I figured it was obviously a bad connector in the phone causing all the static so I bought a new phone for $20 (instead of wasting time to diagnose the problem). I installed a new phone and the noise stayed on the wire. I connected the new phone cord to the old phone handset and it worked great. I don't see anything obvious around the transparent connector, but obviously the cheap 26 gauge cable is broken and making intermittent contact. One piece of junk and I spent $20 on a "spare" phone.
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