Social Security Overhaul: An Obama Legacy?

Among the fires that President Barack Obamamust beat back immediately in his second term, Social Security reform isn't in the mix. But if the president studies past administrations — and aims to enhance his legacy, as presidents do — Social Security may well rise to the top.

The question for a president is, "how willing you are to be a leader and make a name for yourself," said Christian Weller, senior fellow at the Center for American Progress and an associate professor of public policy at the University of Massachusetts Boston. "I wouldn't be surprised if Obama gives it [Social Security revamping] a try."

Added Virginia Reno, vice president of income security policy at the National Academy of Social Insurance: "When Obama has some breathing room, he may want to help ensure that Social Security is soundly financed for the long-term future."

Reno is co-author of a study that evaluates proposals to revamp the program.

As Social Security stands today, it is fully funded through 2033. Conceivably any reform could be left to Obama's successor or even the next president after that.

Reno and others, however, recommend getting legislation in the works sooner rather than later, even if such reforms wouldn't take effect until years after passage. However, not all presidents have exercised such forethought. (Poll: Best way to reform Social Security?)

"President [Ronald] Reagan did not address Social Security until its trust fund was exhausted," said Weller. To avert the impending crisis in 1983, Reagan appointed the Greenspan Commission, headed by Alan Greenspan, who later became chairman of the Federal Reserve.

Its work led to taxation of Social Security benefits, coverage of federal workers under Social Security and an increase in the retirement age beginning in the 21st century. (Read more: Don't wait to claim Social Security.)

"In 1983 they started building up a trust fund, and they are still building up the trust fund" said Weller.

"Social Security is basically a pay-and-go situation," said Eugene Steuerle of the nonpartisan Urban Institute think tank. Unlike Medicare, Social Security must pay for itself, and technically, it is not part of the overall federal budget.

"In its 77-year history, Social Security has collected $15.5 trillion and paid out $12.8 trillion, leaving a balance of $2.7 trillion," said Reno.

Social Security receives revenue from three sources: 1) a mandatory deduction from payroll of 6.2 percent from each worker and his or her employer (more from the self-employed); 2) income tax collected from beneficiaries whose income exceeds a certain level; and 3) earned interest from funds invested in U.S. Treasurys.

From 1935 when Social Security first became law under President Franklin Roosevelt and throughout the administrations that followed, America's popular social-insurance program has gone through many changes.

All were based on what legislators determined to be beneficiaries' needs and trust fund deficiencies as well as political winds and the desire among politicians and constituents alike to provide at least some guaranteed income for retirees, its original mandate.

President Harry Truman was the first to collaborate with Congress in building on FDR's legacy. In 1950, legislation, among other things, extended coverage so some 10 million more people, liberalized eligibility conditions and increased benefits substantially, according to the Social Security Administration's historical archive.

On a key structural level, it repealed a 1944 measure authorizing appropriations to the trust fund from the general Treasury.

"In the 1950s and 1960s, Democrats and Republicans were competing on how much they can do for the elderly," said Steuerle. Those years represented the administrations of Dwight Eisenhower, John F. Kennedy and Lyndon Johnson.

As part of Johnson's War on Poverty in the 1960s, Social Security was expanded to give the disabled benefits. Before that, only the blind were eligible for Social Security benefits along with retirees.

Even President Richard Nixon contributed to the steady buildout.

As luck would have it, President Jimmy Carter was faced with the tough decision of whether to support legislation correcting a flawed 1972 cost-of-living index formula that was overpaying some retirees and costing the system a lot of money. Carter did and the legislation became law in 1977.

Though the Clinton administration was marked by minor changes to benefits, it also included legislation making the Social Security Administration an independent agency.

President Bill Clinton was set to propose reforms in 1998, but got sidetracked when the Monica Lewinsky scandal and the Asian financial crisisdiverted his attention.

A wildly unpopular idea came from President George W. Bush during his second term: privatization.

"Even his commission's people said the numbers didn't add up," said Weller. "It was a political miscalculation on the part of President Bush. He lost his political capital and couldn't get anything done the rest of his term."

Should Obama tackle a Social Security overhaul, political realities, of course, could stymie his plans, but the economics of retirementis certainly on the mind of many. Where the president stands on all the issues is also unclear.

Whether reform is possible depends on the state of the economy and, Washington being Washington, "on the constellation of Congress and whether Congress is willing to compromise," said Weller.