What the 'sequester' means for you ... and what won't change

Politicians in Washington haven’t come up with a better plan – at least not yet. So, starting Friday the law of the land calls for automatic spending cuts to be imposed on most federal government programs.

How will this $85 billion in budget cuts – known as the “sequester” – affect you?

The answer is, it depends.

For millions of Americans, at least in the short run, life should go on pretty much as usual. The sequester won't affect their paychecks, their commutes to work, their parents’ Social Security benefits, or the refundable tax credit for their children. That’s because some very important federal programs are exempt from the cuts.

But many Americans – again measured in the millions – are likely to be affected in tangible ways large and small. Some will take a pay cut because they are federal employees who are furloughed for a time. Other families or business travelers face a longer wait in airport security lines. And the list of subsets of Americans whose lives will be touched somehow by the sequester goes from there.

Why the cuts? Why now? Congress and President Obama agreed on the sequester way back in 2011 as a crude way of reducing chronic federal deficits, if the two sides couldn’t agree on a more elegant way. They haven't agreed yet. After some postponement, the deadline has finally arrived.

Here’s a rough guide to what sequestration will and won’t change, drawing on information from the Congressional Research Service and the White House.

WHAT'S EXEMPT FROM CUTS

Social Security. The program will keep paying old-age, survivors, and disability benefits. But it might be harder to get customer service help. The White House has warned that sequester would mean “a reduction in service hours to the public, and a substantial growth in the backlog of Social Security disability claims.”

Medicaid. Health insurance for low-income Americans will continue.

Medicare. Most Medicare funding for seniors will continue. Untouched are Medicare Part D low-income premium and cost-sharing subsidies; Medicare Part D catastrophic subsidy payments; and Qualified Individual (QI) premiums.

Veterans. All programs administered by the Veterans Administration, and special benefits for certain World War II veterans, are exempt from cuts.

Food stamps. The program formally called the Supplemental Nutrition Assistance Program (SNAP) is unchanged.

SSI. The Supplemental Security Income, which pays benefits to disabled adults and children who have limited income, continue as is.

Foster care. Foster care and Permanency Programs.

Treasury bonds. Net interest on the national debt is to be paid as usual.

Tax credits. Payments to individuals in the form of refundable tax credits will proceed as usual, such as the earned-income tax credit (EITC) for low-income households.

Low-income support programs. Many low-income support programs are exempt, including Child Nutrition Programs (school lunch and breakfast, Child and Adult Care Food, and some others), Children’s Health Insurance Program (CHIP), Temporary Assistance for Needy Families (TANF).

Pell grants. The means-tested Pell grants that many college students rely on are shielded from the sequester. (But other student-aid programs in the discretionary budget, such as federal work study, are not.) 

Your obligations as a taxpayer. You’ll still be expected to file your tax return to the Internal Revenue Service as usual by April 15.

1 | 2

Next