Is Panama cheap? This is perhaps the most important of all questions... because if you're considering moving to Panama only because it's cheap, then you're likely to be disappointed! Cheap is a very relative word, like "hot" or "cold". As compared to what? I have received inquiries from Americans interested in purchasing a house in Panama City, with a budget of $50,000. I am not saying it's not possible... actually, that would be possible in the "interior", but not in Panama City, at least not in a very desirable neighborhood. And at that price level, you cannot expect an ocean view! The Internet is an invaluable research tool, provided the information is up-to-date. What was true fifteen years ago is no longer relevant, but the same considerations apply to your home state, wouldn't you agree? (How much did you pay for a cup of coffee or a gallon of gas, just a few years ago?) I pay a visit to Europe and the U.S. every year. Compared to Swiss prices, Panama is definitely cheap. Compared to Miami, not that much cheaper. Reliable websites like Tripadvisor provide immediate hotel and restaurant pricing comparison, between your hometown and Panama. (With the huge advantage that Panama's only currency is the U.S. Dollar, so you don't have to worry about the "Colones" or "Pesos" daily rate of exchange).
Taking Miami FL as a reference, prices in Panama's metropolitan area are slightly lower. I enjoy my daily fix of cappuccino and a cardboard 8 oz. cup runs me between US$2.63 to $3.74 (including 7% tax), depending on location (as of this writing, April 2013). A lot of things are cheaper here, such as movie tickets, medical services, prescriptions, personal services, for example - especially if you live here under a "pensionado" visa, providing you with many discounts. You can get a cleaning lady charging $20.00 per afternoon, or a live-in maid for about $400/$500 per month. If you don't mind driving 3 hours (highway), prices in the Azuero Peninsula are much lower - and the lifestyle more relaxed.
Bottom line: generally speaking, prices in Panama are affordable. Just don't take your decision based solely on the cost of living. The best advice would be to visit Panama and judge for yourself.