Obama to propose break for states on jobless aid

President Obama is expected to propose easing the burden on states that borrowed to provide jobless benefits during the economic downturn by allowing them to postpone debt payments to the federal unemployment trust fund for two years.

The proposal in his upcoming 2012 budget is likely to be embraced by states desperate for assistance as they struggle to shore up budget shortfalls. But it is being criticized by congressional Republicans as a job-killer that will eventually impose higher taxes on employers who pay the cost of most jobless aid.

Obama is likely to discuss the proposal with Republicans on Wednesday, when House Speaker John A. Boehner (R-Ohio) and other House GOP leaders join him for lunch.

White House Press Secretary Robert Gibbs said the president thinks the steps proposed in his budget outline would reduce the burden on states providing jobless aid, and would give state officials time to "rationalize what they offer and how they pay for it." Obama's budget is expected to be unveiled Monday.

The proposal is not the only measure to help states manage the fiscal fallout from persistent unemployment, said one person familiar with the discussion.

Yet Republican leaders in the House and Senate have made it clear they have little interest in providing federal assistance to cash-strapped states, as Democrats did last year when they controlled Congress. At the time, Obama approved a states' aid bill to keep teachers on the job and provide medical care for lower-income residents.

"There will be no bailout of the states," Rep. Eric Cantor (R-Va.), the House majority leader, said recently.

Thirty states owe almost $42 billion to the federal unemployment insurance trust fund, and the president's proposal would freeze for two years their interest payments to the federal government. Obama's plan would also halt the tax increases that kick in automatically to pay it off.

Congressional Republicans say the Obama proposal would impede job growth by allowing states to eventually increase the tax on employers who pay for unemployment benefits.

lisa.mascaro@latimes.com

cparsons@latimes.com