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

For millions of Americans, life should go on much as usual, but for millions of others cuts in federal spending from the 'sequester' are likely to bring tangible effects. Which camp are you in?

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.

If what’s not being cut feels like “good news,” the flip side of that is that nonexempt programs will in many cases feel a sharp squeeze. That brings us to the next list....

WHAT IS AFFECTED BY CUTS

Federal workers. First on the list is not a "what" but a "who." The federal government is a major employer, across the nation, not just in the area around Washington, D.C. Across the federal workforce, many agencies will need to furlough employees for as much as a day per week. This could equate to a 20 percent pay cut, for example, for most Defense Department workers. Benefits such as health insurance will largely continue.

Defense contractors. The cuts mean reduced hours or layoffs at many private-sector defense contracting firms. Ship-repair slowdowns could have a big effect in places like Newport News, Va.

Coast Guard. Coast Guard rescue aircraft will fly fewer hours, and cutters will patrol the seas for fewer hours.

Airports. Fewer flight controllers on duty could mean fewer planes can fly. Transportation Secretary Ray LaHood predicts flights to cities like New York, Chicago, and San Francisco could have delays of up to 90 minutes during peak hours.

Schools. Some 70,000 students enrolled in prekindergarten Head Start would be cut from the program and 14,000 teachers would lose their jobs, according to Obama administration estimates. For students with special needs, the cuts would eliminate some 7,200 teachers and aides.

College. The Education Department has warned that the cuts could affect as many as 29 million student loan borrowers. 

Food safety. Federal food inspections will be fewer, but Food and Drug Administration Commissioner Margaret Hamburg says most of the effects won't be felt for a while, and the agency won't have to furlough workers.

Medicare. Hospitals, doctors, and other Medicare providers will see a 2 percent cut in government reimbursements under the cuts.

Programs for poor or vulnerable citizens. The White House estimates that 100,000 formerly homeless people would lose access to shelter, 373,000 people diagnosed with mental health problems would face service cuts, and 4 million fewer "meals on wheels" would be served during the current fiscal year (which ends Sept. 30). Child-care subsidies for low-income workers would reach some 30,000 fewer children.

National parks. Visiting hours at America’s 398 national parks are likely to be reduced. Park service director Jon Jarvis has said visitors can expect to encounter locked restrooms, fewer rangers, and trash cans that are emptied less frequently.

Longer-term effects. The sequester cuts, if left in place, would restrain funding across affected agencies for 10 years. Some effects on ordinary Americans would appear slowly and perhaps in less-visible ways, some economists say. Cuts to investments in scientific research, for example, could dampen economic growth. Similarly, the Pentagon says the cuts come at a cost to military readiness, and the State Department has warned that the reductions would affect many efforts it takes to “advance peace, security, and stability around the world.”

Many economists say the ideal approach is not the arbitrary style of cuts imposed by the sequester, but a long-term plan to tame deficits through entitlement reforms, plus a mix of other spending and tax adjustments.

Material from the Associated Press was used in this report.