The Dismal Cliff

The more I look at the NHL labor dispute, the more it starts to look like another dispute that has been unfolding before our eyes over the last year.  The term “fiscal cliff” is a term that refers to the potential economic effects of a series of laws that will either expire or have their provisions take effect starting on or about January 1, 2013.  It is a train wreck of items, but it boils down to tax increases and spending cuts, and the concept has pitted two groups, two worldviews – two sides – against one another. 

The same is true for what I will refer to as the “Dismal Cliff,” which refers to that date on which the National Hockey League will cancel its 2012-2013 season and the potential, and as yet unknowable, economic and structural effects on the professional game of hockey in North America.  The two concepts have much in common, perhaps none more so than having two very clearly defined sides, one a “mob,” the other an “insurgency."  How are these groups and these “cliffs” similar?  Well…

The Players…

The Leader of the Mob

In the Fiscal Cliff matter, the “Leader of the Mob” is clear.  John Boehner “governs,” for lack of a better term, an unruly caucus of 242 members, many of which are freshmen and many of them “Tea Party” members – the “hard line faction” of the group that wants severe cuts to spending on public programs.

In the “Dismal Cliff” situation, the “Leader of the Mob” might be a bit less clear, but it is still Gary Bettman, who governs, by virtue of by-laws, a group that has its own factions.  These factions include (reportedly) a “hard line” group of owners that are insisting on severe cuts to player compensation as a share of revenue and to restrict contract provisions that would have the effect of restricting movement and potential income.

The Leader of the Insurgency

Fiscal Cliff… Barack Obama, the President.  Although seemingly unsuited temperamentally to being the role of voice of the common man, he is it.  He is the champion of having the middle class wage earner protected in their comparatively meager ability to carve out a living in a roiling economy.

Dismal Cliff… Donald Fehr, the Executive Director.  Although seemingly unsuited temperamentally to being the voice of the worker, he is it.  He is the champion of having the rank-and-file hockey player protected in their comparatively meager ability to carve out a living in a short window of time in which they can make their living at playing hockey.

The Basic Issues

Fiscal Cliff… Taxes and spending.  One side – the mob – emphasizes the need to cut spending and preserve income for all, even the most well-to-do, through lower tax rates.  The other side – the insurgency – emphasizes the need for the most well-to-do to pay their “fair share” of taxes to preserve benefits that accrue to the middle class through public programs.

Dismal Cliff… Revenue and compensation.  One side – the mob – emphasizes the need to define revenue narrowly, even for the “big market” teams (although they have backed off this aim), while retaining a larger share of revenue by spending less on player compensation.  The other side – the insurgency – believes that existing contract provisions should be honored and that revenue share should be maintained, or lowered slightly and gradually.

The Strategy

Fiscal Cliff… Miles and miles apart.  One side – the mob – offers up a budget that cuts spending, terminates certain benefits, extends existing tax cuts, and proposes new tax cuts that preserve and protect the “one percent.”  It does not accept the concept of tax increases, even if it meant accepting one dollar of tax increases for every ten dollars of spending cuts.  The other side – the insurgency – opens with the gambit that doesn’t even pretend to negotiate off the other side’s initial offer… they propose ending tax cuts for the “one percent,” proposing more spending (“stimulus”), and preserving and protecting programs for the “middle class.”  The sides have adopted a position of talking past one another and speaking right to the media.

Dismal Cliff… Miles and miles apart.  One side – the mob -- offers up a proposal to increase ownership share of revenue from 43 to 54 percent, limit contract length, eliminate salary arbitration, extend the term of entry-level contracts.  The other side – the insurgency – doesn’t even pretend to be negotiating off the other side’s initial offer and opens up by proposing de-linking the salary cap from revenue and preserving contract rights for players.  The sides have adopted a position of talking past one another and speaking right to the media.

The Side Shows

Fiscal Cliff… Simpson-Bowles Commission, Domenici-Rivlin Debt Reduction Task Force

Dismal Cliff… Federal mediators

Monkey Wrench in the “Grand Bargain”

Fiscal Cliff… One side – the insurgency – proposed more taxes as part of a final deal, killing an agreement that seemed close at hand.

Dismal Cliff… One side – the mob – proposed a “make whole” provision on existing contracts that had players paying other players, killing an agreement that seemed close at hand.

The Idea Out of Left Field

Fiscal Cliff… End to debt limit votes.

Dismal Cliff… Players and owners negotiating without league or union heads and staff present.

The Sad Truth

Fiscal Cliff… Reasonable people know where this is going in the end.  Taxes will go up for high-end wage earners, some deductions will be pared back, and eligibility requirements for certain entitlement programs will be changed to rein in spending.  Reasonable people, however, do not seem to be doing the negotiating.

Dismal Cliff… Reasonable people know where this is going to end.  Owners and players will define hockey-related revenue pretty much as they do now, and they will split it 50-50.  There will be some changes in things like salary arbitration, contract length, and how “back-diving” contracts are handled.  Reasonable people, however, do not seem to be doing the negotiating.

Finding Fault

Fiscal Cliff… Who cares whose fault it is for negotiations to bog down?  Do your jobs!

Dismal Cliff… Who cares whose fault it is for negotiations to bog down?  Do your jobs!

Public Response

Fiscal Cliff… Well, we could vote all the bums out, but what’s the chance of that happening?

Dismal Cliff… Well, fans could cancel their season tickets and not buy any merchandise, but what’s the chance of that happening?

The “Cliff”

Fiscal Cliff… January 2^nd. The day after tax cuts enacted in the early 2000’s expire, spending cuts go into effect as well as new taxes under health care legislation enacted in 2009.

Dismal Cliff… Who knows?  But it’s out there.  It could be in early-January; it could be later in the month.  But it’s out there, the cancellation of the 2012-2013 season and suspension of play until an agreement is reached.