WASHINGTON — Republicans determined to spare the military from devastating across-the-board spending cuts – presidential candidate Mitt Romney among them – must be willing to consider closing tax loopholes and raising rates to increase revenue, the chairman of the Senate Armed Services Committee said Tuesday.
Democratic Sen. Carl Levin insisted that all elements of the federal government – taxes, entitlement programs such as Medicare and Social Security and even additional defense reductions – need to be part of the calculation as Congress scrambles to come up with a way to avoid the automatic, $1.2 trillion cuts in domestic and military programs over a decade. Those cuts are scheduled to start kicking in Jan. 2.
Levin said Republican and Democratic presidents, including Ronald Reagan, George H.W. Bush and Bill Clinton, adopted both spending cuts and tax increases to address budget deficits. He said the current Republican leadership needs to do the same.
"There can be no real deficit reduction and you cannot protect defense and other critically important priorities of this country from sequestration without additional revenue," the Michigan lawmaker said, referring to the process of automatic cuts that will take effect if Congress does not act.
Levin spoke at a national security briefing with retired Gen. James Cartwright, former vice chairman of the Joint Chiefs of Staff, and David H. Langstaff, president and CEO of TASC Inc. The company provides engineering systems and other services to the Defense and Homeland Security Departments.
Levin ticked off various tax loopholes that could be closed, such as offshore tax havens and the carried interest rate that allows profits made by hedge fund managers to be taxed at a lower rate than ordinary income. He also favors returning the top tax rate to 39.6 percent for the wealthiest Americans, a number that was reduced to 35 percent when Congress adopted tax cuts under former President George W. Bush.
Defense Secretary Leon Panetta has warned about the meat ax approach of the automatic cuts, arguing it would hollow out the force. The cuts would come on top of a $492 billion reduction over 10 years that President Barack Obama and congressional Republicans agreed to last summer.
Levin's appeal to Republicans to stop "drawing an absolute line in the sand on additional revenue" adds to the pressure as more than two dozen Senate Republicans and Democrats privately talk about an ambitious plan to avoid the automatic cuts. Uncertainty about the outstanding financial issues – the automatic cuts, expiration of the Bush tax cuts and increasing the nation's borrowing authority – is unnerving to both industry and the markets.
"We're all looking for the best way to deal with a large number of issues we have facing us at the end of the year," said Sen. Lamar Alexander, R-Tenn., who said he had spoken Tuesday morning to a Democratic senator and staff about possible steps. Alexander said he would listen to Levin's suggestions.
"Tax reform is at the top of the list of most Republican senators and most of us feel like that means broadening the base, closing the loopholes and could include more revenues. But for me, only if we have a firm plan to reduce mandatory spending. For me, runaway mandatory spending is the big bugaboo and that's what we need to deal with."
Levin said he is confident that Congress will find a way out, but it must act quickly. "It could come too late to avoid a severe weakening of the economy," he said.
Levin estimated that the automatic cuts would hit 3,000 military programs. He indicated that he would be willing to accept additional defense cuts of $10 billion a year as part of any solution to avoid the across-the-board reductions.
Asked specifically about Romney's call to increase defense spending if elected, Levin quipped: "I can't even contemplate a Romney White House."
He added that if the Republican wants to add money to defense, he must identify what programs he would cut and address the issue of raising taxes.
Shortly after Levin made his appeal, Republican Sens. Kelly Ayotte of New Hampshire, John Thune of South Dakota and John McCain of Arizona spoke on the Senate floor and painted a dire picture of what the Pentagon would face if the automatic cuts occur. They spoke of dealing with entitlement programs but made no mention of tax increase to address the problem.
Associated Press writer Laurie Kellman contributed to this report.