Omnibus Budget Reconciliation Act

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 called Gramm-Latta II, OBRA 1981 was combined with the Economic Recovery Tax Act of 1981 in conjunction with President Ronald Reagan's first budget of Fiscal Year 1982.

The ERTA 1981 was also called the Kemp-Roth Tax Cut. OBRA 1981 and ERTA 1981 together cut the top income tax rate from 70 percent to 28 percent.  They also cut the corporate tax rate from 48 percent to 34 percent. Domestic discretionary spending was reduced by $39 billion but the defense budget increased over time by 35 percent. For more, see Reaganomics.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

ikewise called the Omnibus Budget Reconciliation Act of 1986, COBRA was signed in 1985 but went into effect in 1986. It requires companies with 20 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 the employee quits, is laid off or his hours are reduced, the employee, his 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 who lose their dependent status can sign up for 36 months of coverage.

The employer doesn't have to continue its contribution at the same rate. COBRA insurance premiums are usually very expensive. Most people may find cheaper plans on the health insurance exchanges under the Patient Protection and Affordable Care Act.

(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 percent in the Tax Reform Act of 1986 to fight stagflation. OBRA 1987 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 versus Synar in 1986 that portions of that law were unconstitutional. The combination of OBRA 1987 and TRA 1986 is called Gramm-Rudman-Hollings or more simply, Gramm-Rudman. This 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 1989 changed Medicare's "reasonable charge" method of reimbursing physicians. It replaced it with a fee schedule. (Source: "Medicare Fee Schedule in Place," National Institute of Mental Health.)

Omnibus Budget Reconciliation Act of 1990 (PayGo)

President George H.W. Bush and Congress passed this law to cap discretionary spending. The limit included defense. It required that any new entitlement benefits or tax cuts be offset in other areas.

This concept was called “pay-as-you-go” or PayGo. It raised taxes which violated Bush's campaign promise, "Read my lips: No new taxes." This prevented him from being re-elected. It expired in 2002. (Source: "Gramm-Rudman--A Bad Idea Whose Time Has Come," Jonathan Rausch, Atlantic, February 15, 2015.)

Omnibus Budget Reconciliation Act of 1993 (Deficit Reduction Act)

OBRA 1993 or the Deficit Reduction Act was President Bill Clinton's first budget. It raised the top income tax rate from 28 percent to 36 percent for those earning more than $115,000 and to 39.6 percent for incomes above $250,000. It increased the corporate income tax from 34 percent to 36 percent for corporations with incomes over $10 million. OBRA 1993 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.