Jan 27 (Reuters) - Before the $825 billion U.S. stimulus package even clears Congress, economists are already casting doubt on whether it is the right size and shape to prevent the economy from contracting in 2009.
A paper co-authored by Christina Romer, the head of President Barack Obama's Council of Economic Advisers, concluded that a big stimulus package would add 3.7 percent to U.S. gross domestic product by the end of 2010.
However, some private economists have come up with smaller figures in the range of 2 percent to 3 percent.
There is much debate among economists about how much of a return the government can expect in the midst of a deep recession that has badly damaged consumer and business confidence and constrained spending.
Here are key elements of the proposed stimulus, and economists' views on their impact on GDP:
TAXES
The version of the stimulus package under consideration in the House of Representatives includes $275 billion in tax breaks for individuals, businesses and state and local governments, largely spread over two years. (http://waysandmeans.house.gov/media/pdf/110/sbill.pdf)
* If the amount were evenly split between 2009 and 2010, it would work out to around 1.2 percent of real GDP per year. If consumers and businesses respond to the tax cuts by ramping up spending as economic theory suggests, the economic benefit could be more like 1.6 percent of GDP.
* The concern is that the individual tax breaks will instead be used to pad savings, which would do little to lift growth.
* Business tax cuts "should be viewed as interest-free loans from the government" because companies will probably be more interested in shoring up their balance sheets than boosting hiring or spending, IHS Global Insight economist Nigel Gault said.
* Aid to states may provide the biggest benefit because the money will almost certainly be spent quickly.
INFRASTRUCTURE SPENDING
The House version lists $358 billion for spending to rebuild roads, bridges, waterways, energy grids and other construction projects
* Economic research suggests that infrastructure spending packs the biggest bang for the buck, though the benefits take longer to reach the economy. The total amount considered represents about 3 percent of GDP, but that would be divided over at least two years, probably more.
* The total GDP impact could be closer to 5 percent because in theory each dollar spent on infrastructure returns more like $1.59 in economic benefit.
* The key unknown is when the spending would actually take place. Many lawmakers have touted "shovel-ready" projects that could get started right away, but economists have questioned whether it is realistic to expect much benefit this year.
SOURCES - Congressional Budget Office; "The Job Impact of the American Recovery and Reinvestment Plan" by Christina Romer and Jared Bernstein; "Assessing the Macro Economic Impact of Fiscal Stimulus" by Mark Zandi; interviews with economists (Reporting by Emily Kaiser; Editing by Neil Stempleman)