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You can refresh these files without deleting your game files.
Please follow this process to refresh your Steam files:
steam.exe
steamapps directory (All of Steam's game files are kept here.)
OPTIONAL : Userdata directory (Contains screenshots + steamguard + autologin)
It's not refreshing, it's clearing up log files and old data. Or is compression something different these day's? Surely it ain't the same, but the purpose (Gaining more free space) is totaly relevant.
It shouldn't harm data you would want to keep provided you follow the steps exactly. Although, the amount of space you'd gain from that would be minimal.
My suggestion would be to just get an external hard drive to install your games on or to go through your list of installed games and uninstall games you haven't played in a while.