Superstar Athletes; K. L. Billingsley

In essence, the taxpayers pick up the ma jority of a team's capital costs-usually run ning anywhere between $100 million and $400 million for a new stadium (though New York City is talking about more than $1 bil lion for a new Yankee Stadium on the city's West Side). The annual debt-service costs on a new ballpark can run into the tens-of millions-of-dollars range. Obviously, relieved of such expenses, owners are free to bid player salaries ever higher, while boosting their own bottom lines as well. Government-built stadiums also transform teams from the status of owners to renters. It's alwayseasier for a renter to up and leave than it is for an owner. So, perversely, gov ernment officials who believe that only a taxpayer-built stadium can attract or keep a major league team in their state or citymerely ensure that teams willcontinue issuingthreats and moving. Naturally, under this scenario, teams possess every incentive to pit city against city and state against state in a vicious game of corporate welfare.

Myfellowfans, in the end, it is not the greed of players and owners that result in skyrock eting salaries and city-hopping by teams, but the actions of government officials. In a truly free sports market, leagues op erate free of antitrust regulation, teams re ceive no subsidies, owners build their own stadiums, and player salaries stay within the realm of sanity as owners are forced to consider the full cost of team operations including stadium or arena financing. Indeed, this is how the pro sports business largely worked until the 1960s and 1970s, when corporate welfare expanded along with all other forms of government activity. Government needs to deregulate, privatize, and downsize, allowing the market to work. The result will be healthier sports leagues, happier fans, and savings for taxpayers. D SuperstarAthletesProvide EconomicsLessons by K.L. Billingsley , X Jhat do former San Francisco 4gers y, quarterback Joe Montana, L.A. Raid ers running back Bo Jackson, and San Diego Chargers quarterback Dan Fouts have in common?

All three are former National Football League stars and all three are multimillion aires-not the sort of status that would rank Mr. Billingsley is a journalism fellow at the Los Angeles-based Center for the Study of Popular Culture. them with, say, a plasterer in Pasadena or a sheet-metal worker in Santa Ana. Yet, as the San Diego Union-Tribune recently reported, all three-along with many other athletes are tapping into workers' compensation in the state of California. Since 1990, nearly 200 members of the San Diego Padres and Chargers alone have ap plied for workers' compensation, a generous $8 billion system-primarily funded through compulsory contributions of employers-to The Foundation for Economic Education Irvington-on-Hudson, New York 10533 Tel. (914)591-7230 Fax (914) 591-8910 E-mail: freeman@westnet.com January 1997 Welfare Reform A ll fashions of this world pass away. The welfare state which came into vogue during the 1930s may be with us for a while yet, but not for long. It is dying by inches, going out with the tide of socialism and its many variations.

Welfarism is bound to die from its innate venom and virus. Sired by the doc trines of labor exploitation and class con flict, born of social and economic conflict, nursed on progressive taxation and confis cation, feasting on deficit spending and monetary depreciation, and saddling its trillion dollar debt on future generations, it embodies all the social ills that men may endure. It is bound to end ignominiously as the growing burden of the welfare state is grinding more and more people into dependence and poverty. With more than $5 trillion in debt, which is expected to rise to $8 trillion in a few years and half a tril lion in annual interest costs, with Medicare and Medicaid spending doubling every few years, it is destined to self-destruct. It may implode rather suddenly, like Soviet communism. Or it may disintegrate slow ly, perhaps over decades, as is evident in the old industrial countries from France to Germany, Italy, and Britain.

The sweeping federal welfare act of August 22, 1996 is an indication of many more reforms to come. The legislation transfers control of much of the nation's welfare system from the federal govern ment to the states and imposes many new restrictions on aid. It requires workfare for most recipients, imposes strict time limits on benefits, and cuts back on benefits for immigrants. It affects millions of people for whom welfare has become a way of life. The reform is bound to bring some con fusion, pain, and condemnation. The trans fer of control from the federal government to the states removes its monolithic struc ture and introduces a measure of flexibility and competition among the states. In time, it will lead to differences in state legisla tion and regulation which will give rise to large differences in welfare benefits and tax burdens. Facing economic stagnation and decline, the states most generous in benefits and most severe in tax burdens can be expected to lament the reform and call for an immediate return to the old system.

The new system of state-run workfare builds on the assumption that the recipi ents can actually be led to forego the dole and return to the labor market. It com pletely overlooks and ignores the numer ous institutional obstacles which the reformers themselves have erected. Surely, some people are lured to the dole by gen erous benefits which may approach or even exceed the wages they could earn in the labor market. Assistance payments plus housing allowance, food stamps, and free medical care may exceed the wages an unskilled laborer may earn, which is a powerful incentive for shunning employ ment. But even if all such inducements were removed, real obstacles to gainful employment would remain. Unskilled workers face formidable bar riers to the labor market. Federal and state laws regulating minimum wages, child labor, and working conditions legally bar poor people from securing employment.

Minimum wage legislation may be the worst barrier which millions of unskilled workers, old and young, are unable to clear. It is tragic, and yet so typical of pol itics, that the very legislators who enacted the workfare reform recently raised the minimum barrier to the labor market. Lifting it to $5.15 an hour to which the mandated fringe costs must be added, such as Social Security levies on employ ers, workman's compensation, unemploy ment taxation, paid holidays, and other mandated employment costs, raising the employment costs to some $8 an hour, government is blocking countless workers from reaching the market. At $8 an hour, many welfare mothers are searching far and wide without meeting a single employer. Other legal barriers stand in their way. The Davis-Bacon Act of 1931 commands contractors performing work for the gov ernment or with government assistance to pay their workers "prevailing" wage rates, that is, union rates. Such rates are even higher than an $8 minimum, which makes it rather unlikely that any welfare recipient will ever clear it.

The Employment Retirement Security Act of 1974 (ERISA) and its several supple ments erected unsurmountable barriers for many elderly workers. The law made pen sions for elderly workers a cause of politi cal concern, prescribing rules of eligibility, vesting portable pension benefits, and giv ing pension claims the same status as tax exactions. The financial burdens and the bureaucratic hazards cause many employ ers to be rather reluctant to engage elderly welfare people and soon thereafter pay them a pension. Similarly, the Equal Employment Opportunity Commission (EEOC) which was created by the civil rights acts of 1964 and 1967 aims to ensure that employers do not discriminate against anyone on the basic of race, age, gender, religion or national origin. It makes the employment of public-assistance people doubly haz ardous. Prevented from entering the labor market and unable to clear the obstacles built by government, they are likely to lay the blame on employers. After all, it is they who deny employment. A simple charge of "discrimination" is easily made and rather difficult and costly to refute.

The welfare reformers are laboring to roll the welfare stone up the"mountain to the barriers they themselves erected. Their inevitable failure may reinforce the very system they are seeking to abolish. A true welfare reform would eliminate the political barriers to the labor market. L4 Hans F. Sennholz January Book Sale Save 50 - 75%/ Just in timefor yourwinterreadingenjoyment. Hurry! Offer ends January 31, 1997. Bound Volumes of The Freeman Attractively sewn in a hard cover, each volume contains twelve issues January through December-fully indexed for ready reference. Years 1976-1985 regular price $24.95 sale price $ 5.95 Years 1986-1990 regular price $24.95 sale price $ 9.95 Years 1991-1995 regular price $24.95 sale price $14.95 Essays on Liberty Each volume includes more than forty essays representing the best of the freedom philosophy by powerful writers. Vol. 1: Includes essays by Maxwell Anderson, Frank Chodorov, F.A.

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New from FEE! The Industrial Revolution and Free Trade Edited by Burton W. Folsom, Jr. M ost historians give the Industrial Revolution low marks. This volume tells the rest of the story. The advent of the factory system and mass production made more goods available to more people less expensively than ever before. Even though factory workers often labored long hours under hard conditions, they also increased their wealth, length ened their lives, and improved their standard of living. The economic policy of free trade, which often followed when nations industrialized, fostered increased commerce, the exchange of information, and greater understanding among countries. "For anyonewho doubts that economiesthrive when guided by free enterpriseand the marketplaceratherthan the stricturesofgovernment, The Industrial Revolution and Free Trade shouldbe requiredreading. This is an anthologyof very readable-even colorful-articles, most of which first appearedin The Freeman, but whose classiccharacterwas wiselyappreciatedby EditorFolsom. Adam Smith lives!"

-PAUL L. MAIER, Professor of History Western Michigan University, Kalamazoo liThe Industrial Revolution and Free Trade is a rich, informative anthology.A veritablegold mine offacts about the historyoffree tradeand of thefree market,it is a book worthowning and consulting.Professor Folsom has done well to provideus with this collectionand with his own learnedintroduction.fI -PAUL GOTTFRIED, Professor of History Elizabethtown College, Pennsylvania .. DR. BURTON W. FOLSOM, JR., is a Senior Fellow in Economic Education at the Mackinac Center for Public Policy in Midland, Michigan. A for mer college professor, he is the author of several books and many essays on economic history. Published by The Foundation for Economic Education, Inc. 30 South Broadway, Irvington-on-Hudson, NY 10533 ISBN 1-57246-057-1 • Paperback $14.95 Availablein bookstoresnationally,or call FEE: 1-800-452-3518 SUPERSTAR ATHLETES PROVIDE ECONOMICS LESSONS 29 assist workers who are unable to perform their jobs because of injury. Athletes, on the other hand, often enjoy guaranteed contracts that pay them big money even when they are injured, or when they are healthy and don't play at all. And their respective teams pick up the cost of treating their injuries.

Other wealthy athletes dipping into the public purse include basketball great Bill Walton, former Cy Young award-winning pitcher Randy Jones, and legendary receiver Lance Alworth, who began collecting work ers' compensation nearly 20 years after he stopped playing football. Walton, Fouts, and Montana declined to discuss their windfalls, which average $50,000 to $70,000 per claim. Joe Montana was once the highest paid player in the NFL, earning $13 million over four years. Both the stars' salaries and the current workers' compensation caper illus trate key economic realities. Though some fans are outraged at the high salaries of today's athletes, those salaries are simply a reflection of the willingness of mil lions of people to pay money to watch them play and perform. They are part of the entertainment business-software if you willproviding vicarious thrills for a mostly sedentary populace. If 80,000 cheering fans were willing to part with $20 apiece to watch accountants add, teachers teach, or window washers wash, then these occupations could command similar salaries, complete with lu crative commercial endorsements.

Besides illustrating market forces, athletics shows how a nearly pure meritocracy works. Nobody starts at quarterback for the Dallas Cowboysor guard for the Los Angeles Lakers because his father once played or happens to own the team. If a misguided urban youth can run, pass, kick, and play defense better than those raised in the wealthy suburbs, he willget the job, whatever his race, nationality, or religion. In sports, nepotism is a guarantee of failure, something that government needs to learn. But the attempt of some stars to gain money by other means is also illuminating. A key player in the scheme is lawyer Ron Mix, a former NFL lineman. Along with a squad of attorneys working with the NFL Players Association, Mixpushes the envelope. He even urged former Baltimore Colts quar terback Johnny Unitas, now 63, to file a claim in California. It was one of the few turned down. Word quickly spread that California's system is an easy mark. Even those living in other states, and who played for non California teams, have cashed in.

The superstars' compensation game con firms that those willing to exploit such pro grams need not be low-income people. In deed, in recent years, the wealthy from Mexico, Central America, and as far as Sri Lanka, have had elaborate surgeries such as quadruple bypasses performed under Medi Cal, the Golden State's health-care system for low-income people. Word has spread world wide that this is the place to go for free care, courtesy of taxpayers ineligible to use the system themselves. If a welfare, workers' compensation, or medical-aid system exists, it will be exploited, with the exploitation abetted by professionals who get a piece of the action. Such systems, by their very nature, will alwaysbe inefficient and corrupt, however noble the intentions and rhetoric of their political creators. For policymakers, the rule would seem to be that it is better not to establish such a system in the first place. It is always easier to set up a system than to reform it, much less shut it down. To paraphrase the baseball fantasy Field of Dreams: if you build it, even the millionaires will come. 0 Potomac Principles Replace the Monopoly, Not the Superintendent by Doug Bandow T here's a lot wrong and not much right with the Washington, D.C., public schools: Buildings aren't safe, kids are gunned down in front of their classmates, money is wasted, and precious little learning occurs. So the financial control board, created by Congress in effect to govern the city, engaged in a very public debate over firing the local superin tendent. But blame for the failure of the D.C.