Lowest Cost of Living States -- OK the Best

The great state of Oklahoma is the lowest cost of living state in the union.  It barely edged out Tennessee for that prime spot.  As of the 4th quarter of 2012, the cost of living by state is indicated in this map provided by the Missouri Economic Research and Information Center.

The ranking is based upon data provided on cities and metropolitan areas on the cost of groceries, housing, utilities, transportation, health care, and a miscellaneous category.  Thus, it may not reflect the cost of living in the more rural areas of a given state.

It is worth noticing that the lowest cost of living states are all contiguous, with the exception of Idaho and Utah.  The contiguous block stretches from Ohio west to Nebraska, skipping Illinois, from West Virginia and west of the Applachian Mountains to Georgia, the only state on the Atlantic seacoast, and then west to Texas, skipping Louisiana.  The southern Great Plains states, the lower Midwest, the interior Southeast states, and the interior Mountain states are the best.

The most variable of the cost factors is the cost of housing.  In the 16 lowest cost of living states, housing is the cost with the lowest index rating.  In the 13 most expensive states and the District of Columbia, housing is the highest index value, with the exception of Alaska for which it is 2nd highest.  In Alaska the utilities index is the highest.  Housing costs are affected by the availability of land in relationship to the population.  They are affected by real estate taxes, policies to limit development and other land use controls, building codes, rent controls, contractor licensing requirements, labor and wage laws, and other cost of doing business factors.  In some areas they are also affected the extent of local federal, state, and local government ownership of land.

Utility costs are the second most variable cost.  These are a function of distance from such inexpensive and reliable resources as coal and natural gas or a lack of sufficient natural gas pipeline capacity.  Some states discourage coal electric plants or nuclear power plants.  They are also very much a function of state mandates for wind generation, solar power use, and biomass use for electricity.  In addition, many states like to attach special taxes to utility bills, especially those states so dominated by Progressive Elitists that they believe energy use is a sin.  Meanwhile, they require the consumer to subsidize so-called green energy ii obeisance to Gaia, so long as it is not in their backyard.  The worst states for utility costs are:

Alaska, index 168.4
Hawaii, index 167.7
New Jersey, index 133.9
Vermont, index 129.0
Rhode Island, index 127.3
New Hampshire, index 125.7
Delaware, index 122.8
Connecticut, index 121.0
Massachusetts, index 120.7

The third biggest variable cost is health care.  States dictate the kind and coverage of health insurance policies, restrict the building of new hospitals, license physicians and control the medical schools in their states, license pharmacists, optometrists, and registered nurses, and they meddle with regulations on x-ray equipment and other medical equipment by requiring often wasteful calibration, maintenance, and safety procedures on equipment they know nothing about.  States also have great impact on medical malpractice costs, Workman's Compensation insurance, and other medical liability costs in their courts.  The most expensive states for health care are:

Alaska, index 140.2
Connecticut, index 119.4
Massachusetts, index 119.0, home of RomneyCare
Hawaii, index 116.5
Rhode Island, index 116.3
Oregon, index 114.8
New Hampshire, index 114.2
Maine, index 113.4
Washington, index 112.9

The least expensive, and closely competitive, states in the overall ratings are:

Oklahoma, #1, index 90.5
Tennessee, #2, index 90.6
Kentucky, #3, index 91.0
Arkansas, #4, index 91.5
Indiana, #5, index 91.7
Kansas, #6, index 91.9
Texas, #7, index 92.0
Nebraska, #8, index 92.0
Idaho, #9, index 92.1
Missouri, #10, index 93.0
Alabama, #11, index 93.2
Utah, #12, index 93.2
Mississippi, #13, index 93.2
West Virginia, #14, index 93.3
Georgia, #15, index 93.7
Ohio, #16, index 93.9

The ignominious last fifteen states are not just last, but have been entirely lapped in the race:

Oregon, #37, index 107.0
Delaware, #38, index 108.2
Maine, #39, index 110.9
New Hampshire, #40, index 119.7
Vermont, #41, index 119.9
Massachusetts, #42, index 122.9
Maryland, #43, index 123.1
Rhode Island, #44, index 123.5
California, #45, index 125.6
New Jersey, #46, index 129.8
New York, #47, index 130.4
Connecticut, #48, index 132.7
Alaska, #49, index 134.5
District of Columbia, #50, index 144.8
Hawaii, #51, index 167.1

All of the 15 most expensive states have long been Democrat Socialist Party controlled with the exception of New Hampshire and Alaska.  Much of Alaska costs come from remoteness and the extreme weather.  New Hampshire while neither strongly Republican or Democrat does have a strong environmentalist factor contributing to high housing and utilities costs.  Government controls come with a big price tag which goes well beyond high taxes alone.  They are a major factor in the cost of living in that they raise of cost of many goods and services.

Favorite retirement states of Florida and Arizona fall in the undistinguished middle, but in the lower half of the states. Florida is #28 with an index of 99.0.  Arizona is a rather poor #35 with an index of 102.5.

The Oklahoma branch of my family is happily enjoying their lowest in the nation cost of living.  I, on the other hand, am most distressed by the cost of living in statist Maryland, ranked #43, with a skyhigh index of 123.1.  Earlier in life, I lived in 5 of the 16 best states and in 3 of the ignominious most expensive 8 states.

Family Destruction by Zoning Law

Alexander Cohen of the Business Rights Center of the Atlas Society tells the story of a young man in Michigan who set up a business to support his sick mother and step-father.  He received the necessary permit for his street hot dog vender operation at the location he was to operate from only to have his business shutdown immediately because he was said to be in violation of a zoning law.  The zoning law was a crony protection scheme for restaurants in the zone which violates the right of the young man to earn a living and of the actual property owner who had allowed him the use of his land.  The result of the city shutting down his business is that both he and his mother are now homeless and his step-father cannot join them in a shelter because medication he needs is not allowed there.

Malevolent, rights-violating laws cause real harm to our fellow man.  Crony mercantilism is a serious problem.

A Request for an Overview Discussion of the Financial Meltdown

I have received a request that I provide an overview discussion of what I believe caused the home mortgage and financial crisis we suffered. Robert G. Curry wrote:

I wonder if you have given some thought to the causes of the current financial meltdown. The history leading up to what happened this year, etc.

Have you covered any of this on your blog?

It would be informative to be able to get an overall picture of the actions from the Carter years to the present of who did what, and who's primarily to blame, both through actions or neglect of action, for the meltdown.

How did we get from the so called "Fair Housing Act," through the "No Red Lining," to the "NINJA" loans, to the packaging of junk mortgages as A rated bonds, to the insuring of those bonds by the people at AIG, to the bailouts?

My response to Robert was:

I have discussed it a number of times, but not as comprehensively as you are suggesting I do. Partly, this is because it is a complex history. Partly, because the time period from Sep through Dec is our busy season in my laboratory, though all of 2008 was very busy for me. But, there is also a very critical component to the housing and financial meltdown which is due to problems caused by local and state governments in addition to the unhealthy contributions to the problem made by the Federal government. This really complicates the issue. I have addressed some of the local problems in a few posts as well.

When you look at where the mortgage defaults have occurred, you find that they are very far from an even distribution across the country. Mostly, the problem spiked in those areas where local and state government have such restrictive policies on home-building that home prices have become inaffordable for most people who in other parts of the country could readily buy a home with their income. In California, the average home buyer is paying 8 times his income to buy a home, when paying more than about 2.5 times your annual income for a home makes you a sub-prime borrower. We can argue that the average home buyer in California has no business buying a home, but human nature being what it is, they still badly want a home. In large part, the fact that homes cost so much in California is because of local and state government policies. For the most part, this is the pattern of where mortgage defaults are occurring. In Nevada the problem is that the Federal government owns 84.5% of the state and land around Las Vegas is not available because it is penned in by Federal land. Florida is another area with a spike of failures, where apparently there is a lot of speculation in homes based on quick improvements and rolling over the homes. This may have other explanations, maybe just that a lot of baby boomers are retiring or will soon and home values may have been rising due to their plans to move there upon retirement and it became an easy money fad to buy homes in anticipation of an easy resale at a higher price. Ohio and Michigan have elevated mortgage failures due in part to the very bad business climate in those states, which is causing them to lose jobs badly.

Because of these local issues, many people have put more and more pressure on Congress for affordable housing. In effect, many present home owners in local areas were happy with the rising home values due to government restrictions and maybe did like less traffic on the roads, lower taxes due to having fewer public schools to build, and more parks, but others wanted housing they could afford and some of the home owners are probably feeling guilty for favoring restrictions that they must realize are causing homes to be unaffordable. Congress does nothing to address the local building restrictions, so they have done as much as they can to press the envelope on lowering the costs of home mortgages. Many of the problem programs you named resulted in good part in response to some very vicious local housing affordability issues.

Of course, this then becomes a good lesson in how excessive government meddling in economic matters and in matters of property, causes all sorts of problems, the attempted responses to which cause still more problems.

Robert has a grasp of much of the path taken at the national level to attempt to make housing more affordable. He understands that this process began long ago and has resulted in a major problem for the economy. I was on the verge some time ago of addressing this side of the problem more thoroughly, but upon looking into it, it became clear that it was even more complex even on the federal affordable housing side of the issue than I had thought. It was going to take some real effort to sort it all out. In the process of looking into that, I realized that a good part of the reason pressure was put on the federal government to make home mortgages more available and less expensive was due to problems already caused by local and state governments which made housing in some substantial parts of the country ridiculously expensive.

There is a push-pull problem here of massive proportions. Government creates a bad problem, then government responds to the screams of pain that result by appearing to address the problems at least in part. Only then it is found to have planted many dozen rattlesnakes into our prairie dog colony. We suffer a financial meltdown and Wall Street and the banks become beggars who are put on the dole. Meanwhile, many home buyers are still sub-prime borrowers and they now cannot get loans. The home building and real estate industries then suffer, but mostly in those areas where most homes are very expensive for most potential buyers.

Meanwhile, the local and state governments are still very happy to follow policies that greatly increase the cost of housing in many communities. There is little movement on their part to address the prime reason for the housing and, ultimately, the banking and financial institution problems. Zoning restrictions, green park policies, antiquated and expensive building codes, excessive federal land ownership, disallowing pre-assembled housing so more local tradesmen will be hired, requiring excessively large home lots, high-handed and unavailable county building inspectors, and many more policies that cause home prices to be much higher than they need to be remain very popular in many communities.

So, as incensed as I am about the many bad choices made by the federal government regarding their powers to influence and control the lending institutions and to put pressure on them to follow unwise and risky lending policies, I do not want us to lose focus on the most fundamental of the originating problems. We allow local and state governments, with some assistance from the federal government, to infringe upon our property rights and thereby to deny many of us the much improved housing that we, in our pursuit of happiness, could have otherwise attained.

The Convenience of Not Thinking in Politics

Thomas Sowell, in Applied Economics, points out that people generally think only about the immediate intended result of any political issue they think about. When thinking that it would be nice if there were less violence, it seems so easy to wish that the elimination of gun ownership will eliminate violence. The fact that criminals will still acquire guns, while law-abiding citizens will be the ones disarmed, does not come to mind unless one takes the thought process a step further. Certainly thinking about the studies that show that there is more violence and that more homes are robbed when occupied when gun ownership is limited to the criminals, is still another step down the road of thought that is not followed.

Here in Maryland, the electric utilities have not been allowed to charge residential home owners enough for their power that the electric utilities could properly maintain and modernize their power distribution systems. In the BG&E area, residential owners were paying one-third less for power than were commercial users. In effect, commercial users were subsidizing the residential power users, since their additional payments were providing a disproportionate share of the power system maintenance costs and for the upgrades to the system. These commercial users were getting only a portion of the benefits in reliable power that they should have been getting. There is a very unreliable transformer near my laboratory which has long needed to be replaced and it has not been. This is likely a direct result of the residential home power subsidy. In addition to the many power failures experienced at my lab, we have nightly brown-outs, which I suspect are due to BG&E intentionally reducing the line voltage in the middle of the night in a desperate attempt to reduce their operational costs a bit. This may not affect many residential users of power, but my laboratory often runs experiments through the night. These brown-outs only rarely kill the computers, but they add to uncertainty about the quality of some of the data acquired by our spectrometers. Of course, those businesses which place a premium value on reliable power do not have as many concerned voters on their side as does the side which wishes for lower home power costs. It is simply assumed that we commercial users will be able to continue to provide jobs whether we have reliable power or not. It is not rocket science to understand what the effects of state power commission interference in rational power rates will be, but most of the voters will not allow themselves to think past the idea that it would be nice if the state government arranged for their power costs to be lower.

I talked to my mother tonight and she remarked that many of her elderly friends refuse to think about the effects of social programs such as Medicare, Social Security, and further proposed socialized medicine schemes. My Mom points out that medical care will suffer and that the costs of Medicare are too high because it is in no one's immediate interest to control costs. My Mom has often questioned why she or my Dad were charged so much for a procedure, a doctor walking through and asking "How are you?", or the cost of a medical product. The reply is usually, "Why do you care? You are not paying for it." Commonly, this response is an angry one. She asks her elderly friends why they do not care that the programs they want come at the expense of higher taxes on their children and grandchildren. They respond that that is depressing to think about, so why think about it? It seems to me that this is a clear case of parental and grandparental abuse of children and grandchildren, but it is apparently widely accepted practice. The AARP institutionalizes it and works mightily to lobby for this abuse. For this reason, I immediately throw away their invitations to join their organization. I love my three daughters and my nieces and nephews. I do not want to smother their life options in oppressive taxes. I will not join AARP in their crusade of intergenerational warfare. But most elderly people apparently do. They are only too happy to hurt their children. It is good not to think about this painful consequence of thinking only about their immediate convenience.

In the Maryland suburbs of Washington, DC such as Montgomery County and Howard County, about half of each county has been set aside to remain farmland or to be developed in 3 acre lots. The cost of land is so great in these counties that hardly anyone can afford to buy 3 acres and put a home on them. These land-use restrictions are intended to provide plenty of open green areas. This is the wished for result and it works. This is the claimed sole intent. However, a great many of the voters have an ulterior motive. Their monetary stake in their homes is great, so they do think a bit further down the road on this issue. They are generally very aware that they are choosing a course of action here which will drive up the cost of housing in their area and increase the value of their home in particular. On this kind of political issue they have an incentive to think about the consequences of their green area restrictions and they like the result. Yes, given a money incentive, people will think about what they are doing politically, at least a bit further down the road. But, do they admit that this is the real reason they are so green? No, never. They are very happy to pull the mantle of being an environmentally friendly good guy over their shoulders. But, that is not their primary reason for wanting land-use restrictions. The primary reason is to make housing more expensive. There is little remorse that this hurts others.

So, what do the politicians think of these usually unthinking voters? That it is very easy to present ideas for legislation which have wished for intentions. This legislation always gives the politicians more power. It improves their chances of re-election. By the time the problems come home to roost, they will be in a higher office or already retired from politics. If they serve in the US House of Representatives or the Senate, they will be enjoying a retirement with more than $1,000,000 a year income from a Fedeal government pension and further income for lobbying. Far from wishing to provide leadership in the quest for good government, our politicians see only gravy in the micro-thoughts of their electors. They are intelligent enough to manipulate the voters into giving them power, but never intelligent enough to think about the consequences of their actions on future generations of Americans. You see, they do their own wishing. They wish for power and a conscience free of concern for the ill they have done the country. In my correspondence with Maryland Senators and Representatives, I have found them all to be simple-minded in their espoused thinking, but very nimble in manipulating the voters. They are clearly practiced at selective thinking. They specialize in only that thought directed at being re-elected and increasing their own power over others.