Interest waivers on unemployment benefits offered to states

Interest waivers on unemployment benefits offered to states

Interest on loans for unemployment benefits owed by states and businesses to the federal government  might be waived under a plan by the Obama administration.

Some $42.3 billion have been lent to states to cover jobless benefits. Under the plan, states and companies will no longer have to pay interest amounting to $1.3 billion for two years.

The proposal will be submitted with the federal budget by President Barack Obama next week to lawmakers.

Companies have already been exempt in paying interest for the past two years under the 2009 Recovery Act. But that law expired on December 31 and this new plan may extend the relief employers have received.

Besides waiving interest on unemployment benefits, companies may also be exempt from paying higher federal jobless taxes which are utilized to pay the principal of loans.

The plan by the administration will allow states to  change tax rates and benefits for the years ahead, making them less reliant on future assistance from the federal government.

"It prevents future state bailouts, because in the future, states are going to have to rationalize what they offer and how they pay for it," White House Press Secretary Robert Gibbs told reporters Tuesday.

Some states are hiking jobless taxes on employers and are planning to decrease benefits to shore up their trust funds.

During the recession in the 1980s, some $28 billion were lent to states which took nearly a decade to repay their debt to the federal government. Unemployment benefits in 44 states were reduced during that downturn in order to pay off the debt.

Posted by James Fried on Wednesday February 09 2011, 3:44 AM EST. Ref: CNN. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0