Cycles are often systemic, predictable, and, as I have long argued, often the result of policy distortions interacting with underlying structural forces. The latest data showing where the cost of living is rising fastest in the United States is a textbook example of how centralized, urban-centric policies can create persistent price pressures and distort economic incentives.
According to a new study by Plasma, the cities where the cost of living is rising fastest are:
- New York City
- San Diego, California
- San Francisco, California
- Los Angeles, California
- Seattle, Washington
- Boston, Massachusetts
- Philadelphia, Pennsylvania
- San Jose, California
- Chicago, Illinois
- Baltimore, Maryland
All of these metros are either solidly Democratic blue or dominated by policies implemented by progressive leadership. Broader evidence shows higher costs in blue states and blue cities due to higher regulation, taxes, and constrained housing supply.
While red and purple cities also experience price pressures, the magnitude is markedly different. Berkley conducted a study to determine why costs rise rapidly in blue-driven areas. Data show blue stated and the cities within them exhibit higher cost structures compared to their red and purple counterparts, particularly in housing. Berkley noted that the trend of higher costs in blue states has been a 15-year trend in the making. “A combination of high demand for housing and restrictions on supply that lead to shortage drive high housing costs in blue states,” the study notes.
The study looks at Regional Price Parities (RPP) data, produced by the U.S. Bureau of Economic Analysis (BEA) annually to determine national pricing levels. Each element of RPP, from housing, utilities, goods, and services, is distinctly higher in blue states. Utilities, as of 2023, were 45% more expensive in blue states, while housing jumped 52% higher than purple or red areas.
Blue states have greater levels of regulation-driven housing shortages. “Environmental regulations and policies promoting clean energy likely play a role,” the study admits. Zoning restrictions have prevented blue areas from creating enough housing to meet demand.
Urban centers like New York, San Francisco, and Boston are global magnets for capital and labor. The concentration of finance, tech, and high-skill jobs amplifies price pressure. Higher demand leads to higher costs, which leads higher wage demands and overall price levels. But policies will not permit the market to operate freely, and areas are reserved for government-approved housing. Government makes it increasingly difficult to build housing that they cannot control and monitor. Interventions like rent controls and mandates further distorts supply.
These areas also have massive budget shortfalls. New York City’s self-proclaimed socialist mayor Mamdani admitted that high earners will need to pay more in taxes to meet budget deficits. That plan has never worked and only successfully leads to capital flight. The drastic difference in pricing between blue and red or purple cities and states shows how policy and policed markets can distort pricing.
Read the full article here