The NBA Needs to Tweak the Salary Cap

Recently, Josh Childress became the highest profile (and certainly most in demand) NBA player to leave for a European team. His deal is worth approximately $20M over three years, but since it’s not subject to taxes you have to figure that the actual value is closer to $35 or 40M.

 The NBA should always be able to compete for its own major stars. For young guys like Kevin Durant the immediate endorsement money, combined with the rookie scale contract probably prices most European teams out of contention. For older, more established stars, the money is always gonna be there, just look at the extensions Lebron and CP3 just signed. But the Childress episode highlights the key weakness in the current collective bargaining agreement: the somewhat stars.

 Look, nobody will ever confuse Josh Childress with MJ or even Joe Johnson, but ask anyone who watches basketball and they’ll tell you that at worst he’s a 6^th Man on a championship team. He can defend, get to the basket, and his shooting percentages are in the elite range. The man is incredibly efficient, all while buying into the team concept…which of course leaves him completely undervalued in the And-1 Mixtape world that can be the NBA.

 Granted, the NBA has a way for teams to add players like this. It’s called the mid-level exception and I’ll spare you the definition (If you’re unfamiliar, refer to Larry Coon’s excellent Salary Cap FAQ). The problem here is that, in the NBA, if you’re worth more than the mid-level but less than a max contract, there’s considerably little wiggle room in terms of relocating. Most teams either use their cap room on their own free agents or build up enough for a marquee guy. The only free agent to get considerably less than a max deal but more than the mid-level was Corey Maggette. And for all those econ nerds out there, what happens when the demand for a certain commodity is depressed (in this case, the somewhat star)? His value drops! Usually all the way to the mid-level, where a nice safety net of capped-out, contending teams awaits.

 So you’re Josh Childress. You feel that you’re worth more than the mid-level, but the NBA has established a system that, by ensuring a lack of available cap space, pigeon holes you into a contract starting at around $5.8M/year, is it difficult to see the allure of a Euro team, especially to a reportedly intelligent Stanford guy like yourself?

 Of course it isn’t, and while I’m not like some people out there claiming that the sky is falling on the NBA, I do believe that the NBA is in danger of seeing a steady stream of players of Childress’ caliber head overseas, considerably weakening the NBA product, unless the NBA does something to recognize and compensate these players.

 Here’s my suggestion for fixing this. The reason Euro teams are able to compete like this is a lack of parity. Nobody cares how much a team spends, and teams will spend up to the point where the added competitiveness is negated by the increased loss of money. While a capless league is clearly not an option, the real reasons for the lack of capspace are old, terrible contracts that haven’t expired yet and superstar contracts that are prohibitively huge. The key idea here is that pas financial decisions should never hinder a team from putting a competitive product on the court.

 My idea focuses on reducing the cap drag created by those superstar players. By the time a player like Kevin Garnett is making in the range of $24M/year, he’s effectively using almost half his team’s cap. Why not let players like this only count against the cap for the starting maximum salary? If a max deal starts around $16M, and you’re the owner of a franchise trying to keep your best player, why should it cost half your cap to keep a guy just because you drafted and developed him well?

 Allowing those players to count against the cap at a set price would benefit the league because this exception would only apply to the players at one end of the bell curve. Think about it, NBA teams can already sign veterans to the minimum and have their salaries count less against the cap. Have you ever heard of a really bad veterans minimum deal? Me neither. The mid-level has been a disaster of Isaiah Thomas-level proportions. This is because by placing the exception in the middle of the talent scale you leave yourself open to a wide range of evaluation errors (see: James, Jerome). But if you allow teams to save money on elite players, players they would have paid $16M+ on anyway, you have a better chance of reducing the random errors that accompany all player evaluation, and therefore clearing up more future salary cap money.