I wish that I could be as optimistic as MikeT23, though the scenario for making the wildcard just above here is not impossible.
But there are two different time factors - 1) this season, which could be salvaged yet, though I suspect we are looking at the reckoning I have expected for a few years now finally arriving, and 2) the near future, which given the average age of the team, its financial commitments to people who aren't playing for much longer or at all (A-Rod especially) and the restrictions on spending requires fixes that can't happen even in one season.
The whole philosophy went haywire somewhere in the early to mid 2000s - the trading of young players for established, but past-their-prime and overpaid stars and superstars led to a number of results:
1 World Series championship
a nearly guaranteed presence in the postseason every year
a bloated budget that structurally got harder to fix
enormous revenue, since people turn out in part to see an exciting team with big name players that makes the playoffs
an overage team and a neglect of player development that once produced Jeter, Rivera, Pettitte, Posada, Alphonso Soriano, Nick Johnson - Cano stands out as an exception today
But all this meant that moving away from this same strategy in any given year would result in less fan interest, a likely need to rebuild without a playoff berth for a season or two, and in any case, with the enormous payroll commitments that this same approach had built up year after year, the need for that higher revenue and fan interest to justify the higher payroll.
So the thing took on a life of its own after a while. I do think that as late as 2002-3 or 2004 the criticism of the Yankees for having such a high payroll was somewhat unfair in that players that had won the World Series in 1996 and 1998-2000, and then returned to the Series in 2001 and 2003, had a right to expect to be paid more than non-championship teams were. And as I noted above, many of the key players had been home-grown in the farm system.
But with the trading away of Nick Johnson and Alphonso Soriano, I think the train was off on the wrong track and stayed there till now.
The mistake, I think, is not realizing that, beyond a basic level of fan loyalty to any team, the two things that pull in fans are winning, which was the Yankees' approach, and the excitement of anticipating and watching develop a core of new players who gradually become world class - I remember the 1993-5 Yankees in that way, and also the way New York focused on the Mets in 1985. There are times when fans will be patient because they have the sense that something is happening that is worth seeing with your own eyes.
So, if this is the necessary year or two that is needed in order to break an unhealthy and unsustainable pattern then so be it, but if so, it should involve bringing up some younger players, spreading word among fans about prospects in the farm system (I remember that we were hearing about Bernie Williams for years before he was a regular in the Yankees lineup) and so on.
The difficulty is that players like A-Rod still get paid for years to come, so even shifting gears - and a successful farm system is not grown in one season either - will take time.