Politicians must also deal with sequestration which threatens to shave half-a-percentage point off growth and cut 750,000 jobs.
"I think that there is a growing number of members on a bipartisan basis who want to do something sensible and not have sequestration," Lew said.
He added that "The right thing for the American people would be for us to have a sensible agreement where we do entitlement reform and we raise some more revenue in the context of tax reform."
While talks are at early stages, the Treasury secretary expects the problem can be worked through over the coming weeks and months.
China Trip
Lew's first overseas trip will be to China given the importance of the relationship in terms of the impact on growth of the world economy. "It's a good idea to get those conversations going right from the start and to have the kind of relationship where you can raise the issues you need to with each other," he said.
Lew noted that the U.S. has raised concerns over the years about access to markets, that currencies should be determined through the markets and intellectual property.
He added, "The issues that the U.S. and China have are serious."