President Barack Obama was to meet later Thursday with top House Republicans at the White House to seek a path beyond a confrontation that has left the government shuttered for close to two weeks.
House Speaker John Boehner will ask Republicans to approve a short-term extension of the U.S. government's ability to borrow to meet its bills and avoid a default, Republican aides said Thursday.
"The president remains willing to negotiate over the future direction of fiscal policy, but he will not negotiate over whether the United States should pay its bills," Lew told the committee.
Lew's testimony came after a day of activity but no real signs of progress.
Obama on Wednesday had House Democrats over to the White House. And Republican conservatives heard a pitch from the House Budget Committee chairman, Rep. Paul Ryan, R-Wis., on his plan to extend the U.S. borrowing cap for four to six weeks while jump-starting talks on a broader budget deal.
The deal Ryan proposed could replace cuts to defense and domestic agency budgets with cuts to benefit programs like Medicare and reforms to the loophole-cluttered tax code. Curbs to "Obamacare" were not mentioned.
At the hearing, Sen. Orrin Hatch, R-Utah, accused the Obama Administration of intentionally scaring the public and financial markets over the borrowing limit, "in an apparent effort to whip up uncertainty in the markets."
Hatch said the administration was refusing to "even have a conversation" over reducing the soaring cost of the government's big benefit programs such as Social Security and Medicare.
"If the Obama administration won't negotiate on entitlements in the context of the debt limit, when will they negotiate on entitlements," Hatch asked.
Lew said that the government's payment systems were not designed to allow him to pick and choose which bills to pay out of the 80 million payments the government makes each month.
"Prioritization is just default by another name," Lew said.
Lew said default would cause serious damage as outlined in a report Treasury issued last week.
That report, Lew said, "points to the potentially catastrophic impacts of default, including credit market disruptions, a significant loss in the value of the dollar, markedly elevated U.S. interest rates, negative spillover effects to the global economy and real risk of a financial crisis and recession that could echo the events of 2008 or worse."
In 2008, a serious financial crisis pushed the country into the deepest recession since the 1930s.
Republicans on the committee insisted that Obama would have to agree to negotiations as a way to end the current stalemate.
"If you are saying, you give me everything I want and then we can have a conversation on things that are important to you, I find that shocking," Republican Sen. Pat Toomey of Pennsylvania told Lew.