If you have a cadence of 60 and below, normal, non-bike specific clothes are fine. If you tend to ride with a normal cadence of 80 and above, I find spandex\lycra more comfortable. I simply bought a pair of lycra leggings for $10 and wear those inside a pair of no name polyester shorts. My morning commute tends to be cooler this time of the year and the return ride home warmer. So I just wear the shorts on the way home. Neither of those are bike-specific (read: expensive) clothing. I did buy a pair of lycra\spandex arm warmers on sale for $18 at my local equipment store. These are very good for keeping the arms warm and getting more utility out of short sleeved garments yet providing the flexibility of removing them as the temperature changes.

The best thing one can do for regular commuting is to dress in layers so one can tailor their garments with the prevailing conditions. The more comfortable you are, the safer you are since you won't be as distracted especially in urban traffic.