Could not agree more, on all counts.

I spoke with a Libertarian presidential candidate recently who had a plan to cap government spending at a certain % of GDP. And I was immediately turned off because he didn't seem to take into account the fact that government spending is a portion of the GDP calculation...

Agree that it shouldn't be counted. It's not as if it's real capital earned by the government; it's just funds confiscated by a coercive tax regime.

Also agree completely that the best course of action is to flush the excess credit and unproductive zombie firms out of the system with haste and then let the economy naturally recover. I have no doubt in my mind that it would be extremely painful in the short run but the economy would bend, not break. That's way better than the economy slowly succumbing to asphyxiation by warped incentives and absolutely unproductive uses of capital supported by theft via inflation.

Bad businesses and ideas need to be allowed to fail, full stop.