U.S. Economy Faces Challenges But Optimism Remains

The United States faces a number of steep economic challenges to its continued economic growth, but a group of business and policy experts said they believe the Obama administration, working with Congress, can solve daunting short-term issues that threaten to derail economic recovery.

"We all agree that something needs to be done," said Michael Porter, professor at Harvard Business School. "We just can't decide on how to do it. This fiscal cliff issue is really important. We have to make progress right now toward a sustainable budget."

Porter, speaking at the Washington Ideas Forum on Wednesday, said the United States must also work to make U.S. economy more competitive internationally. Right now, a complex regulatory environment and an intricate tax code discourage investment on American shores, he said.

Lack of competitiveness is "sapping the ability of the economy to grow," Porter said. "Unless we can get the economy running in the long-run, we're going to deal with these problems over and over again."

Bob Kimmitt, deputy secretary of the Treasury under President George W. Bush, said that sustaining the American economic recovery was key to making sure the United States retained its global power.

"The strong economy is as critical to stability as a strong military," Kimmitt said.

Douglas Holtz-Eakin, former director of the Congressional Budget Office, said many of the problems facing the United States were due to lack of personal savings by consumers.

"People just don't save enough," he said. "That needs to be fixed. This is a driver of our financial problems."

Holtz-Eakin also said that large amounts of discretionary spending on programs like Medicare and Medicaid weighed down growth in other areas of the economy. He said President Barack Obama needed to find a way to work with Congress to solve these and other issues, while Congress has to agree to negotiate with the president in good faith.

"Politicians are standing at either end of the bridge staring at one another," he said. "We need to start on things where there's a lot of agreement. We are not going to make these big decisions and have no idea where the common ground is."

Steve Case, co-founder of America Online, added that America must retain an entrepreneurial spirit in order to remain competitive globally.

"We need to make sure we remain the world's most entrepreneurial nation. We need to build on that," Case said. "Other countries in the last 10 years have learned that the secret sauce that fueled the American economy was entrepreneurship."

Despite these challenges, Kimmitt said he felt the U.S. recovery would continue.

"We have to get our house right at home," he said. "I'm very optimistic about America's future."