Caterpillar Inc. (CAT) Chairman and Chief Executive James Owens said Tuesday that Congress should expand the upcoming federal transportation funding bill to supplement the infrastructure spending in the federal economic stimulus legislation approved earlier this year.

Owens, a member of the Obama Administration's Economic Recovery Advisory Board, said unemployment in the construction sector continues to run at about 18%. He said he's relayed his ideas to administration officials, including Lawrence Summers, director of the President's National Economic Council.

"They understand we need some sustained fiscal stimulus," Owens said in remarks to reporters following a presentation to Wall Street analysts at the company's headquarters in Peoria, Ill. "The country needs it. We're not out of the woods completely."

Congress is scheduled to begin deliberations this fall on a new multi-year transportation funding bill. Owens said roads, bridges, rail routes and other infrastructure in the U.S. are suffering from decades of under-investment and deferred maintenance.

Owens noted that infrastructure spending has lagged economic growth by $3 trillion in the past 40 years, a reversal from earlier periods, when infrastructure spending grew at a rate that was either equal to or greater than annual U.S. gross domestic product growth. He said increased spending on infrastructure is inevitable if the U.S. wants to remain competitive with other developed countries.

"If we don't step up the investment here, we'll clearly be at third-world standards in a decade or two," Owens said.

Caterpillar is the world's largest manufacturer of mining and construction equipment by revenue. Despite rapid expansion in overseas markets in recent years, North America remains its largest single market, accounting for 40% of the company's machinery sales in 2008.

Owens anticipates the U.S. market staging the strongest rebound in machinery sales of the developed countries coming out of the global economic slump.

"The U.S. market for us is going to have a lot of recovery growth for us under any recovery," he said.

The building and commodities boom powered Caterpillar for five years - helping it more than double its annual revenue from 2002 to 2007. Overseas sales offset a slumping U.S. housing construction market early in 2008, but by late in the year, a pullback in commodities prices and sluggish global economic growth hurt results.

Under the global economic recovery scenario outlined by Caterpillar Tuesday, the company's sales could approach $60 billion by 2012, with earnings per share of $8 to $10. The company affirmed it outlook for 2009 of profit in a range of 40 cents a share to $1.50 a share, on sales and revenue of $32 billion to $36 billion.

Owens expects low interest rates, contained inflation, and massive doses of government-sponsored economic stimulus spending throughout the world to be catalysts for higher machinery sales beginning in 2010.

"The global economy can't grow without the mining equipment, the construction equipment and power-generating equipment that our company is positioned to provide," he said.

Owens forecast that U.S. GDP will increase by 2% in 2010, following a 3.2% decline this year. He sees global GDP growth of 2.2% next year, with the greatest growth occurring in China and the slowest growth in Europe and Japan.

Nevertheless, Owens added that significant risks remain that could undermine a recovery in the U.S. and elsewhere, including higher interest rates, restricted access to bank loans and restrictive trade policies. He estimated that risk for the current recession continuing into next year is about 25%.

Last month, Caterpillar reported that its second-quarter profit fell 66% amid slumping machinery and engine sales, as job-cut charges further reduced earnings. Caterpillar has reported lower profits in three of the past four quarters and swung to a loss in the other quarter on restructuring charges.

Caterpillar's stock closed up 6.1%, at $47.89.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com