WASHINGTON - Over the next several months, Congress faces a complex and difficult duty. We must agree to legislation that will reduce the deficit by at least $1.2 trillion over the next decade. Under the budget agreement we passed in July, if we fail to hit that goal, huge automatic budget cuts in vital national programs will take effect, cuts I believe are unacceptable. I and every other member of Congress must do our best to avoid that outcome, beginning with the 12 members of the Joint Select Committee on Deficit Reduction who have been assigned the job of crafting a plan.
Despite the difficulty, this task is achievable. We can reduce the deficit, avoid devastating cuts to important programs, and avoid greater harm to middle class families that have seen their incomes stagnate or even fall over the last decade. In hopes of moving that process forward, I have sent the Joint Select Committee a letter outlining a seven-point plan for deficit reduction that will require sacrifice not just from middle-class families, but from all Americans.
Central to my proposals is a belief that we cannot achieve real deficit reduction with spending cuts alone. We must restore revenue as well. A little historical perspective might be helpful. Federal revenues today are the lowest share of gross domestic product in generations: just 14.9 percent. And past efforts to reduce high deficits have made new revenue a significant part of the equation. President Reagan, for example, presided over three deficit reduction plans that achieved more than three-quarters of their deficit reduction through revenue increases.
Apart from history, the simple mathematical reality is that we must generate additional revenues. Don't just take my word for it. Listen to the nonpartisan Concord Coalition, a budget reform group, which recently said: "For a 'grand bargain' on deficit reduction, finding a way to bring in some revenue is a crucial piece of the puzzle."
So revenue needs to be part of the Joint Select Committee's agenda. My letter identifies seven possible steps to eliminate wasteful tax loopholes and special breaks so as to share the burden of deficit reduction more broadly.
The first two proposals would close two kinds of unjustified loopholes that benefit corporations and wealthy individuals at the expense of working families: offshore tax shelter abuses that cost American taxpayers billions of dollars a year, and a loophole that forces American taxpayers to subsidize the stock options that corporations grant to their executives.
The third and fourth proposals would close two Wall Street tax loopholes: the "carried interest" loophole that leaves American taxpayers subsidizing the paychecks of hedge fund managers, and a tax loophole for financial derivatives that promotes speculation over long-term investments that boost economic growth.
The fifth and six proposals would promote tax fairness and ensure shared sacrifice in reducing the deficit by restoring upper-bracket income tax rates to pre-Bush levels and capital gains tax rates to rates closer to those in place under President Reagan.
The seventh would eliminate the use of paper tax liens and create an electronic database of those liens.
Combined, these commonsense changes could reduce our deficits by $1 trillion over the next 10 years - a sum that would make the committee's difficult goal, one the Congress and the entire government share, much more achievable.
To those who would automatically reject revenue increases for deficit reduction, I would say that the spending cuts that will be necessary for significant deficit reduction will be difficult as well. They will have a real impact on important programs, and probably I won't like many of them. But just as I will have to compromise on some spending cuts, others will have to compromise and accept the reality that revenue must be part of the equation.
The ideas I have proposed outline a path toward such a compromise. It is a fair path. If Congress is willing to embrace compromise, we can reduce our deficit while helping to protect middle-class families from further economic harm. If some are not willing to compromise, the automatic cuts that would take effect as a consequence of our failure to agree will make our country less safe and the livelihoods of our families less secure. I hope my proposals will help us work together to avoid that unacceptable outcome.
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Carl Levin is the senior U.S. senator from Michigan.