Out of Bounds: The cost of basketball economics?

Show me the money! In recent months, the NBA has become embroiled in discussions of the sport's economic policies; last week's trade deadline, as well as a feud between players and owners, brings more questions than answers to the financial debacle.

The owners and players union are negotiating a new collective bargaining agreement to replace the one that expires after the 2010-11 season. Players receive 57 percent of the basketball-related income in the existing agreement. With the state of the economy, however, the two sides are not finding it easy to compromise and whispers of a potential players' lockout have surfaced.

Owners are arguing that they are at high risk for losing money. The outspoken owner of the Dallas Mavericks, Mark Cuban, wrote that he believes teams are at risk of going out of business. Cuban, a billionaire himself, is not at risk, but his openness to disclose what is on his mind has relegated him to be the public voice for the owners' perspective.

The NBA has a "soft cap" system. The soft cap limits the of signing free agents, but still allows certain trades and specialized set contract offers, even if the team is over the cap. The salary cap is set at $57.7 million this year, but fluctuates each year with regards to the national economy.

In addition to the salary cap, there is a luxury tax line. Teams that are spending over the luxury tax line (set at just under $70 million this year) must pay a dollar for every dollar they spend over the limit. That money is split between all the teams who fall beneath the cap and the league.

The depressed economy, in addition to steep falls in revenue, has caused a drastic shift in the owners' negotiating stance. On top of that, the owners are pushing to lower the amount of years and money for the level of the maximum contract. Combine those reductions with predicted decreases to the salary cap for future years, and the result is a substantial pay-cut for the players.

Last week's trade deadline is the perfect harbinger for the focus of the NBA for the next couple of years. More trades were made for fiscal reasons than for talent reasons. Multiple teams actually agreed to moves that hurt their roster, but left them better off financially.

The first one that comes to mind is the Utah Jazz trading shooting guard Ronnie Brewer to the Memphis Grizzlies for a second-round draft pick. The Jazz saved money, but the move didn't even put them under the luxury tax.

Other moves that served the same purpose include the Chicago Bulls trading forward John Salmons to the Milwaukee Bucks, the New York Knicks trading center Darko Milicic to the Minnesota Timberwolves and the Los Angeles Clippers trading center Marcus Camby to the Portland Trailblazers.

In addition to the purely financial transactions made last week, many other teams traded away talented players in order to reduce their long-term cap space. Rebuilding franchises like the Washington Wizards after the Gilbert Arenas controversy have employed this strategy recently.

The Wizards traded two impact players, forward Caron Butler and center Brendan Haywood, to the Mavericks, then traded power forward Antawn Jamison to the Cleveland Cavaliers.

These trades allow some teams to start rebuilding, but the beneficiaries gain high-quality pieces to their franchises. All they had to do was be willing to pay the high-end salaries, which the smaller teams just cannot afford. Certain teams, therefore, will have the star players (Yao Ming, LeBron James and Dirk Nowitzki, respectively) and other teams like the Grizzlies or the Oklahoma City Thunder will have to work with young talent and hope they can hang onto any stars they develop.

This system will most likely be changed when the two sides agree on a new collective bargaining agreement. If the owners succeed, the role players will be paid similarly and the stars will always get their money. Owners, however, will haggle down the salaries of the middle-tier players, and a gap between the middle-tier and the stars will emerge. If the players win, the larger-market teams will continue to have an edge and reel in the star players. The solution, as usual, lies in a compromise.