As our federal, state and local governments scramble to find an appropriate response to the COVID-19 pandemic, the Michigan League for Public Policy is advocating for a fiscal response that is timely and equitable. Governor Whitmer has been taking action and Congress continues to work on its response. But we have much more work to do.
Economists predict that by summer, Michigan’s job losses will amount to 10.6% of private-sector jobs, or 416,610 jobs. Leisure, hospitality, and retail will take the biggest hit, with a loss of 23.5% of those private-sector jobs. Most of those job losses will be recorded in April. Additionally, economists are estimating that our nation’s production will drop by 14% in the second quarter of 2020. The time for action is now.
This recession is going to come in two phases. The first phase will affect primarily low-wage workers; there will be startling job loss numbers reported in the coming months. Because these workers will not receive income or purchase as many goods as they regularly would, income and sales tax payments are going to drop significantly. Thus, the second shock to the Michigan economy will be a collapse of state tax revenues.
The Center on Budget and Policy Priorities released a brief calling for an immediate and robust policy response to the grave risks facing the economy. The recommendations include expanding the share of Medicaid funding paid for by the federal government, which will open up state funds to be used to fund essential state programs during the upcoming fiscal crisis. The Families First Coronavirus Response Act included a modest increase to these payments, but the increase is not enough to fulfill the budget shortfalls that will occur with the estimated increase in unemployment. We also need to push for expanding health coverage to those who are not currently insured so people can still be covered in case they lose their job or see incomes fall.
To ensure that families and individuals are insulated from the recession, the Center on Budget and Policy Priorities suggests a number of steps. First, Unemployment Insurance should be expanded to cover more individuals, including those who are self-employed or are not covered for other reasons under the traditional UI program.
Second, the federal government should expand food assistance, including SNAP and WIC. These measures could include an expansion of emergency SNAP provisions to address temporary needs, and a suspension of SNAP collection limits.
Finally, the federal government should act swiftly to provide direct payments to families in this crisis. These payments need to be large enough to assist families in paying for necessities such as rent and food and also be sustained as long as the crisis exists.
These recommendations are essential to ensuring that Michigan’s families and businesses are insulated from the recession, and we are working to develop additional recommendations moving forward. There is a lot of fear associated with not knowing how this crisis will play out. But have hope; organizations and individuals are working tirelessly to ensure that all Michiganders are protected through this crisis and beyond. Stay tuned to the League for updates.