Omnibus Budget Reconciliation Act

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American presidents and other dignitaries attend the memorial service of former President Richard Nixon April 27, 1994 in Yorba Linda, CA. Nixon died April 22 at age 81 in New York Hospital-Cornell Medical Center four days after suffering a severe stroke. (). Photo by John Barr/Liaison/Getty Images

Definition: The Omnibus Budget Reconciliation Act refers to a number of different laws enacted under Presidents Reagan, Bush 41 and Clinton. Here are the most popular ones, listed by date.

Omnibus Budget Reconciliation Act of 1981

Also known as Gramm-Latta II, it was combined with the Economic Recovery Tax Act of 1981 (Kemp-Roth Tax Cut) in conjunction with President Ronald Reagan's first budget (Fiscal Year 1982).

Together, they cut the top income tax rate from 70% to 28%, and the corporate tax rate from 48% to 34%. It reduced domestic discretionary spending by $39 billion but increased the defense budget over time by 35%. For more, see Reaganomics.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Also known as the Omnibus Budget Reconciliation Act of 1986, it was signed in 1985 but went into effect in 1986. It requires companies with twenty or more employees to give workers and their family members the option of continuing with the same company-sponsored health plan under the following circumstances:

  • If they quit, are laid off, or their hours are reduced. The employee, spouse, and child can continue the plan for 18 months.
  • If the employee becomes eligible for Medicare, gets divorced or separated, or dies, the employee's family is eligible for 36 months of coverage​
  • Children can sign up for 36 months of coverage if they lose their dependent status. 

    However, the employer doesn't have to continue its contribution at the same rate, so COBRA insurance premiums are usually very expensive. Most people may find cheaper plans on the health insurance exchanges under the PPACA. (Source: "Fact Sheet: COBRA," U.S. Dept. of Labor.)

    Omnibus Budget Reconciliation Act of 1987 (Gramm-Rudman)

    With this law, President Reagan cut corporate taxes to 40% in the Tax Reform Act of 1986 to fight stagflation.

    It lowered rates while eliminating $30 billion in loopholes.This revised the Balanced Budget and Emergency Deficit Control Act of 1985,  after the Supreme Court ruled in Bowsher v. Synar (1986) that portions of that law were unconstitutional. Combined, the two acts are known as Gramm-Rudman-Hollings, or more simply Gramm-Rudman. They set annual spending reduction targets that were enforced by sequestration. (Source: "1987 Balanced Budget and Emergency Deficit Reaffirmation Act," University of California at Berkeley.)

    Omnibus Budget Reconciliation Act of 1989

    OBRA '89  changed Medicare's "reasonable charge" method of reimbursing physicians, replacing it with a fee schedule. (Source: "Medicare Fee Schedule in Place," NIMH)

    Omnibus Budget Reconciliation Act of 1990 (PayGo)

    President George H.W. Bush and Congress passed this law to cap discretionary spending, including defense. It required that any new entitlement benefits or tax cuts be offset in other areas, a concept known as paygo. It raised taxes, violating Bush's campaign promise "Read my lips -- No new taxes." This prevented him from being re-elected. It expired in 2002. (Source: Jonathan Rausch, "Gramm-Rudman--A Bad Idea Whose Time Has Come," Atlantic, February 15, 20015)

    Omnibus Budget Reconciliation Act of 1993 (Deficit Reduction Act)

    This was President Bill Clinton's first budget. It raised the top income tax rate from 28% to 36% for those earning more than $115,000, and 39.6% for income above $250,000. It increased the corporate income tax from 34% to 36% for corporations with incomes over $10 million. It also ended some corporate subsidies, taxed Social Security benefits for high income earners, and created the earned income tax credit for incomes under $30,000.