'This Week' Transcript: Judy Smith, Jack Lew

LEW: This is about building...

STEPHANOPOULOS: -- I understand...

LEW: -- a better future.

STEPHANOPOULOS: -- that those are the president's ideas and that you believe strongly in them. But I don't see the kind of basis for building on that that you are talking about. It sure seems like the sides are dug in right now.

LEW: You know, George, I have talked to a lot of people in Congress, both sides of the aisle, Democrats and Republicans. I talk to leaders. I talk to, you know, members and senators.

There's a majority in Congress that wants to replace the across the board cuts with more sensible policies.

Our challenge is breaking through the logjam in Congress to get that done.

STEPHANOPOULOS: That's my question.

LEW: I actually think we're...

STEPHANOPOULOS: How are you going to do it?

LEW: Well, I think, what the president has done is provided a clear frame where the stakes are clearly in front of both Congress and the American people. I think that, you know, if -- if this is about what we want to accomplish, let's have a debate about what it takes to build an American middle class that's growing and thriving.


LEW: It's not just social policy, it's actually good economic policy.

STEPHANOPOULOS: But is your...


STEPHANOPOULOS: -- still the same.

LEW: -- actually, it produces a better economy.

STEPHANOPOULOS: But is the bottom line, excuse me, still the same, the President is not going to negotiate over the debt limit? And if that's the case, aren't we headed for the showdown you fear?

LEW: You know, George, I think that, uh, a lot of people watched, uh, 2011 and learned from it, that it was a big mistake. I think that the leaders learned from that that that's not a good way to do business. Congress has to act on this. They're going to have to figure out a path to do it.

STEPHANOPOULOS: And if that includes spending reductions, the president will sign it?

LEW: You know, George, I think the president has made crystal clear, he's not going to negotiate over the debt limit. And I've got to like underscore how important that it.

The mere fact of negotiating over the debt limit, after 2011, would introduce this notion that somehow there's a question about whether or not we're going to pay our bills, whether or not we're going to protect the full faith and credit of the United States.

Well, it's not OK to default. Congress can't let us default. Congress has to do its work.

STEPHANOPOULOS: So will you ask Senator Reid to pass the clean debt limit first?

LEW: Congress is going to have to pass a debt limit that can reach bipartisan consensus in the Congress and that the president can sign into law.

STEPHANOPOULOS: Perhaps the most consequential economic decision the president is going to make the next few weeks of months is the decision to replace Fed Chair Ben Bernanke. Um, and some lobbying has begun, it seems, uh, for two of the main candidates, Fed, uh, Governor Janet Yellen, Larry Summers, the president's former national economic adviser.

Speaker Pelosi and about a third of the Senate Democrats have weighed in on behalf of the idea of a woman candidate and Janet Yellen. Your predecessor, Tim Geithner, is backing Larry Summers. Which side are you on? I know you're part of the discussions. And what is the president looking for in a Fed chair?

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