President Barack Obama told leading American CEOs on Wednesday that more investments in infrastructure were key to laying the "foundation for growth."
"It makes no sense that we have a first-class economy with second-class infrastructure," Obama told the Business Roundtable, an association of CEOs that represent businesses worth $7.4 trillion in annual revenues.
But Republicans would challenge where the funding for infrastructure would come from, Obama said, especially if it meant new taxes. As such, it will be unlikely for the GOP-dominated Congress to vote on an infrastructure bill, Obama acknowledged.
Obama has collaborated with BlackRock's Larry Fink to figure out how to attract private investment in infrastructure, which is often practiced in foreign countries but unusual for the U.S. He added that currently, the U.S. legal and tax structure is not optimally designed to allow the private sector to invest in infrastructure. "If we have tax reform that gives avenue for (a) big push for infrastructure, that would be great," Obama said.
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Earlier Wednesday, Roundtable chairman Randall Stephenson, CEO of AT&T, highlighted the gridlock over tax reform and the ambiguity over net neutrality rules as the two concerns that are holding his company back from increasing investment spending.
Obama told the CEOs that in order to see progress in tax reform, Congress should start "with the corporate side" because there are fewer variables and it is a more discreet problem. Once this is accomplished, Congress can tackle broader reform. He stressed that he is "not willing to structure a tax deal that blows up the deficit."
"When it comes to corporate taxation, there are so may loopholes that it's not consistent what companies pay," he added.
"In the short term, there are going to be some winners and losers—including in this room. The question then becomes, are folks willing and ready to go ahead and make that move for the sake of a simpler, more streamlined, more sensible tax system."
Obama said that in the global perspective, the U.S. "continues to lead," pointing to the striking degree of optimism that G-20 leaders have expressed about the U.S.—far more than what many Americans think of their own economy.
"What world leaders see is consistent with global surveys. ... When you ask people where is the number one place to invest, it's the United States of America," he said. "A lot of you (CEOs) can take great credit for the kind of bounce back we have seen in the past six years."
The quarterly CEO Economic Outlook survey, a composite index of CEO expectations, declined slightly for the fourth quarter. It showed that a majority of CEOs expect their companies to grow and to boost hiring in the next six months.
Obama also reached out to the CEOs for help in ensuring more "broad-based prosperity." Although productivity has increased, wages have continued to be at a standstill, which has been "creating negative undertones" despite a generally improving economy.
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