Omnibus Budget Reconciliation Act

clinton-bush-reagan.jpg
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 several different laws enacted under presidents Ronald Reagan, George HW Bush and Bill Clinton. Here are the most well-known omnibus budget acts. They are listed in chronological order.

Omnibus Budget Reconciliation Act of 1981

The Omnibus Budget Reconciliation Act of 1981 is also called Gramm-Latta II for short. Congress combined it with the Economic Recovery Tax Act of 1981 and President Ronald Reagan's first budget (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 cut the corporate tax rate from 48 percent to 34 percent. Reagan’s budget reduced domestic discretionary spending by $39 billion. But the defense budget increased over time by 35 percent. For more, see Reaganomics.

Consolidated Omnibus Budget Reconciliation Act

The Consolidated Omnibus Budget Reconciliation Act is also 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 families to extend health insurance. Employees have the option of continuing with the same company-sponsored health plan under the following three circumstances.

  1. 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.
  1. If the employee becomes eligible for Medicare, gets divorced or separated, or dies, the employee's family is eligible for 36 months of coverage.
  2. 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. Most companies reduce their subsidies.

That’s why COBRA insurance premiums are so expensive. The employee pays most of the cost. Some people find cheaper plans on the health insurance exchanges under the Patient Protection and Affordable Care Act. (Source: "Fact Sheet: COBRA," U.S. Department of Labor.)

Omnibus Budget Reconciliation Act of 1987

The Omnibus Budget Reconciliation Act of 1987 set annual spending reduction targets enforced by sequestration. It corrected the Balanced Budget and Emergency Deficit Control Act of 1985. That Act had assigned enforcement of sequestration to the Comptroller General, a Congressional Office. The Supreme Court ruled in Bowsher versus Synar in 1986 that it was unconstitutional for Congress to enforce its own laws. The Omnibus Act of 1987 moved that function to the Executive Branch where it belonged. 

It also increased the debt limit and delayed the deadline for passing a balanced budget by two years. It was superseded by the Budget Enforcement Act of 1990.

OBRA 1987 worked in tandem with the Tax Reform Act of 1986 to fight stagflation. TRA 1986 cut corporate taxes to 40 percent. It eliminated $30 billion in loopholes. Combined, OBRA 1987 and TRA 1986 are called Gramm-Rudman-Hollings or the Gramm-Rudman act.

(Source: "1987 Balanced Budget and Emergency Deficit Reaffirmation Act," University of California at Berkeley.)

Omnibus Budget Reconciliation Act of 1989

The Omnibus Budget Reconcialiation Act of 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

President George H.W. Bush worked with Congress to passed this law to cap discretionary spending, including defense. It required that any new entitlement benefits or tax cuts be offset in other areas. This concept is called “pay-as-you-go” or PayGo.

The Act also raised taxes. That violated Bush's campaign promise, "Read my lips: No new taxes." This prevented him from being re-elected.

The Act 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

The Omnibus Budget Reconciliation Act of 1993 is also called the Deficit Reduction Act. It 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. It raised the top rate to 39.6 percent for incomes above $250,000. 

OBRA 1993 increased the corporate income tax from 34 percent to 36 percent for corporations with incomes over $10 million. It also ended some corporate subsidies.

It taxed Social Security benefits for high income earners and created the earned income tax credit for incomes under $30,000.