In short: No.
Cliff Lee is a stud. A rock solid ace who makes batters look foolish and guarantees his team that they have a chance to win every single time out. Missing out on a guy like that is never good.
However......as previously stated on this web site, had the Yankees signed Cliff Lee to the 7 year contract, by 2013 the Yankees would be indebted over 130 million to a bunch of guys 33 and over. Very good players, yes, but players on the decline. That's a lot of money being handed out to players who's best years are behind them.
So where are the Yankees without Lee? Well, definitely in the short-term not as powerful a juggernaut as they would have been. There is a hole in the rotation—no question decision need to be made between now and Opening Day. But what the "Failure to Sign Lee" forces the Yankees to do—hopefully—is to take their medicine.
There's a couple of the directions the Yankees can go in 2011 and beyond. Most likely, the Yankees are going to do everything they possibly can to go get another starter. And that's fine. Truthfully there ain't much out there. Justin Duchscherer, Brandon Webb and the lot are gambles at best. There's talk the Yankees might try to trade for the Twin's Kevin Slowey. But you know the Twins would ask for the world for a middling pitcher considering they know the Yankees are dealing from a weakness. The Yankees will find someone off the scrap heap and hopefully not pay too much in the process.
The other option—and the one I hope they take—is to give their farm system a chance. Cashman for years now is saying that the Yankees have to get younger; have to get cheaper; have to start using their own kids—all the while doing exactly the opposite. Now, realizing the Yankees can't always buy a rotation, they might actually have to what every other team in the major leagues does (except, seemingly Philadelphia). Bring up a kid from their farm system and go through the growing pains as they learn how to pitch in the bigs. As Mike Silva reported earlier, this isn't an option the Yankees are comfortable with—but come on, is Ricky Nolasco the long-term answer? Jeremy Bonderman? Why not go from within and try to build on of your own?
Look, last year's Yankee team won 95 games. Should Andy Pettitte come back—and I think the Yankees are going to give him oodles of cash to make sure that he does—the Yankee rotation won't be in the terrible shape everyone seems to think it will be in. With Pettitte back, the Yankee rotation is still better than 80% of most teams. Sabathia, Hughes and Pettitte make a nice front 3. And if new pitching coach Larry Rothschild can work even a little bit of magic with A.J. Burnett and get him to a place of halfway-reliability, that means the Yankees would have four awesome-to-decent starters.
I sincerely hope the Yankees ultimately make is the choice they have been doing their best to avoid. and that's go with their kids. There is no magic bullet out there in free agency. No hidden gem someone missed. All you have a busted shoulders and head cases. Why not try to mold your own starter. Ivan Nova showed enough in a cup of coffee call-up late last year to at least get a shot at the 5-spot. Down the line, after Pettitte retires, the Yankees could turn to promising kids Dellin Betances, Manny Banuelos, Hector Noesi, Andrew Brackman, Shaeffer Hall, Adam Warren and Graham Stoneburner. And look, seriously, no one seriously thinks all of these kids will turn out to be quality pitchers, but if even just one makes it, that's a reliable starter pitching for 10 years in your staff, and that you control for a long while. And heck, what if 2 kids make it? Isn't that a chance worth taking?
At the very, very least, it will be cheaper than the alternative—spending money and prospects on a guy who—bet the farm—you know won't be the answer.