that is not based solely on money, and he apparently did so. And, significantly, he did not permit his ego to make that call for him.

And so, Albert Pujols. Will he or won't he, and will considerations other than money enter into his deliberations? They can, and probably should, but at this point, who knows? As we ponder that, something to discuss amongst yourselves: I may be projecting my sensibilities onto other people when I say this, but I get the feeling that folks are beginning to resign themselves to life without Pujols, for a couple of reasons: They are beginning to see his side of the negotiation as mainly ego-driven and that’s at least off-putting to them; and as this thing has dragged on they’ve had time to come to the realization that the Cardinals won championships before Albert Pujols existed and will do so after he is gone. (The front office, of course understands this. They know that people will come out to watch the Cardinals if they are in contention for a championship, no matter who’s on the field; and, conversely, they will stay home if the team is not in contention – again, no matter who’s on the field.) At any rate, to the fans losing Pujols was once unthinkable. It is now…well, thinkable. That he has contributed mightily over the last decade to what matters attendance-wise – being in contention – goes without saying. The fans like him and the things he does. But that doesn’t mean the Cardinals can’t be in contention without him. They can.

Pujols did not help himself in the fans-on-his-side department by saying at one point that the process and its outcome were out of his control. It is far from clear what Pujols was trying to convey by saying such a nonsensical thing, but fans and observers can be forgiven for reading it one of three ways: (1) His agent is in control and Pujols works for him; (2) The Cardinals own the process because its up to them to give him what he wants, or not, and if not he’s outa here; or (3) a process has been set in motion that cannot now be stopped. Folks recognize all of that for the nonsense that it is, and their intelligence was insulted when he said it. And so they wonder, legitimately, exactly where he’s coming from in all of this.

Does he want to be the highest paid player in the game, to reflect his stature as the best player in the game? If so, fair enough. But for how long? A long-term deal that continues to pay Pujols millions when he’s in his forties is bad enough from the Cardinals point of view. But for them to make him the best-paid player for the duration of such a contract – say eight or nine or ten years -- would mean the deal would have to include escalations in pay each year, since, over time, others would surely catch up to and surpass his yearly take. In short, the combination of long-term and best-paid is an impossibility.

A reasonable course for the Cardinals, it would seem, is to make Pujols an offer that makes him the highest-paid player but is only good for a couple or three years. If that doesn’t work for him, let the free-agent market works its magic. He leaves or he stays. Either way, life goes on. What they can’t do – and what no reasonable person should ask or expect them to do – is put the effective long-term money-and-personnel management of the enterprise in jeopardy for the sake of one employee.

Meanwhile, will non-monetary considerations enter into Pujols’ thinking in this? We shall see. And, of course, all of this hinges on the proffer of a free-agent deal that’s more remunerative than what the Cardinals are offering. The assumption is that such an offer will be forthcoming from somewhere. We shall see about that, too.

The Company vs. Albert Pujols

Imagine that it’s July 25th and the Cardinals, injury plagued and pitching-poor, are seventeen games out of first place and on a fast track to oblivion for the 2012 season. However, Albert Pujols, still a Cardinal, is having his customary sparkling year, on a pace for 35 home runs, 120 RBIs, and a .325 batting average. The question: Are you going to be spending serious ticket bucks to go to the ball park and watch Albert do his thing, even though the team is out of contention and Albert’s thing, admirable though it may be, can’t change that? In a situation where it doesn’t really matter if the team wins or loses a given game, are you going to the stadium just to witness Albert’s baseball artistry? (Which, by the way, may or may not make an appearance that day.)

Well, not me.

On the other hand, imagine that it’s July 25th and the Cardinals, relatively injury-free and with a pitching staff that’s dealing game after game, are in first place, one game ahead of two or three very good teams in a race that could go down to the final day, but Albert is wearing the uniform of the California Angels. The question: Are you going to be spending big ticket bucks on Cardinal games?

Me.

The point: The Cardinals, like most professional athletic teams, have a fan base that responds to winning – to battles for the championship – and that loses interest when no such battle is in progress. That’s true with Albert Pujols on the team and it’s true without him on the team. The Cardinal franchise, in a city that is somewhat more baseball-friendly than most, usually draws in the vicinity of 3,000,000 people when the team is in contention for all or most of the season, and considerably less than that when it’s not. That was so before Pujols came here and it will be so after he’s gone. The game’s the thing; that, and the fate of the team. In a down year, any one player’s pursuit of statistical superiority is inevitably reduced to a curiosity.

It’s in that context that the St. Louis Baseball Cardinals LLC and Albert Pujols have been discussing the amount of money the former would pay to the latter for his baseball-playing services. Because the company understands that when it comes to producing revenue, winning is what matters most, it had to calculate what Pujols would contribute, over time, to that process.

Let’s back up a bit. To the extent that SLBC LLC operates as a normal business enterprise, its owners expect it to make a profit; so their challenge, like the challenge of all businesses in all market economies, is to maximize revenue and minimize cost. Or, more accurately, to set a profit expectation level, and to manage the revenue-vs. -cost equation to produce that profit level. So the job of the owners of the Cardinals – the investors who have put their money at risk in operating this enterprise -- is to manage all their costs, including labor costs, to produce the financial outcome they want.

That’s the business context within which Cardinals-Pujols pay discussions were being carried out. In these circumstances, it ain’t, to coin a phrase, personal. It’s business. Each side brings its needs and expectations to the table, along with whatever “weapons” it has at its disposal to get those needs and expectations met. The Cardinals would have liked to continue to employ Pujols because he helped them produce revenue, but not at a cost that had the effect of negating that revenue. Pujols presumably wanted to stay with his current employer, but not if it cost him a portion of the dollars he could get by offering his services to others. If the two positions were mutually exclusive, no deal. If they were not…deal. As we now know, they were.

Meanwhile, the company had no choice but to do due diligence – to think in terms of best and worst cases (and every case in between) and imagine what effect the various scenarios would have on its financial picture. Best case, vis a vis Pujols: He signs for ten years, continues his extraordinary winning ways for all of those years, helps the Cardinals win or be in contention every year, and the Cardinals sell a lot of tickets, hot dogs, and beer. Worst case: His production drops off precipitously in one or two years, the team falls into a protracted playoff-pennant dry spell, and the organization sells far fewer tickets, hot dogs, and beers.

The reality will in all likelihood be somewhere between those extremes, and it would have been irresponsible of the Cardinals not to craft its offer to Pujols based on how it believes the next several years will play out. So it was, and had to be, a financial calculation, having nothing to do with loyalty or gratitude or allegiance to the wishes of the fans, on either side. The two parties were vying for what they as business entities wanted, and the hope, from both points of view, was that they could make a deal that gave it to them. The team is not villainous for not giving money to Pujols that it can’t afford. Pujols was not villainous for marketing his skills to other potential employers in an effort to get the package he most desired – a 10-year contract, being the game’s best-paid player, or some combination of those things and others. Or maybe something else altogether.  We may never know.  What we do know is that from the outset of the salary discussions, he wanted more than the Cardinals were willing to give; so the argument we're hearing from some quarters that the Cardinals should have locked him up when they had the chance doesn't hold water.  They clearly never had the chance.

A general observation: Professional sports, despite what many people apparently believe, are not on a continuum of ever-increasing materialism, acquisitiveness, and moral bankruptcy. They were just as much a business in 1925 as they are in 2011. A sports franchise was then, and is now, an entertainment enterprise. And the owners and players were every bit as willing back then to gouge each other's eyes out for a bigger slice of the revenue pie as they are today. The only difference then was that the numbers were smaller and the owners were holding all the cards. A sports franchise is a business, and how to make money -- that is, how to survive -- next week, next month, next quarter, next year, and over the next ten years and beyond, is the job of those who manage the business.

Yes, ballplayers have every right to try to extract the most money from what they do, the same as rock stars and child actors. The operative words are "the right to try." No one is obligated to pay. So the issue isn't whether ballplayers "deserve" to make as much as other entertainers, as some have argued. They deserve to make whatever they can, as we all do. But they can only make what someone is willing to pay them. If the people doing the paying think it will be in the best interest of the entertainment package they are offering to make such an investment, they will make it. If they don't, they won't.

So, the question isn't who's right or wrong -- who's holding the moral high ground in all of this and who, therefore, "deserves" what. The only question is, who's gonna win? Which side has the most potent weapons -- and brains enough to use them effectively -- to get what they want.

As to the third "faction" in all of this, the fans -- they need to understand that there is no constitutional guarantee of access to low-cost sports entertainment. Sports owners, like all business people, will charge what the traffic will bear and not a penny less. So, ticket prices will continue to rise in the absence of any indication that people are unwilling to pay them. It could even be argued that pay demands respond to price increases as much as they cause them. The players want more of what we, the fans, have shown over and over we're willing to cough up. So if you don't like the price of a ticket, don't pay it. Don't go. Prices, and salaries, will start coming down before you know it. (It should probably also be noted that MLB ownership is in large measure responsible for its own labor cost problems, having set the bar far higher than was necessary by repeatedly laying riches at the feet of players who had no ability to move the revenue needle -- as will likely be the case with the Angels and Albert Pujols about halfway through his contract, or maybe sooner.)

As to the owners and players, the question isn't who's being most severely put upon by the beastly opposition. The question is which side is wise enough, and ruthless enough, in the uses of power to extract what they want from this enterprise, without bringing the whole thing crashing down around their ears.

The BCS

Without getting too deeply into how the BCS rankings do what they do, it’s enough to know that the system puts two major chunks of information into its numbers grinder.  The Harris Interactive poll and the USA Today poll form one chunk.  Six computer rankers -- Anderson & Hester, Richard Billingsley, Colley Matrix, Kenneth Massey, Jeff Sagarin, and Peter Wolfe – form the other.  After considerable dividing, multiplying, and averaging, all of that input produces a result.

Reasonable people can haggle over the formula -- this link has a pretty good explanation of how it's all supposed to work...

http://www.ehow.com/how-does_4564626_the-bcs-work.html 

...but the point is, both components, but especially the computer rankers, take into consideration, when they look at the universally sparkling won-lost records of the teams in contention, who they won over.  And, of course, it’s the answer to that question that tells us why the Gorillas of Podunk State College are not considered the best team in the country, despite their 12-0 record. 

It’s not just a little about strength of schedule.  It’s all about strength of schedule.  The people who respond to the two polls in the formula presumably at least glance at strength-of-schedule in the course of their ruminations.  But the computer rankers focus on it.  They do so because it matters greatly to the accuracy of the result, and they do so because they can.  That’s what computers bring to this undertaking. 

People who think it can be determined which among America’s college football teams is the best in any given year are on a fool’s errand, in part because there are just too many variables.  College football is not like, say, Major League Baseball where the teams are of more or less equal stature, making the win-loss record over 162 games a not unreasonable indicator of best-team status. Obviously, no such indicator applies in college football  -- there will be any number of undefeated or close to undefeated teams in any year – and even among those teams which, by general acclaim, are thought to be high on the list, it is impossible to say which of them is indisputably the “best.”

But that doesn’t stop some folks from trying.

But the BCS rankings come closest, and here’s why:  They do a pretty thorough job of dealing with the strength-of-schedule question.  And in this calculation, that question is not merely one piece of input.  In this calculation, that question is everything.

Actually, it IS how you play the game

Is it my imagination or is the chest pounding and macho posturing of football players becoming both more intense and more ludicrous lately?  I don’t suppose you can tell the pros much, but have we become so completely inured to the idea of college kids as athletic mercenaries -- as opposed to student-athletes -- that we no longer think it worthwhile or possible to steer them away from making buffoons of themselves on the field? 
             The spectacle is even more grating, if that’s possible, when it’s done by members of lousy teams.  The inability to produce football victories is, by itself, totally forgivable and even a little endearing.  The better schools generally lose at football more than they win, presumably because they have something resembling a sense of perspective when it comes to understanding football’s place in the great scheme of things; and they therefore refrain from, or at least limit, the laying of scholarship riches at the feet of young fellows who can only sort of read but who can run 100 yards at warp speed and reduce anything that gets in their way to a spot of bleeding ooze. So the coaches’ feet, in these circumstances, aren’t held as unremittingly close to the fire as they are in places where won-lost records are thought to actually matter.
               This clownish muscle flexing and touchdown dancing – along with the custom of insulting one’s opponents and their bloodlines, belittling their talents, threatening them, and engaging in all the rest of the macho gibbering known as “trash talking” – is not endearing at all. It’s just juvenile. But put this prancing and jabbering together with losing, and you enter into the realm of the truly pathetic.  Pathetic, indeed – and, it would seem, the antithesis of the concept of a college as a place to grow through learning – is the sight of a young man whose team is four touchdowns in arrears pointing, gesticulating, strutting about like a rooster and, presumably, trash talking in an exquisitely empty-headed display of childish machismo, after having participated in a more or less routine tackle.  One can imagine the tackle-ee looking at our strutter in puzzlement and asking that person if he has checked out the scoreboard lately.
              There was a time when the players on the good teams, far from whooping it up over the most minor and ephemeral of successes, treated every success, touchdowns included, with studied indifference, the better to position themselves as people for whom success was not a novelty but an expectation, and to thus intimidate their opponents in a way that being mouthy could never do. In the upside-down world of big-time college athletics, the coaches either don’t notice this infantile japery or ignore it, creating the impression that is has never occurred to them to worry about such trivia as how their young charges behave. Not when there is winning and losing football games to worry about.  We all know that college football has little to do with education and everything to do with money and commerce…and, of course, coaching jobs.  Still, one holds out the hope that coaches would at least have the grace to show some outrage – well, okay, irritation – at this tendency on the part of their players toward ostentatious self-expression – the sort of self-expression that is in danger of revealing a bit too much about the level of education they’re receiving as participants in a major college football program.   
                What coaches, administrators, and boosters can never get through their heads:  It really isn’t whether you win or lose.  It really is how you play the game.

Rats

From a recent Wall Street Journal article, we learned that Manhattan’s Upper East Side has lately suffered an onslaught of rats; which is not to say that it didn’t have rats before, but only that there are considerably more than is customary for the area, due, many think, to a big subway construction project beneath Second Avenue.  It looks like the street’s moving, the Journal quoted one guy as saying about the multitudes of rats.  Hence, the newsworthiness, in this instance, of rats in New York.

This development reaffirms my conviction that the characterization of New York as a good place to visit but not to live is more than just a throwaway line, but is, in fact, an enduring truth, which find-their-destiny wannabes contemplating moving east from flyover territory ignore at their peril.   New York is a good place to live only if you’re a fan of an impossibly expensive and inhospitable lifestyle that features, among a whole host of inconveniences and annoyances, tiny living quarters with Murphy beds that you pay gazillions to nurse your claustrophobia in, considerable difficulty in getting from place to place due to an unavoidable reliance on the good will of taxi drivers and the schedules of trains (as opposed to just hopping in one’s car), and the rendering of what should be perfectly simple undertakings like buying groceries complicated and daunting.  Also crime, grime, and chesty people with attitudes.

          Unfortunately, New Yorkers are unwilling to suffer these iniquities in silence, instead insisting on telling the rest of us about them ad nauseam, and, in fact, spinning them so as to make them seem advantageous and even enjoyable; as in, these things are fun and interesting and exciting to endure, and we are, above all else, resilient. Well, I say anyone who includes in their description of why they like a city the words “endure” and “resilient” maybe ought to rethink the entire proposition. (“Vibrant” is another word they use a lot – a travel writers’ coinage whose meaning is vague but seems to have something to do with the presence of large numbers of people.  It potentially takes on a somewhat creepier connotation in view of the moving-streets discussion above.)

          One’s immediate instinct is to deliver a stinging riposte like “Oh, yeah? Well, our baseball is every bit as good as your baseball, maybe better, plus we have the St. Louis Symphony, and, well, other good stuff.” But that will only encourage them. They will start throwing Broadway, the Met, and MOMA in our face.  Of course, “they” includes the vast numbers of New Yorkers who have never had any contact, and never will, with any of these institutions, or any of the myriad others they draw like a gun when they feel the need to reassure themselves of their cultural superiority.  (We, on the other hand, should probably cut out including  Ted Drewes on our lists of top ten St. Louis attractions, as an ice cream stand in that position doesn’t exactly paint you as a world class city.)

          Anyway, at least we don’t have rats.  Okay, we have some rats.  I see a new slogan in our future: “St. Louis – the city that has some rats, sure, but not in sufficient numbers to make our streets look like vibrant with them!” 

Something along those lines.