In America, a new day brings new hopes for a fix on the economy and this week has been no different. In New York, the U.S government has decided to spend more than $7 trillion in an attempt to help resuscitate the economy. This overall total means that for every American $23,000 will be spent and more than half on U.S annual gross domestic products.

This amount is a massive sum, and the last time the government went on a rescue spree was in the late 1980’s - 1990s when they tried to revive the savings and loan crisis. But the $160 billion ($237 billion in today’s American currency) that was spent does not come close to todays standard.

However, the American public have been reminded that this total is not as bad as it seems. A major portion of the $7 trillion will be invested, the government has not spent close to the total slot yet and the taxpayer may even benefit from it.

Dean Baker, co-director of the Centre for Economic and Policy Research tried to reassure US residents: “It's a lot of money, but it's not like it's out the door, never to be seen again. A lot will be lost, but we're not going to lose anywhere close to $7 trillion.”

The government has already invested about £3 trillion of the total amount and it has already received much of that investment back. For example around $1.2 trillion has been received of the $1.6 trillion that was lent to banks in its ongoing Term Auction Facility.

The government collects interest on its loans and when it again takes an equity stake in a certain company, those holdings could grow with value over time whilst in possession of the government.

John Silva, Chief Economist at Wachovia stated that investing was the right choice: “At the end of the day, it's an expensive plan, but the government had to step in. It's a difficult thing to estimate, but the government could sell the assets at a decent price once the markets better.”

Critics have commented that the government is spending too much and as a result putting taxpayers at even more risk, a risk that cannot be lost. Others have said that for all the government has spent, the results do not match the actions.

However, supporters responded by saying that a financial bailout was the only option, and the best one at that, because it acts like a safeguard preventing the economic system from declining into total collapse and despair.

Barker is one of those supporters and stated that inaction would have been the worst action: “We're doing this to prevent a financial collapse. Not acting would be much worse, because the financial system would grind to a halt. More banks will likely fail, and I wouldn't be surprised if the FDIC has to go to Congress to get recapitalised. There's lots more bad debt that has yet to show up."

Helping the property market

Many officials like FDIC have called upon TARP money to be used for home insurance companies. FDIC has asked for the financial lifeline to be spent on guaranteeing mortgages backed by private lenders to encourage them to reform loans for struggling homeowners.

The government has listened and has invested billions into rescuing consumers and their homes.  One angle on how the money will be spent looks at ‘Rehab foreclosed homes’ where$4 billion will be given to states and municipalities in assistance to buy up and rehabilitate foreclosed properties.

Another angle is for the ‘Housing Rescue’ where $300 billion will be spent to help home insurance, fixed rate mortgages for at-risk borrowers and $16 billion will be spend on tax credit for first time buyers, but lenders have been slow to agree.

The American government is quickly running out of cards to play, so hopefully the new sum will pull something out of the hat and their new hand will revive customer spending and help the government to boost the economy.