This week, officials of FIFA, the world soccer federation, will be visiting the United States to examine America's bid to host the 2018 or 2022 World Cup, with Los Angeles remaining as one of the potential host cities. The U.S. Bid Committee has touted the tournament as a major moneymaker for the U.S. economy, predicting a financial benefit of up to $5 billion. Such a needed boost sounds too good to be true. Sadly, it is.
FOR THE RECORD:
World Cup: A Sept. 7 Op-Ed article on bidding for the World Cup referred to the Montreal Olympics in 1974. The Games were in 1976. —
In July, I released a report, "World Cup Economics: What Americans Need to Know About a U.S. World Cup Bid," which reviewed the economics of sports mega-events. The most relevant finding: Organizers for the 1994 World Cup claimed that the U.S. would see a positive impact of $4 billion, yet a post-Cup analysis by economists Robert Baade and Victor Matheson showed a cumulative loss of $5.6 billion to $9 billion. They arrived at this by comparing the gross domestic product in the host region during the World Cup with standard figures in non-Cup periods for the same regions. The average host city lost $712 million, but their estimates indicate that the metropolitan Los Angeles/Long Beach area lost the most of any host city in 1994. Of course, while the population of Los Angeles and the U.S. more generally was losing billions, FIFA and the U.S. Organizing Committee were taking in record profits.
In a very real sense, the issue is whether Americans are willing to provide billions of dollars in corporate welfare to the international and American soccer establishments.
If World Cup bidding were a transparent, accountable process, basing a bid on such a wildly optimistic estimate, in light of the real effect it eventually had on taxpayers, would be considered malfeasance. But the current U.S. Bid Committee, led by sports, entertainment and political luminaries, may be dragging Los Angeles and other U.S. cities into another financial debacle at a time when we can least afford it.
The evidence implicates not just the 1994 World Cup. My review showed that there were serious issues with the economic expectations for mega-events such as the 2006 World Cup in Germany, the 1992 Barcelona Olympics and, I suspect, this year's World Cup in South Africa. The 1974 Montreal Olympics created a debt that took 30 years to pay off. Those are just a few of the mega-events that were oversold and then severely underperformed.
Perhaps overly cautious from 1994's large gap between economic expectations and reality, or aware of the angry anti-tax mood sweeping the country today, the U.S. Bid Committee has refused to share its economic impact statement for the 2018/2022 Cup proposal, while still claiming that the U.S. will benefit to the tune of $5 billion at no cost to taxpayers. There has been little public pressure to have these estimates made public or justified.
Indeed, none of the temporary euphoria America felt watching South Africa's World Cup this summer has translated into curiosity about our own country's bid. Billions of dollars that could be better spent on jobs, education, infrastructure or tax relief are on the line. We need to wake up.
Californians should demand that the Bid Committee defend its claim that no taxpayer money will be spent on the 2018 or 2022 World Cup, if the U.S. is successful in securing the games. The committee can begin by making public its economic impact statement. The next step is to explain how the claim of no taxpayer money squares with the report that Chicago withdrew as a host city candidate because it was unwilling to make financial guarantees that could have reached $10 million. Finally, Californians should demand to know what the state and city governments have pledged to provide in money and services to support the bid. The committee should prove that no taxpayer money will be used. Simply asserting it repeatedly is not enough.
Ultimately, Californians must decide if their state can afford to host the World Cup. Get informed and let your elected officials know your opinion before the decision is made. With the American economy struggling to recover from recession, and tax dollars increasingly stretched, we need to make some hard choices. Hosting a sporting extravaganza whose fan base lies mainly in Europe, South America, Asia and Africa makes the economic rationale all the more critical.
I am not personally opposed to a second U.S. World Cup; when I take off my economist's hat, I am a sports fan. But I am strongly opposed to buying into unfounded economic optimism and secretive bidding processes at a time when 10% of the American workforce is out of work and the economic well-being of our country is in doubt. We need to have a serious discussion about our finances, the costs of the World Cup and whether this is the best use of our scarce resources before the 2018 and 2022 World Cups are awarded in December.
Dennis Coates is a professor of economics at the University of Maryland-Baltimore County and is the past president of the North American Assn. of Sports Economists. He writes regularly for the Sports Economist blog.