The salary cap recession

NBA decision makers live in tough times.    The salary cap fell this past season and projections show a significant decrease on the horizon for next season.   The collective bargaining agreement expires after the 2010/2011 season at which point the owners a lockout seems inevitable.    This leads to tough choices.

First, the upside down nature of the salary cap decreasing causes large problems with the typical contract structure.   In the past, a contract given out with a 10% annual raise leaves the percentage of cap space used on that player relatively static due to the similar rise in salary cap space.    For example, a player getting a non-veteran max contract at 25% of the salary cap would continue to count at 25% going forward as the cap rises with the raises.

The decreasing salary cap changes everything though.   Let's look at Luol Deng's recent extension.   He signed a contract worth approximately 16% of the salary cap which is quite far away from the non-veteran max of 25% of the cap.   This season, his salary has bumped up to 18% of the team salary cap, still not so terrible, but quite a rise.    If the worst case scenario happens next year and the salary cap drops to the 50.4 million level at the low end of the league's estimate, then Deng's contract will advance up to 22.5% of the cap, just slightly under the veteran max.  If the salary cap continues to fall, then he could easily end up at higher than max contract rate in his final three years.

Luol's hardly alone in this group.   Many contracts signed this off-season and last off-season with five or six years left have players who can't hope to justify their contracts due to the shift in NBA economics.   The question becomes, how long will the league continue to sign these monster deals with huge raises in an era with a receding salary cap?

What does this mean for NBA decision makers?  The logical outcome seems to be lower offers for players.  For some players, that definitely was the case.  However, a team like Toronto spent money like a drunk sailor throwing out huge backloaded deals to Hedo Turkoglu and Andrea Bargnani.  They hope to keep Chris Bosh, however, if Bosh signs a max deal with them next off-season then they'll never add anything else around him as that team capped might fill 80%-90 of the room under the luxury tax with Bargnani, Calderon, Turkoglu, and a resigned Bosh in a couple years.

You know I love Ben Gordon, however, if the salary cap continues to fall, then his deal won't look so hot for the Pistons going forward either.  

This is one reason why 2010 is the Bulls greatest hope and potential worst enemy.  The league is going to destroy the players union after the 2010/11 off-season when the next CBA is introduced.  Players signed in 2010 likely sign under far more player friendly contract conditions than the players a year later.  Chris Bosh will sign 6/120 million dollar contract with someone, and if he doesn't play like a top 10 player that team's in a world of hurt.   Do you trust Chris Bosh to do that?   Same deal with Amare Stoudemire.  Carlos Boozer won't get quite that much, but the same argument applies.

However, the rub lies in that the 2011 free agency class is nothing special.   There are no superstars available, so teams waiting for the new CBA will miss out on all the talent.  This puts NBA general managers in the same spot they've always been.  They're starving men with a bird in the hand destined to give them diarhea later. 

Look at Rashard Lewis's signing with Orlando.  It's hard to criticize that signing after Lewis helps them to the finals, but the back end of that contract is still nasty, and the signing is unlikely to produce a championship.  Still, what choice did they have other than to go for it?   Not go for it and be even worse?   They'd have no money to spend under the cap later due to Howard's extension kicking in.

Balancing short term success, long term success, and profitability becomes a near impossible task for those teams not blessed with true superstars, and it can be difficult even for those that are.  

So what would I do in this situation?   Going into 2010, I'd bid on LeBron James as hard as I could.   I'd probably find out through some type of pseudo-illegal tampering that seems common place whether I had a chance to get him or not.  If that doesn't work, I'd throw out the same pitch at Chris Bosh and Dwyane Wade.   If that doesn't work, I'd let everyone else spend their money and go bargain shopping if there are any bargains out there.   If not, and I expect their won't be, I'd wait.  

Sorry Bulls fans, but that might be the most prudent course going forward.  It's something we've had to do a lot of.  Waiting to become a contender again.   However, it's better to wait with the window of possibilities open than to slam the window shut and lock us out of all of our dreams for a short term small improvement.

I'm not saying 2010 won't work.  I've always viewed it as a 20-25% chance of acquiring one of the big names, but until the salary cap recession, there were great backup choices.  Joe Johnson, Amare Stoudemire, or maybe Carlos Boozer among others were solid back up plans.   However, in an era where those players could be wroth 40% of the cap by the end of their contracts, you can't justify that.  It's hard to justify anyone except LeBron in that type of price range. 

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  • http://blogs.dailyherald.com/node/2507

  • I really hope we manage to dump Deng and Kirk. Next year both their contracts have the potential to take up 20% of the salary cap.

  • In reply to TheStig:

    Typo, I meant 40%

  • In reply to TheStig:

    I don't think we will be far enough under the cap next year to sign a max free agent due to the cap lowering. If Salmons ops into his contract and we resign Tyrus ( I don't think we will) we will have enough room to go after a good player but probably not a Lebron/ D-Wade type of player

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