US Needs Immigration Reform to Stay No. 1 : Condi Rice

Condoleezza Rice
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Condoleezza Rice

The challenge to U.S. global leadership will not come from upstart emerging markets like China, but from a "U.S. gone bad," former Secretary of State Condolezza Rice told the TDAmeritrade Institutional conference on Thursday.

The danger, Rice said, is a "U.S. that doesn't deal with its debt, doesn't deal with its entitlements and doesn't believe that the private sector provides economic growth."

She said getting the balance right between creativity, low taxation and low regulation are key to creating the risk-taking and innovation needed in the information-based economy.

With innovation a key facet of economic growth, Rice said, the U.S. needs immigration reform and better education to ensure the country continues to attract the best and brightest to help lead the economy forward.

"We have a real problem if we don't get comprehensive immigration reform right," Rice said. Otherwise, the country could look like Japan with its aging population.

(Read More: Obama: 'Now Is the Time' to Fix Immigration Laws)

"After immigration reform, access to quality education is important so that Americans can continue to rise from humble beginnings to do great things," Rice said.

Rice also pushed back against any expectations that China and the other BRICs countries will one day lead the world despite their fast-growing economies. China lacks the institutions to deal with its rapid economic growth, and corruption remains endemic, she said.

"The very things that make Brazil and India stable – multi-ethnic democratic institutions – are much more a problem for China," Rice said. And as the country continues with its rapid urbanization, social tensions could continue to rise, she said.

Of Russia, Rice said it doesn't belong among the other BRICs, which also includes Brazil. "Russia is an oil and gas syndicate" rather than an emerging economy, she said.