[blam]

"If the government acts to cut the deficit while people are continuing to pay down their debts, then we could have a second leg of decline that could be very, very ugly. "

I agree.

However, further stimulus could lead to (intolerable) high inflation or even hyperflation.

So...

What to do?

[the invisib1e hand]

aren’t we already in the second leg? I’m looking for the third one.

[BfloGuy]

When the government cut spending and raised taxes, the whole economy came crashing down.

I see exactly the same pattern in the US today. If the government acts to cut the deficit while people are continuing to pay down their debts, then we could have a second leg of decline that could be very, very ugly.

Do you spot the missing piece? The Japanese, he says, cut spending and raised taxes. He compares that to Americans cutting the deficit and paying down debt. The two have no common denominator.

He also ignores, as do they all, the fact that the Japanese Central Bank has kept the supply of Yen stable for years, now. A stable currency has led to falling prices (increased purchasing power) and a GDP which doesn't increase. How could it? There aren't any more dollars.

The Japanese are enjoying a rising standard of living, but the Keynesians can't see it, because the number of yen aren't increasing.

[tbw2]

Leave taxes (federal income) absolutely the same to allow business and personal planning. Then dramatically cut spending to live within the tax revenues (spending). The economy doesn’t crash, because most government spending ends up in the pockets of connected elites or wasted.
As waste is eliminated in a streamlined national budget, money flows to productive uses, eventually improving it. Keep taxes flat, and use the increasing revenue of a growing economy above that baseline tax revenue to pay off national debt.