Mickey Loomis and the Gym Membership

The gym membership that is nearly impossible to cancel is a classic sitcom trope. Most would agree that Mickey Loomis doesn't look like he has seen a gym in years, but few would be surprised if he pays for one. Why am I talking about gym memberships? Well, Mickey Loomis flawed salary cap management is a lot like a gym membership that can't be canceled.

Mickey Loomis apologists who predicted the Saints to win '12 games minimum' the last two years and are drinking the same stuff as Mickey and predicting it again in 2024 share his philosophy on the salary cap. They say that Mickey Loomis is ahead of the curve in his cap management. The salary cap grows every year, and restructures are like an interest free loan, so why not take advantage of increasing future salary caps to gain a competitive edge and win now? If they were right, the Saints might be winning 12 games.

Here is the truth. The salary cap does increase every year. Restructures are interest free. But the salary cap has two catches that an interest free credit card does not. One catch is that it does have a yearly limit in what you can pay off. Whether you restructure those contracts and put them on the credit card or pay the full salary up front like cash, you have a limit each year. Your owner may have a billion in the bank, but they can only spend the salary cap whether its for new contracts, existing contracts, or dead cap. So if the salary cap is $250 million and you sign a group of players to contracts worth a total of $500 million, you cannot get out a big check and write off those contracts all at once, that money has to be accounted for in cap years, divided up among at least two cap years. And there is no other credit card. No other fund. Its like having no savings in the bank and living month to month on a union job salary that increases a steady amount every year. You can put expenses on the credit card or write a check, or charge it on the credit card and write checks to the credit card over the next 5 years, but you can't write checks for more than that fixed salary, its a cap, and beyond that they will bounce. All player money has to hit the cap in one year or another and stay under the limit by the time that year arrives. But thats not the most important difference.

The key difference between the salary cap and an interest free credit card is dead cap. Here is how credit cards would work if they had dead cap: You sign up for a gym membership and never use it, kind of like how the Saints sign players and don't get their moneys worth. After 2 years of paying the membership on the credit card at $100 a month and your credit card balance spinning out of control as you make minimum payments, you call the gym to cancel. The way credit cards work, this $100 you are not charging each month from that point forward makes it a lot easier to get your balance under control. But if credit cards had dead cap, you would get a very different answer. The credit card would call and inform you that you have payments due from 2024-2027 for financing your 2022-2023 gym membership, and canceling your membership will cause a dead cap hit on your credit card, and you will need to pay the credit card $2400 immediately to pay back your gym membership balances that you financed in order to be able to cancel. So unless you come up with $2500 on the spot, you are still adding another $100 a month for gym membership under you can, and the debt is only getting bigger. And you are welcome to join more gyms and finance more memberships, but the one thing you cannot borrow money for is to pay that $2400 to cancel. Canceling is the only thing you can't charge on the salary cap, canceling is always a 100% up front payment. But Gayle is rich, so maybe you have $2400 to cancel. But thats where the yearly limits come in. You don't just have to have the $2400 to pay off the gym payments on the credit card to cancel the gym membership and stop paying, you also have to have room in your annual salary cap budget to take that $2400 charge. You are like that union worker living paycheck to paycheck with no savings who does not have $2400 and can't fit it under your cap. So if you don't have that much to spare in the budget so you cannot cancel. To even afford to cancel you have to cut other budget items. So to be able to cancel the gym one day, you have to look at smaller items not to get $2500 under your annual budget next year to afford to cancel. Maybe you don't buy new things. Maybe you cancel Amazon Prime or Netflix where the dead cap hit from past financing on the credit card hits as $250 this year, and frees up $100 of budget next year to get closer to being able to afford canceling the gym membership, even though you did use netflix and it was not the service you wanted to cancel. You can't cancel anything until you 100% pay it off in lump sum, and the lump sum payoffs have to fit in the annual budget too.

But for prudent sober minded general managers who don't max out future cap and put everything on the credit card, there is an option. Say that they want to get the gym membership off the books but don't have the $2400. If they didn't budget to put everything on the credit card, they still have flexibility. Perhaps their budget had them paying a $2400 annual homeowners insurance premium from their checking account. They have the flexibility to switch it up, put the $2400 homeowners insurance on the card, use the $2400 that frees up in their checking account to pay off the gym membership on the credit card, and cancel the membership. Now they can't cancel the HOI unless they pay that off the credit card, but probably they didnt need to cancel that. The salary cap allows that type of thing. It allows restructuring Davante Adams and Max Cosby to free up cash to cut Derek Carr. So if you don't get in a cycle of max restructuring everyone just to get under the cap, you can always restructure one or two players you weren't planning to restructure to free up cap to take an unexpected dead cap hit on another. Moderation allows flexibility. But you can't be living 100% on the credit card, because then there is nothing to shift, you are $2400 short and a gym member for life. The salary cap is like an interest free credit card, on a fixed income budget, with a special policy that to cancel any kind of lease or subscription you have to pay it off first. That difference is key. Its a trap, but only if you go all in and put everything on it. Mickey Loomis is like a union worker who puts every expense down to rent on the credit card because he got a 0% offer, has no savings, and has spent until the minimum payments are equal to his take home pay, under the NFL rules of dead cap where he can't cancel any of his big subscriptions to get the minimum payments down. He is not smart. He is a slave to debt who has run out of options.

So, I hope you can see how salary cap debt is not just like an interest free credit card. It is a debt trap that can make it impossible to dig out if you get in too deep, except its not interest that stacks up, it is bills you are not allowed to cancel until they are paid off and can't afford to pay off because you can barely keep up with minimum payments. That is why competent general managers use restructuring in moderation and always retain enough cap flexibility to move on from big contracts that didn't work out. Other general managers 'know when to say when.' Mickey Loomis doesn't, he never has, and we can all see it's finally catching up with him.