Lew: No wiggle room on debt limit

On Wednesday, the House Ways and Means Committee approved a bill that would give the Treasury the power to prioritize certain payments. The bill passed along a party-line vote, and will likely receive a floor vote in May.

The legislation would allow the Treasury Department to continue issuing debt above its borrowing limit only in order to pay bondholders, as well as Social Security benefits.

Republicans contend the legislation would take many of the dire threats aired by the White House during the last debt limit standoff off the table, as the GOP prepares to demand concessions from President Obama in exchange for hiking the limit.

Yoder accused Lew and the administration of employing "hyperbole" in the past during debt limit fights. As the limit neared again at the beginning of the year, Obama warned that Social Security and veterans' benefits would be delayed and the global economy would be thrust into turmoil. Republicans contend the administration could make those payments a priority and not meet obligations elsewhere.

Yoder said those kinds of statements from the president were actually spurring market skittishness over the debt limit.

"The rhetoric that the administration has previously used on this issue has created self-fulling results," he said. "That isn't nuanced … the debate that we have is we're going to default on our Treasury bonds and it's going to result in a global economic meltdown."

But Lew maintained that the debt limit is not something to be trifled with, and the U.S. government missing obligations on even relatively minor items could have wide-spread consequences.

"You enter a world that we've never been in once the United States is not meetings its obligations," he said. "We cannot assume that we know that markets will function in an orderly way if that happens. You cannot prepare for a scenario where you can predict we'll have the ability to continue to go to market and roll over debt if we stop paying our bills."

The nation's $16.7 trillion borrowing limit is currently suspended thanks to a deal struck earlier this year between the two parties. The three-month suspension of the debt limit will expire May 19, at which point the borrowing cap will be automatically raised to cover new borrowing done during that time frame. At that point, the Treasury will begin to deploy "extraordinary measures" to buy time and avoid default while Congress looks for another deal to boost the limit. Such measures are likely to give Congress until sometime in August to raise it without a default occurring.

Lew, sworn in as Treasury Secretary in February, picked up right where his predecessor left off on the debt limit. During the big debt limit fight in the summer of 2011, Timothy Geithner was adamant that Congress had no choice but to extend the debt limit.

Correction: This post originally misidentified the lawmaker asking Lew about debt prioritization.