Moderate Democratic Sen. Evan Bayh (D., Ind.) endorsed a compromise solution of extending all the Bush-era tax cuts for two years and then allowing them to expire, becoming the second Senate lawmaker to back the plan this week.

Bayh said given the weak economic recovery, it doesn't make sense to let any of the expiring Bush tax credits lapse. But he said the country is facing a longer term fiscal crisis, and therefore it wouldn't be affordable to renew the lower tax rates permanently.

"We need to err on the side of growth for the next couple of years," Bayh said. "At that point, we have to pivot" and start to tackle the deficit, he said.

Bayh was speaking to reporters at a press conference at the Newseum in Washington, D.C. He was speaking alongside Peter Peterson, who through the Peter G. Peterson Foundation, was launching a national television campaign drawing attention to the need to tackle the country's fiscal imbalances.

Bayh's comments come a day after Sen. Orrin Hatch (R., Utah) said he would be open to a two year extension of all the rates. Hatch is expected to be the top Republican on the tax-writing finance panel next year.

When asked what he thought would actually occur when lawmakers reconvene next week, Bayh said he believed an ultimate compromise could see rates for people earning less than $200,000 a year extended permanently, and those for wealthier Americans only continued for a shorter period of time.

Hatch, and other lawmakers, have rejected that solution out of hand.

Senate Budget Committee Chairman Kent Conrad (D., N.D.) said that he would like Congress to tackle a comprehensive overhaul of the U.S. tax code. Until that is done, Conrad said the Bush era tax rates should be extended.

The tax cuts enacted by former President George W. Bush's administration in 2001 and 2003 are set to expire at the end of the year unless they are continued by Congress.

Debate continues to swirl over whether they all should be extended, or if just those for the so-called middle class earners should be.

Most Democrats had insisted that the rates for rich Americans be allowed to revert to their pre-2001 levels, while Republicans have countered that raising anyone's taxes now could imperil the economic recovery.

In the wake of the electoral drubbing the Democrats received in the mid-term elections last week, President Barack Obama and some senior congressional leaders have said they would be open to a compromise on the issue.

Bayh is retiring from the Senate at the end of the year. He had previously said he wanted to extend all the tax cuts permanently.

-By Corey Boles, Dow Jones Newswires; 202-862-6601; corey.boles@dowjones.com