New York Yankees Confront Opportunity Cost After Dismal Postseason Exit

It was the best of times; it was the worst of times for the 2022 New York Yankees. A season filled with great expectations came crashing down into a pile of rubble courtesy of the Houston Astros in four games of the American League Championship Series. Now, the Yankees are left wondering how everything unraveled so quickly and whether poor personnel decisions have come back to haunt them. In what has become a regular occurrence since 2010, postseason competition continues to expose weaknesses for the Yankees regardless of a 99-win regular season and Aaron Judge’s historic achievement of breaking the American League’s single season home run record.

After a dismal postseason exit, Judge’s upcoming free agency will be at the epicenter of the Yankees’ offseason plans and the talk of Major League Baseball. Even as the Yankees have always been committed to winning and investing in payroll, one must wonder how wisely they are spending money or is it time for new voices to be heard in the decision making process. Opportunity cost is present in all business decisions, but do the Yankees have any regrets passing on previous elite free agents such as Bryce Harper or Manny Machado? How about a missed opportunity with a managerial hire such as Buck Showalter? How are they feeling about the acquisition of 36-year-old third baseman Josh Donaldson knowing he is owed $21 million next season and an $8 million buyout on a 2024 club option worth $16 million?

The Yankees desperately want to recapture the euphoria that is currently present in Philadelphia. The Phillies have won their eighth National League pennant in franchise history and first since the 2009 season. Ironically, their last World Series appearance had occurred against the Yankees in which they had defeated the Phillies in six games. The 2009 World Series also represents the last time the Yankees had appeared in the Fall Classic.

On August 1^st, the Yankees had a 70-34 record with a .673 winning percentage complemented by a +212 run differential. Only the Los Angeles Dodgers had a better winning percentage (.676) due to a 69-33 record. Besides a 12-game lead over the second place Toronto Blue Jays in the American League East, they were the first major league ball club to win 70 games. Over the final 58 games of the season, the Yankees were mired in mediocrity and posted a 29-29 record with a +28 run differential.

The postmortem on the 2022 season will sound very familiar to the previous twelve. Senior Vice President, General Manager Brian Cashman will come across as the erudite baseball executive whose disappointment will be evident as he chronicles the ball club’s failure to achieve its lofty expectations. He will mention the Steinbrenner family’s deep commitment to winning as evident in their payroll and investments in the best resources and technology. Cashman will reference the fans and express sorrow while answering questions from the media using flowery language that occasionally possesses a tinge of condescension.

Manager Aaron Boone will come across emotionally exhausted as the reality of another season without a World Series appearance begins to weigh heavily on him. Boone will address the injuries, questionable in game decisions, poor performances, and might even express regret for a weather comment made after Game Two of the American League Championship Series. As the ball players will be cleaning out their lockers and confronting another winter of disappointment, the Yankees will likely part ways with a coach or two who had nothing to do with the ball club’s failures in the postseason. Boone just finished the first of a three-year contract extension with a club option for the 2025 season.

In 2021, the Yankees fell below the $210 million base tax threshold with a Competitive Balance Tax payroll of $208.4 million. The 2020 penalties were suspended due to the pandemic. The Yankees would have paid an estimated $11 million penalty based on a Competitive Balance Tax payroll of $239.8 million with a $208 million base tax threshold according to the Associated Press. They would have been a second-time offender since they had paid a $6.7 million penalty in 2019 as a first-time Competitive Balance Tax payor. In total, the Yankees have paid an estimated $348 million in Competitive Balance Tax penalties since the 2003 inception of the deterrent to curtail excessive spending on payroll by large market franchises.

Based on a September article by the Associated Press, the Yankees are projected to have a 2022 Competitive Balance Tax payroll of $267 million which will exceed the $230 million base tax threshold by $37 million. The Yankees will be classified as a first-time Competitive Balance Tax payor. Based on the numbers provided by the Associated Press, the Yankees could pay a 20 percent tax on the first $20 million ($4 million) and then a 32 percent tax on the remaining $17 million ($5.4 million) which will bring the grand total of the penalty to an estimated $9.4 million.

Presently, the Yankees are committed to the following ball players next season with their average annual value salaries for Competitive Balance Tax purposes in parentheses according to Cot’s Baseball Contracts: Gerrit Cole ($36 million), Giancarlo Stanton ($25 million), Josh Donaldson ($25 million), DJ LeMahieu ($15 million), Aaron Hicks ($10 million), and Harrison Bader ($5.2 million). Anthony Rizzo has an opt out clause in his contract or he can return for the 2023 season at $16 million. The Yankees also hold a $15 million club option on Luis Severino ($2.75 million buyout) for the 2023 season. If the Yankees decide to go bold this offseason, they must prepare to be a second-time Competitive Balance Tax payor in 2023 given the $233 million base tax threshold along with the surcharge thresholds.

Cot’s Baseball Contracts has identified 14 ball players on the Yankees who will qualify for salary arbitration. Excluding Rizzo and Severino, the Yankees have nine free agents and will likely extend only one qualifying offer of one-year, $19.65 million to Judge. Jameson Taillon is a candidate, but will the Yankees be willing to increase his $5.8 million salary by 239 percent?

The path going forward for the New York Yankees begins with clarity in terms of their appetite for spending and how to construct a well-balanced roster that can sustain the rigors of postseason competition. Even though they achieved great success during the regular season, bad habits produced a one-dimensional ball club predicated on power. The Yankees were defeated by a far superior ball club in the Houston Astros. They barely survived a best-of-five Division Series against the Cleveland Guardians who subscribe to a high contact, low strikeout philosophy. Don’t overlook the fact that both ball clubs are led by future Hall of Fame managers with old school tendencies who embrace analytics but are not beholden to them.