US & World Economies US Economy Omnibus Budget Reconciliation Act What Presidents Reagan, Bush 41, and Bill Clinton All Have in Common By Kimberly Amadeo Kimberly Amadeo Kimberly Amadeo is an expert on U.S. and world economies and investing, with over 20 years of experience in economic analysis and business strategy. She is the President of the economic website World Money Watch. As a writer for The Balance, Kimberly provides insight on the state of the present-day economy, as well as past events that have had a lasting impact. learn about our editorial policies Updated on March 31, 2022 Reviewed by Robert C. Kelly Reviewed by Robert C. Kelly Robert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. He is a professor of economics and has raised more than $4.5 billion in investment capital. learn about our financial review board Fact checked by Hans Jasperson Fact checked by Hans Jasperson Hans Jasperson has over a decade of experience in public policy research, with an emphasis on workforce development, education, and economic justice. His research has been shared with members of the U.S. Congress, federal agencies, and policymakers in several states. learn about our editorial policies 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: Photo by John Barr/Liaison/Getty Images The Omnibus Budget Reconciliation Act refers to several different laws enacted under presidents Ronald Reagan, George H.W. Bush, and Bill Clinton. Here are the most well-known omnibus budget acts, 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 Reagan's first budget for Fiscal Year 1982. The ERTA 1981 was also called the "Kemp-Roth Tax Cut." It cut the top income tax rate from 70% to 50%. Reagan’s budget reduced domestic discretionary spending by $39 billion. But the defense budget increased over time by 35%. In fact, Reaganomics almost tripled the federal debt. 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 so called COBRA coverage to extend health insurance. Employees have the option of continuing with the same company-sponsored health plan if the employee: QuitsIs laid offHas their hours reduced The employee, as well as the employee's spouse and any dependents, 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. 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. Note In 2021, all households who purchase insurance through the exchanges will qualify for subsidized health insurance, even if their income would have been too high previously. These subsidies were temporarily increased under the American Rescue Plan, which was passed in response to the COVID-19 pandemic. 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 U.S. Supreme Court ruled in Bowsher vs. 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%. It eliminated $30 billion in loopholes. Combined, OBRA 1987 and TRA 1986 are called "Gramm-Rudman-Hollings" or the "Gramm-Rudman Act." Omnibus Budget Reconciliation Act of 1989 The Omnibus Budget Reconciliation Act of 1989 changed Medicare's "reasonable charge" method of reimbursing physicians, replacing it with a fee schedule. Omnibus Budget Reconciliation Act of 1990 President George H.W. Bush worked with Congress to pass 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, which violated Bush's campaign promise, "Read my lips: No new taxes." This prevented him from being re-elected. The Act expired in 2002. Omnibus Budget Reconciliation Act of 1993 The Omnibus Budget Reconciliation Act of 1993 is also called the "Deficit Reduction Act." It was President Clinton's first budget. It raised the top income tax rate from 31% to 36% for those earning more than $115,000. It raised the top rate to 39.6% for incomes above $250,000. OBRA 1993 increased the corporate income tax from 34% to 36% for corporations with incomes over $10 million. It also ended some corporate subsidies and taxed Social Security benefits for high-income earners and created the earned income tax credit for incomes under $30,000. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. University of California, Berkeley. "1981 Omnibus Budget Reconciliation Act." U.S. Congress. "H.R.4242—Economic Recovery Tax Act of 1981." Bruce S. Jansson. "The Sixteen-Trillion-Dollar Mistake: How the U.S. Bungled Its National Priorities from the New Deal to the Present," Page 240. Columbia University Press, 2001. U.S. Department of the Treasury. "Historical Debt Outstanding - Annual 1950 - 1999." Congressional Research Service. "Health Insurance Continuation Coverage Under COBRA," Summary. U.S. Centers for Medicare and Medicaid Services. "American Rescue Plan and the Marketplace." University of California, Berkeley. "1987 Balanced Budget and Emergency Deficit Control Reaffirmation Act." Internal Revenue Service. "Corporation Income Tax Brackets and Rates, 1909-2002," Pages 288-290. United States Congress Joint Economic Committee. "The Tax Reform Act of 1986: Implications for the Future," Page 88. Congressional Research Service. "Medicare: Payments to Physicians," Page 1. University of California, Berkeley. "1990 Budget Enforcement Act." University of California, Berkeley. "1993 Omnibus Budget Reconciliation Act."