Max Scherzer and Deferred Money

Photo Credit to Geoff Burke, USA Today Sports

    As most probably know, the Nationals recently signed Max Scherzer to a "record" contract of 7 years and $210 million. The catch with this deal though, is that is isn't actually $210 Million. The deal has been reported stating Scherzer will be paid $15 Million a year for 14 years by the Nationals.

    Basically, that means the Nationals will pay Max Scherzer for his time with the team for seven seasons, and the rest of the money owed will be deferred for the following seven years. The Nationals did this deal so they can now have different options regarding their pitching staff and can even move one of their starters. The biggest thing about signing Scherzer though, is that the Nationals can now stay competitive even in the likely event they collect the compensation picks for Zimmermann, Fister, as well as even Desmond and Span. Overall, this deal makes sense for the Nationals believe it or not. The years, not so much, but I will save that argument for another day. The problem I have with this deal? Well, it's the money they'll be paying Scherzer after his contract "expires".
    I get it. The Nationals did this type of contract because the front office knows that the money they will pay Scherzer over time will be worth less due to inflation. However, this isn't an economics website, and I can tell you with the utmost certainty that the idea of being on the hook to pay a player for a long period of time to not even play for you doesn't sit right with me. I don't understand why teams can't simply make the payments to have them over and done with. Because it appears convenient, deferred contracts likely happen more often than most think, but that doesn't mean that they work out well. One instance of a team owing a player deferred money is the famous agreement between the Mets and Bobby Bonilla.

This one may be tough to look at. Courtesy of phourforphour.wordpress.com

    When the Mets signed Bobby Bonilla in 1992, he was coming off consecutive seasons finishing in the top three of the NL MVP voting. He had a productive tenure with the club before they traded him to Baltimore during the 1995 season. A few seasons later though, Bonilla found his way back to the Mets and was not exactly welcomed with open arms. By the time 2000 came around, the Mets wanted him to go away and that was what happened. The team released Bonilla, but that came at a fatal cost. The Mets came to a settlement that they would pay Bonilla's salary of $5.9 million. The team decided they would pay him small amounts of money each year until 2011 and here's the kicker, they would then pay him $1 million every July until 2035. Yep, that's right, 2035, the year my little cousin who is five months old, will be in her third year in college... you can't make this stuff up. The clause of Bonilla's release was that the Mets decided to pay him an interest rate of 8% which turned $6 million into almost $30 million. I don't know how an 8% interest rate came about, but it happened. All I have to say is that history is there for a reason, ladies and gentlemen. History is there so we learn from it and that with our knowledge, it won't repeat itself.
     Now the thing with Max Scherzer's contract is that $50 million of his $210 million is actually a signing bonus. Basically this deal wins for both sides in that Scherzer and Scott Boras in the words of MLB Network, "get to wave their flag around" in the fact that their waiting game didn't blow up in their face since the deal looks good due to the technicalities. The Nationals also win this deal because the addition of Scherzer gives the team many options (one of those is possessing the best rotation since the Braves in the 90's), as well as the ability to stay competitive after their likely Free Agent departures. The one's who don't win though, are the General Managers and the Owners long term.
    The General Managers don't win because unless the player brings the team a title (as referenced by fellow writer Dan Z in his article,  "Are the Nats ready to run away with the NL East?"), they have the burden of looking bad once the fans remember that their favorite team is still paying the player millions years after his contract expires from a deal that GM signed him to. The Owners are also hurt from this due to the obvious fact that they are stuck with paying the player millions to NOT play for them. Now the same argument can be said for when a player is released or traded, but the difference is that the process of paying that player usually isn't as drawn out, and not as expensive like Bonilla's release. Maybe it's because of the fact that the Mets are stuck paying Bobby Bonilla until 2035, but I think the tendencies of ballclubs looking to defer money needs to stop.

via kci.com

   Max Scherzer's deal could be very scary. Not so much because of what Scherzer adds to an already well built Nationals team, but because of the fact that Scherzer's deal could set a precedent. Word has gotten out about the details of the contract, and that the Nats will make deferred payments so they can afford Scherzer. Small market teams or competitive teams teams trying to work with a budget may start making deals like this more often, but that would be a mistake. This is a deal that helps the Nationals in the short term, but is also a deal that will cripple the club for half of the fourteen years they will be paying him (and that's the best case scenario, but far from realistic). If teams feel like deferred contracts are a good idea, ask that question to the Red Sox who are stuck paying Manny Ramirez from 2011 until 2026? Most of all, look at what the decision to defer money to Bobby Bonilla. I think deferred contracts should not become the future of baseball deals. Deferred money is seen as a way to avoid paying the player up front, but is truly a dragged out process that embarrasses the whole organization when they have to pay a player who hasn't played for them in years for a long period of time