The past year has been an unusually challenging and stressful one for our nation and for Michigan. As we look forward to 2012, I’d like to share with you my thoughts about a tough year just completed and about the year to come.

Twin challenges in 2011 — the need to grow the economy and to reduce the deficit — dominated 2011 and will demand our attention again this year.

The past year included some heartening signs that steps we took in the aftermath of the financial crisis are bearing fruit. The unemployment rate, both in Michigan and nationally, has fallen in the last year. Michigan and the nation benefitted from some small business job-creation programs that I helped author: the State Small Business Credit Initiative, modeled after a Michigan program that helps small businesses get the capital they need to grow; and the Intermediary Lending Pilot Program, which helps nonprofits boost small businesses in their local communities. These programs will continue to help create Michigan jobs in 2012.

Unfortunately, too often our jobs-related efforts in 2011 were sidetracked by brushes with disaster. For instance, in late July, Congress dawdled and then barely avoided financial catastrophe by raising the federal government’s debt limit.

As part of the agreement to avert that disaster, we passed a series of deep spending cuts, and we established a “supercommittee” tasked with finding agreement on at least $1.2 billion in additional deficit reduction over the next 10 years. When they could not reach an agreement, the law triggered automatic, across-the-board spending cuts that will take effect in 2013.

Those automatic cuts are unacceptable. Avoiding those drastic cuts and making real progress on deficit reduction will be our most important task in 2012.

The only path to true deficit reduction is a balanced path – one that includes both spending cuts and revenue increases, and one that ensures that all Americans, not just middle-class families, share in the sacrifice.

In September, I outlined a seven-point plan to restore revenues along with spending cuts to reduce the deficit. I will continue making the case in the coming year for a balanced approach to deficit reduction because it offers the only real hope for avoiding draconian automatic cuts that would make our nation less safe and our families less secure.

Despite these challenges, I remain optimistic about our future, because we saw lots of encouraging signs in 2011.

First, the U.S. auto industry, and manufacturing more generally, continued a remarkable rebound. Domestic carmakers continued to create jobs. These successes validate the investments taxpayers have made in preserving domestic manufacturing.

We also made progress in protecting consumers during 2011. In April, the Permanent Subcommittee on Investigations, which I chair, released the results of more than two years of investigation into the causes of the financial crisis. This bipartisan report highlighted the unrestrained greed, heedless risk-taking and conflicts of interest that nearly sank us into a second Great Depression.

The hearings we held in 2010 as part of our investigation helped set the stage for passage of Wall Street reform legislation, and in 2011, our task was to encourage regulatory agencies to forcefully implement the new law. I’ll continue pressing regulators in 2012 to put a cop back on the beat on Wall Street.

I also serve as chairman of the Senate Armed Services Committee, and in 2011, we succeeded in guiding a defense authorization act through Congress for the 50th consecutive year. This bill ensures that our troops and their families will have the support they need to keep us safe, and it includes other important policies, including tough new sanctions against Iran that already are having an impact, and can help us prevent Iran from acquiring nuclear weapons.

But perhaps the most important national security development of 2011 was the end of the war in Iraq and the withdrawal of our troops. Our strategy in Afghanistan – a strategy to prepare Afghan institutions to take responsibility for their own security – is moving forward, and 2012 will be a crucial year in preparing Afghan security forces to assume responsibility for the security of the entire country by the end of 2014.

We are coming through the worst financial crisis in generations, two difficult wars, and we survived a series of often discouraging and polarizing political battles. I look forward to 2012 optimistic about our future and determined to work for solutions that work for Michigan and our nation.

Carl Levin is the senior U.S. senator from Michigan.