REFILE-Penn. gov. says US infrastructure renewal critical

(Repeats to fix word in first sentence to read "done" insted of "down.")

By Jon Hurdle

PHILADELPHIA, July 14 (Reuters) - The United States should establish a capital budget to pay for about $1.6 trillion in national infrastructure repairs to ensure the work gets done and prevent the risk of becoming a "third-rate" economic power, Pennsylvania Gov. Ed Rendell said on Monday.

In his first speech as 2008/09 chairman of the National Governors Association, Rendell said U.S. spending on facilities such as roads, bridges, and passenger rail is only 0.6 percent of gross domestic product, compared with 9 percent in China and 3.5 percent in the European Union.

Rendell, a Democrat, urged other governors at the NGA's centennial meeting to back his call for a renewal of infrastructure, and warned that the expense of doing so will increase the longer the task is deferred.

Rendell said the establishment of a federal capital budget was the best way of ensuring the work gets done, and argued the repairs should not be paid for out of current expenditure.

"They buy paper clips in the same way that they finance road building," said Rendell, whose has chosen infrastructure as the theme of his chairmanship. "It makes no sense."

According to a 2005 report by the American Society of Civil Engineers, the U.S. has a shortfall of $1.6 trillion in infrastructure funding over a five-year period.

Without those repairs, the U.S. risks becoming a "third-rate" economic power in 50 years' time, Rendell warned.