In the States: Football and the Local Business Community

by Raymond J. Keating
Chief Economist
Small Business Survival Committee

Some will paint their faces and shout warlike screams. Others will don the jerseys of their favorite teams. Money will be waged in office pools. The National Football League (NFL) 2002 season is upon us.

And as has long been the case whenever one of the four major league sports begins play, new sports facilities usually open their doors as well. This football season has three new stadiums coming on line.

Unfortunately, each of these new stadiums has been subsidized by the taxpayers.

The defending Super Bowl champions, the New England Patriots, have taken up residence in CMGI Field. The total cost of the new stadium is estimated at $397 million, with the taxpayers coughing up $72 million.

Meanwhile, the Detroit Lions have moved into a new den — Ford Field. Of the estimated total cost of $500 million, $125 million came from public coffers.

Finally, the expansion Houston Texans have stampeded into Reliant Stadium, estimated to cost $449 million. The taxpayers were hit hard for $337 million.

Too often, leaders in the local business community toss their support behind such stadium subsidies. Like the politicians who willingly hand over taxpayer dollars, many business leaders will make grand declarations about what a new stadium will do for the local economy. And of course, an NFL team supposedly raises a city to „major league” status.

To the contrary, an objective economic look dictates that the business community should not serve as blockers helping to get these subsidies across the goal line. Instead, they should be leading the pass rush trying to sack taxpayer handouts for sports teams.

Consider that all of the independent economic studies show that subsidizing sports teams does not boost economic growth, income or jobs. Indeed, some studies find such subsidies to be an economic negative. When you think about it, that’s not surprising.

First, individuals and families only have so many leisure dollars to spend. If there isn’t a football team to see in a new subsidized stadium, then people will spend their money doing something else for fun. A new stadium will only shift around how leisure dollars are spent. That means that government subsidies are guiding consumers away from some businesses and to others.

Second, sports subsidies mean higher taxes for individuals, families and business. That’s never a plus for the economy.

Third, subsidies mean that politicians are making economic decisions rather than entrepreneurs and consumers. Politicians work under completely different incentives than do those in the private sector. The concerns of the political class focus on power, patronage, fatter budgets, and public relations. Meanwhile, the private sector is disciplined and guided by prices, profits and losses. The economy does not benefit when political decision making supplants decisions by consumers and business owners.

In the end, the only clear beneficiaries of stadium subsidies are team owners, who reduce their capital costs and enhance their revenues, and players, who can extract higher salaries from owners.

It’s easy to get caught up in the excitement of sports. Ask my wife, and she’ll tell you that I often get a little too passionate as a fan of the Minnesota Vikings. However, local business leaders have an obligation to take a sober look at the issue of taxpayer subsidies for multi-millionaire sports team owners and players. It’s simply bad economics.

Is there economic value in sports? Yes. However, that value should be determined in the competitive marketplace, as is the case with other businesses, not by politicians.

________________________________

Raymond J. Keating
is chief economist for the Small Business Survival Committee, and co-author of U.S. by the Numbers: Figuring What’s Left, Right, and Wrong with America State by State (Capital Books, 2000).

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