I don't think so; the 3rd-world-like situation is limited mostly to SF, many other cities in the same area are not as progressive and doing better. Ditto for Seattle - the East Side has greater wealth, more expensive housing, is less progressive, and is doing much better. Tacoma has far less wealth, is less progressive and is doing better anyway. There's a common pattern here...
There's a grain of truth in what you say in terms of progressive policies used to "paper over" stuff - some places prevent the problem via non-progressive policies, and those stupid enough to use progressive ones are left with the 3rd world conditions in need of papering over.
I have a pet theory... I think compassion is the worst basis for policy, proven by study after study to be irrational, scope insensitive, biased in many ways. The 2nd worst basis for policy are slogans. However, most people are compassionate and are fired up by slogans, so they vote for compassionate simple policies. That predictably causes horrible results, at which point the smarter/richer people become a bit more likely to leave, and the less smart/less rich people stay, or are not able to leave financially; that causes more compassionate and slogan-based policies; rinse, repeat.