UtilityMinimization

OASDI is better knows as Social Security.Social security is the state-run old age insurance plan in the United States. Officially know as Old Age, Survivors, and Disability Insurance (OASDI), it is the largest domestic spending program. Unfortunately, Social Security is one of the most misunderstood government spending programs. Many of these misconceptions lead to ill-advised schemes to fix a program in ways that it is not broken to the degree that is often claimed, if it is broken at all. This article offers a brief description of how the program works in order to help a policy analyst determine what proposals might work, and those that cannot.

First of all, Social Security is an old-age insurance program that covers almost all workers in the US. What exactly is the insurance aspect of Social Security? It is simply insurance against living longer than you planned to live. If a person expects to live to age 80 (and saves accordingly) but ends up living to age 85, Social Security provides an income benefit that helps cover this difference. Just like any other insurance policy, you pay a relatively smaller premium over a long period of in order to receive a relatively larger benefit over a short period of time.

Read the rest of this entry »