Why a $210 Million Baseball Contract Is Less Than It Appears

With inflation in the news, let’s look at baseball salaries.

Where are we going? To the value of a $210 million deal.

The Scherzer Deal

Signing with the Washington Nationals, pitcher Max Scherzer negotiated a whopping $15 million a year for the next 14 years. Some call it a $210 million deal. It is actually much more complicated because he gets some of the money as income, some as a bonus, some after he retires and some before.

Let’s just look at inflation though and assume that he is paid $15 million each year. If the inflation rate is close to two percent for each of the next 14 years, then $15 million in 2029 would have the same spending power as $11.5 million (or so) today.

Next, Mickey Mantle.

Mickey Mantle’s Salary

During each of the six years before he retired in 1968, the Yankee star center fielder was paid $100,000.

But it depends how you look at it.

According to the BLS inflation calculator, you needed $113,725.49 in 1968 to have the same purchasing power as $100,000 in 1963. So, that means he was really earning 13 percent less

A Baseball Quiz

And finally, a number I discovered that most of us will assume is a phone number except for our baseball friends.

714-511-4256

The answer is after “Sources and more…” below.

Our Bottom Line: Inflation History

We cannot predict where the inflation rate will go. And we should remember this quote from economist Rudiger Dornbusch (1942-2002):

“The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.”

But still, in assessing the Scherzer deal, here is some inflation history:

From: WSJ