To offer any opinions on what the Yankees will and should do this winter, we must first assess their situation. It is not a good one.

The team lacks a right side of the infield and a decent centerfielder. Aside from Alex Rodriguez, not one of their everyday players can be expected to play better next season than he did this season. Not one of their starting pitchers can be penciled in for 200 effective innings. And past Mariano Rivera, the bullpen is unreliable at best.

Money will not solve these problems. First, the Yankees may not have as much of it as is commonly thought. Without a single significant salary coming off the books, the Yankees’ payroll, accounting for the luxury tax, looks to be a hair under $200 million next year, about $12 million less than it was this year.

It’s possible that George Steinbrenner would go significantly past that figure – I suspect the Yankees could sustain a payroll somewhere around $300 million for a season or two without damaging their long-term value. But it’s more likely that they will fill their holes with relatively inexpensive veterans like Jeff Kent, or else spend their money to sign one superstar and a variety of Tony Clark and Miguel Cairo types (Cairo himself is unlikely to repeat this season’s play). You can make an argument for either approach being better, but neither is going to magically transform the club.

Second, the Yankees are at a point where spending more money actually works against their long-term interests. The problem with signing superstar free agents is that by the time a player hits free agency, his prime is mostly behind him, and you end up paying top dollar for declining production. Jason Giambi is the classic example of this risk.

When you have, as the Yankees do, several such players, signing more superstars at the height of their value can do little more than prolong the inevitable paying of accounts. The team will be shelling out $86 million to Giambi, Mike Mussina, Gary Sheffield, Jorge Posada, and Derek Jeter in 2006, and they’re likely to get a collectively average performance from this group of aging veterans. Adding to this collection of eight-figure salaries isn’t a solution.

For these reasons, the Yankees would be foolish to sign Carlos Beltran or Pedro Martinez. Beltran is a tremendous player, but it’s not clear the Yankees can afford him without ignoring all their other pressing needs. His signing would necessitate one among a series of unpleasant decisions involving Giambi, Bernie Williams, first base, and the DH role. Given their other needs, the best move would likely be to keep Williams in center and sign a defensive specialist to back him up.

Beltran or not, the pitching staff remains the more pressing issue. Martinez can still be great in the right situation, but the Yankees need a durable rotation anchor, not a former ace who needs to be nursed through the season. And while the name of Carl Pavano will be bandied about, his injury history makes him a dodgy bet.

The wise course would be to focus on the Cubs’ Matt Clement, who had a better season than any Yankee, and Philadelphia’s Eric Milton, who would come fairly cheap and still holds the potential to be the next Andy Pettitte. These two, in combination with holdovers, would form a rotation of no. 2 and no. 3 starters, which is all the team really needs with what should still be an excellent offense. Additionally, neither would require a long-term commitment.

As for the bullpen, this winter’s market features the thinnest crop of free agent relievers in memory. The Yankees will either have to hope that some decent arms are non-tendered, or else explore the Japanese market, as the White Sox and Padres did last winter with notable success.

You’ll note there are no trades suggested here. That’s because the Yankees have the worst farm system in baseball. There are a variety of reasons for this, and not all of them reflect badly on the front office, but the upshot is that the Yankees have nothing to trade, nor can they count on any young players to cheaply fill a hole like that at second base or in the bullpen. Most importantly, there is no one in the Yankee farm system who can be expected to improve and eventually fill the roles that players like Posada and Jeter will abandon as they age.

The most important thing the Yankees can do this winter is to change this equation. The workings of their front office are too Byzantine for any outsider to truly know who’s to blame, but it’s clear that George Steinbrenner has to put someone in charge of player development who can get the Yankees back to producing All-Stars.

This might mean shifting responsibilities, firing old hands, or promoting from within. Steinbrenner might also consider paying up for someone like the Texas Rangers’ Grady Fuson, who built Oakland’s farm system in the 1990s and has overseen a strong development pro gram since joining up with Texas for the since-rescinded promise of eventually becoming general manager.

Past that, I think Joe Torre will be fired, and I think he should be. Steinbrenner’s ostensible justification for doing so will be that the Yankees haven’t won a World Series since 2000, which is a silly reason to fire someone, but it’s clear that Torre is no longer the right man for the job.

Torre likes a structured offense, a rotation of durable starters, and a clear succession of relievers from the sixth inning to the ninth. He is at his best when operating within those circumstances, but a combination of reckless decision-making and conditions for which no one is to blame have made it impossible to provide him with the tools he needs to win. Torre does not deal well with chaos, and chaos is what he will have for the foreseeable future. This is hardly a character flaw on his part; but it is delusional to pretend that his strong hand is the best for this team just because it has been best for so many years.

The firing of Torre would have the additional benefit of marking a clear break with the Yankees’ championship tradition. Once they were prudent; they have become gluttonous. Once they were wise and patient; the team has been run in a panic for years now.

After the most devastating loss in team history Wednesday night, Derek Jeter offered the simplest explanation for what had happened: “It’s not the same team,” he said. Indeed it isn’t. To hold on to Torre at this point would just be to pretend that it is.