Unable to reach a new extension w/ James Harden, OKC Thunder trade Harden to Houston for Kevin Martin, Jeremy Lamb & Picks: 

Via John Hollinger of ESPN Insider:

I gotta admit, I hadn’t seen this endgame coming.

I thought if the Oklahoma City Thunder couldn’t agree to a below-market extension with James Harden, they’d do one of three things:

(1) They’d re-sign him for the max after the season and amnesty Kendrick Perkins, or (2) They’d re-sign him for the max after the season and trade Russell Westbrook, or (3) They’d sign-and-trade him after the season.

Why that? Because all those avenues had the benefit of giving the Thunder another year of contending for a title with their star trio of Harden, Westbrook and Kevin Durant.

Instead, they opted to pull the plug now. Oklahoma City traded Harden to Houston Saturday night, along with Cole Aldrich, Daequan Cook and Lazar Hayward, in return for Kevin Martin, Jeremy Lamb, two first-round picks. (Including a juicy, likely lottery pick from Toronto) and a 2013 second-rounder from Charlotte that will likely be 31st or 32nd.

Obviously, it’s a great haul for OKC. Equally obviously, it probably makes the Thunder take a step back in their quest to win the title this year. I don’t think this was necessarily a bad move, but it does leave us burning the midnight oil with a lot of questions in mind.

Let’s get to them:

Why not the max?

The Thunder reportedly would not offer Harden a max contract. But OKC and Harden ended up only about $8 million apart over the four years of a potential contract extension — chump change in the grand scheme of this league’s payrolls, especially for title contenders. While that amount could have trebled depending on their luxury tax situation, the obvious remedy of using the amnesty on Perkins was available next summer to limit the hit.

The bigger issue may simply have been how badly a max contract would have tied the Thunder’s hands in other respects. They could have done triage to minimize the cap impact, but they were basically never going to be able to add players for more than the veteran’s minimum going forward and they were going to be drafting in the high 20s every year. Their eventual roster would have been possibly even more top-heavy than Miami’s or the Lakers’. And once you factor in paying Perkins to play for another team, it wouldn’t have been an inexpensive proposition either.

Why Harden and not Ibaka?

The fact Harden didn’t get a max extension stands out against the fact that Serge Ibaka got a four-year, $51 million deal weeks earlier. But this comes down to trade value and position.

First: position. The Thunder already have a dominant wing player in Kevin Durant, and in the long term Oklahoma City probably preferred to pair him with a defense-and-3s type like, say, Jeremy Lamb, than with another scorer. As we saw in the Finals last year, Harden can’t match up against elite wing players, and if you’re going to line up Westbrook-Harden-Durant on the perimeter, somebody has to.

And then there’s trade value. If you were going to trade one of Harden or Ibaka, Harden would get a much greater haul.

Why Harden and not Westbrook?

This is a deeper question. Point guard is an easy position to fill cheaply, and plus-minus aficionados would argue Harden is the more valuable of the two players. Harden would also be less expensive — by a lot this year, and by a little in the following seasons, but always less.

Inevitably, however, the wing-wing issue comes up again with Harden and Durant. It’s one thing to play that way with LeBron James and Dwyane Wade, both of whom are capable of shut-down defense. But for the Thunder a wing stopper who can make 3s — again, like Lamb — was a better fit long-term. (Not a better player, mind you. But a better fit.) And now they’ve re-set the clock at this position by having Lamb for four years on a rookie contract.

Is this another loss for small-market teams?

It is, in the sense that New York or Los Angeles would have maxed Harden without batting an eyelash. On the other hand, for half the league’s teams (at least), this would have been an extremely difficult proposition.

News flash: Nobody has three max-type contracts except the Lakers and Heat. Entering today, nobody had four players making more than $12 million a season except Brooklyn, which will be funding operating budgets for 29 other teams with its tax payments in 2014-15. Ironically, the Thunder temporarily join the Nets on that short list as a result of this deal — Martin’s expiring deal is worth $12.9 million.

In other words, payrolls like the one the Thunder were setting up are huge exceptions, rather than the rule, and it requires almost perfect cap management in other respects to execute. The Thunder made one bad mistake, the Perkins extension, and it bit them here. If Perkins wasn’t on their books it would have been easier to justify going somewhat into the tax in 2013-14 and maybe even paying a repeater penalty in 2014-15.

The bigger issue about the new CBA, however, is that it hammered the Thunder in a completely different way by not allowing them to offer one more year in an extension — a fifth year instead of just four — unless they rolled out the max. That used to be the trump card small-market teams had available, but in an effort to get shorter contracts the owners threw out the baby with the bathwater. Similar rules apply to regular extensions, which means that Kevin Durant, for instance, will almost certainly be an unrestricted free agent in 2015 regardless of how the Thunder woo him.

That’s the real way the CBA screwed the Thunder (and secondarily, by giving Durant a $3 million after-the-fact raise via the “Rose rule” that just happens to be the exact amount they were apart on a deal with Harden). It’s now much harder to lock down talent long-term, no matter how badly you want to. The league did it to protect owners from themselves, but they took away the small market’s best ally in the process.

How does it look now for OKC?

Cap-wise, they can breathe again. The Thunder now have a $65 million payroll the next two seasons, putting them well under the luxury tax. If they let Eric Maynor walk and commit to Reggie Jackson as the backup point guard, they’ll be able to use some of their midlevel exception and still stay under the tax, and are likely to have a first-round pick from Toronto in the 10-to-12 range. The other picks have a bit of value too — a top-20 protected first from Dallas that they may not see for a while, and a 2013 second-rounder from Charlotte. (None of the picks were Houston’s originally, so the Rockets’ eventual record has no impact on the value of the draft choices.)

If the Thunder wanted to be more aggressive, they could amnesty Perkins, sign-and-trade Maynor for a backup wing player, use their full midlevel and biannual exceptions on frontcourt help and still stay under the tax. While this would be more expensive overall, they would avoid the tax man and end up with a better team.

The big-picture takeaway is that the Thunder have options again. If they had stuck with the big-4 strategy and paid Durant, Westbrook, Ibaka and Harden, they were going to be increasingly constrained by the tax rules and their late draft position.

They won’t be able to fill those spots with anybody as good as James Harden, but they may get a better fit in Lamb, and if they can get 3-4 decent supporting players to replace the Derek Fishers and Daequan Cooks of a year ago, it’s possible they come out even or ahead on the bargain.

Nonetheless, this was a trade made with a gun to their head, and it’s tough to win those. The Thunder did about as well as they could to come away with a prospect at a need position, a one-year rental of a deadly scorer, two firsts and a high second. I’ll have more on their short-term prospects by Monday, but if you were going to trade James Harden, this was the deal to make.

How does it look now for Houston?

Did I mention there was another team in this trade? The Rockets are looking good. Reeeeal good. They gave up some choice assets they’d accumulated to make a deal just like this one, and in return they finally have a go-to star on the wings. Harden will have a max extension faster than you can say “beard,” and Rockets GM Daryl Morey can finally move forward with the post-Yao strategy he’s been working so hard to initiate.

And here’s the really scary part: Did you know that Houston still has max cap room next year, even after giving a max deal to Harden? You don’t think the Rockets might be an attractive destination with a Harden-Lin backcourt and all those kids (Terrence Jones,Donatas Motiejunas, Royce White, Patrick Patterson, Chandler Parsons)? Yowza.

Obviously a lot of this depends on some unknowns — how good Harden can be as The Man in Houston, how well Jeremy Lin will play, and how good those other young Rockets really are. I’ll have more by Monday on what this means for Houston’s prospects this season. But long-term, you have to love the concept of a slashing, creating Lin-Harden backcourt, Omer And the Random Young Power Forwards playing behind them, and max cap space lingering for a run at an elite forward.

One thing Houston will have to do in the short term is cut a few people, as its roster still has roughly 85 players and has to be down to 15 by Wednesday. It’s possible at least one of Aldrich, Hayward and Cook will be part of the cull, but no matter. Harden was the prize they’d been hunting all summer, and they finally got it.