California’s economy could get a huge boost under a plan President Barack Obama announced to suspend payments states owe to the federal government for borrowing money to cover unemployment benefits, one expert confirmed. 

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Henry Brady, the Dean of the Goldman School of Public Policy at UC Berkeley, said that right now, anything done to help California in its current fiscal crisis will be helpful.  

“This is really great news for California since we are $9.9 billion in arrears and the interest on that amount is quite considerable,” Brady said.

During the economic crisis, 30 states, including California, ran through state unemployment benefits that support those who lost their jobs for up to 26 weeks. Tax collections are not keeping up with the costs of unemployment programs and the states borrowed money from the federal government and now owe roughly $42 billion.

California currently owes the federal government hundreds of millions of dollars a year in interest. Putting off paying back the debt without accumulating interest, according to Brady, will be great for the state. 

The proposal, which Obama will include as part of a larger budget request, will be presented to Congress next week. 

In times of economic difficulties, Brady said, states are often hit after the federal government. The amount of debt weighing down numerous states is evidence of this.

Brady said Obama’s proposal will put off the federal government being paid back roughly $1.5 billion in payments. Even though some may protest that this is unnecessary funding by the government, Brady argues that it is a form of stimulus. And the government is looking for “anyway to help states not make additional cutbacks.”

Although Republicans have been complaining that Obama is spending to much money, Brady said that Obama is in a strong position because his increased spending will help unemployment benefits. 

The debt to the federal government will have to be repaid eventually, though. If Obama’s strategy goes according to plan, the moratorium on employer tax increases and interest payments on the debt will end in 2013. 

Some think the economy will have recovered by 2014, according to the Washington Post. At this time, the portion of worker wages on which employers pay unemployment taxes will jump from $7,000 to $15,000. Brady said this will make paying back the debt California owes feasible. 

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