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1993 Omnibus Budget Reconciliation Act

SUMMARY:

The Omnibus Budget Reconciliation Act of 1993, better known as the Deficit Reduction Act of 1993, was President Bill Clinton’s first budget. The fiscal year 1994 budget proposed the highest peace-time tax increases (on high income earners) in United States history, cut appropriations spending, and renewed the framework of the Budget Enforcement Act of 1990.

DESCRIPTION:

The related issues of rising budget deficits and an increasing national debt were centerpieces of the 1992 presidential election. With the nation in a slow-recovery from recession, the economy already was a major political issue in 1992. When charismatic independent candidate Ross Perot appeared on the scene, he made the looming national debt an issue that the two major party candidates were forced to contend with. Although Bill Clinton campaigned on a pledge to invest in America through stimulus spending (and middle-class tax cuts), shortly after his victory in November 1992, he began instead to focus on reducing the deficit.

President Clinton’s first budget, submitted in 1993 for fiscal year 1994, proposed to cut spending and increase taxes in order to reduce the budget deficit. The budget proposal submitted by Clinton’s OMB included increasing the marginal tax rate for incomes of over $180,000 from 31 to 36 percent, with an additional 10% for those earning over $250,000 annually. The proposal also called for: increasing the corporate income tax from 34 to 36 percent for corporations with incomes over $10 million; ending some corporate subsidies; taxing on Social Security benefits for high income earners; and an earned income tax credit for incomes under $30,000. The proposal also included significant investments in education, technology, and infrastructure; however, these proposals were largely gutted during Congressional negotiations based on fears that they would add to the deficit. Clinton had promised "middle class tax cuts" during the campaign but had left those out of the budget for fears of adding to the deficit.

The budget passed by a narrow margin, 219-213 in the House and 50-49 in the Senate. Clinton signed the bill into law in August 1993. Many credit this bill with helping set the stage for the large budget surpluses of the late 1990s because the increased marginal tax rates generated billions of dollars in revenue for the federal government. Some, however, attribute the Democratic losses in the midterm elections of 1994 to the tax increases included in this bill.

FURTHER INFORMATION:

Omnibus Budget Reconciliation Act of 1993 (Pub. Law No.: 103-66). http://www.gpo.gov/fdsys/pkg/BILLS-103hr2264eh/pdf/BILLS-103hr2264eh.pdf

"Budget Reconciliation, Fiscal Year 1994." In Congress and the Nation, 1993-1996, vol. 9, 44. Washington, DC: CQ Press, 1997. http://library.cqpress.com/catn/catn93-0000141192.

"Deficit-Reduction Bill, 1993 Legislative Chronology." In Congress and the Nation, 1993-1996, vol. 9, 87. Washington, DC: CQ Press, 1997. http://library.cqpress.com/catn/catn93-12-7943-428692.

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