Grand Rapids Reporter

The uncertainty of the new coronavirus and its effects on the Michigan economy — which some predict could be the hardest-hit state due to the automotive industry — is challenging, and some state lawmakers are considering creative ways to boost the economy once the COVID-19 threat subsides.

Tim Bartik, a senior economist at W.E. Upjohn Institute, told WWMT last week the effects of COVID-19 will hit almost every industry and community across Michigan. He and other economists say a recession is occurring and the state could be hit hard, with millions of workers displaced in the next 45 days.

The auto sector was the hardest hit during the 2008 financial crisis, and the new coronavirus has impacted the sector globally, reported Crains Detroit Business. The good news is that fewer residents in the state are employed in the auto sector compared to the previous recessions.

So far, auto factories have shut down until March 30, but this could go on much longer as the COVID-19 threat continues.

University of Michigan economists, according to Crains Detroit Business, are projecting state unemployment to reach 10% in 2020 or as low as 5.6%, depending on several factors, including the degree of success of social distancing.

Worker layoffs increased after Gov. Gretchen Whitmer signed the “Stay Home, Stay Safe” executive order on March 23, which directed all businesses and operations not essential to sustaining or protecting life to temporarily suspend in-person operations.

"The problem is that the data won't be in to tell us for sure how big this recession is until long after the pandemic has ended," Betsey Stevenson, economist and professor at University of Michigan, told Crains Detroit Business. "If we want the economy to spring back when the pandemic subsides, we need bold fiscal policy efforts now. Without them, the drop in income can create a cascade of defaults, foreclosures, bankruptcies and depleted bank accounts. All of which will mean that people can't go back to spending the way they were prior to the pandemic, even when it ends. If that happens, we are in for a much longer recession with a slower recovery."

One state lawmaker, Rep. Lynn Afendoulis (R-Grand Rapids Township), chair of the Michigan House Tax Policy Committee, introduced a “sales tax holiday” plan to help boost retail sales and the state’s economy after it emerges from the new coronavirus threat, according to Michigan House Republicans.

The measure would waive Michigan’s 6% sales tax on various purchases made at physical locations. While specifics would be determined down the road, Afendoulis said preparations should begin now.

“This is a bill to get Main Street Michigan back on its feet after this unprecedented, challenging time,” said Afendoulis,.“We don’t know how long coronavirus will be a public health threat – but we do know challenges will remain from the disruption it is causing to our economy and way of life. When the time is appropriate, a sales tax holiday is one of the tools we can use to incentivize spending and get our economy get back on track. It’s an important sign of support for retailers, their employees and customers – all of whom will need support as this situation evolves.”

Afendoulis said she is working through several issues to ensure the sales tax holiday would be constitutional and in compliance with federal law.