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Will Congress Forge Budget Deal, Avoid ‘Fiscal Cliff’?

Tuesday, 22 May 2012 | 10:25 PM ET
Tim Graham | The Image Bank | Getty Images

As the Congressional Budget Office warned of a recession in the event of a federal fiscal stalemate, two senators appearing on CNBC’s “The Kudlow Report” did little to bridge differences.

“I would want to put Bowles-Simpson in place immediately,” Sen. Mark Udall, D-Colo., said Tuesday, adding that it would cut spending, simplify the tax code and fix Medicare and Social Security. “If I couldn’t be re-elected because Bowles-Simpson made some people mad, I could live with that.”

A series of tax hikes and automatic spending cuts would take effect in January unless the White House and lawmakers forge a compromise.

The CBO forecasted that the U.S. economy would contract at an annual rate of 1.3 percent for the first half of 2013 if lawmakers take no action to prevent the looming tax hikes and spending cuts, according to Reuters.

Is a Grand Bargain Possible?
The Congressional Budget Office expects that a recession could happen in the U.S. in 2013 unless Congress acts on fiscal issues. Sen. Mark Udall, (D-CO), and Sen. Ron Johnson, (R-WI), weigh in.

“Given the pattern of past recessions ... such a contraction in output in the first half of 2013 would probably be judged to be a recession,” the CBO said.

Udall said he would like to avoid a budget showdown like the one that occurred in August.

“It was discouraging to me a bit because we had nine part spending cuts to one part revenue increase,” he said. “My good friends on the Republican side wouldn’t take the deal. ... Let’s get to work and get Bowles-Simpson put in place.”

Sen. Ron Johnson, R-Wis., took a stance that did not appear open to any increase in taxes.

“People talk about tax increases, but that hasn’t been shown to generate revenue, but tax reform could generate revenues,” Johnson said. “Let’s increase it the old-fashioned way, by growing our economy.”

Johnson added that Congress needed to send a message that “America is open for business again,” which would spur investment of “all the cash that’s on the sidelines right now that’s afraid to be invested” and “give those guys the confidence to start investing in business and creating jobs.”

But most of all, he said Democrats needed to stake out a position.

“Since I’ve been here, a Senate Democrat has yet to even vote for one budget proposal. None,” he said. “They need to do that first so the American people can see what their plan is for preventing the fiscal cliff.”

Tune in:

"The Kudlow Report" airs weeknights at 7 p.m. ET.

Questions? Comments, send your emails to: lkudlow@kudlow.com

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  • Lawrence Kudlow is a CNBC senior contributor. Previously, Kudlow was anchor of CNBC's prime-time program "The Kudlow Report"