It should work, if you put a wrapper around the element to be resized, and make this wrapper resizable.
I was playing around with that idea and this result seems to work:
<script>
$(document).ready(function() {
$(".resizable")
.wrap('<div/>')
.css({'overflow':'hidden'})
.parent()
.css({'display':'inline-block',
'overflow':'hidden',
'height':function(){return $('.resizable',this).height();},
'width': function(){return $('.resizable',this).width();},
'paddingBottom':'12px',
'paddingRight':'12px'
}).resizable()
.find('.resizable')
.css({overflow:'auto',
width:'100%',
height:'100%'});
});
</script>
Test with jsfiddle