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In a best case scenario, the U.S. economy is destined for a Japanese-style malaise, otherwise known as an L-Shaped recovery, Nobel prize winning economist Joseph Stiglitz tells The Daily Ticker in the accompanying clip. In a worst case scenario, the U.S. is headed for many 'double dip' recessions if policy makers push for austerity measures.

Contrary to the Tea Party, Stiglitz has been arguing since the financial crisis that cuts in government spending will only worsen America's fiscal mess because we will generate fewer tax revenues. "Austerity is not only a recipe for more pain now it's really a recipe for more pain later," he says. "You don't provide the basis of economic growth by having negative economic growth."

So here's how to fix what's ailing the economy:

Home Improvement

Instead of bailing out banks, the government should be doing more to bailout homeowners, he says. "An economy in which you have homeless people and empty homes doesn't make any sense and that's where we're heading."

Stiglitz is pushing for debt restructuring for millions of underwater homeowners. He's calling for a Chapter 11 of sorts for homeowners. Just as a corporation remains in control of its business operations as a debtor in possession in Chapter 11, in this scenario, homeowners restructure their debt but stay in their home AND keep paying the mortgage. Banks have been reluctant to accept any principle write-down but if the economy deteriorates and home prices drop they might be out of options.

Debt Relief

When it comes closing the gap on the country's $1+ trillion deficit on $14+ trillion in debt, Stiglitz says the country can turn things around in 4 relatively easy steps:

1. Repeal the Bush-Obama tax cuts for the richest Americans.

2. End the wars in Afghanistan and Iraq, "that have not improved our security" and are costing trillions of dollars. In 2010 Stiglitz published the book: The Three Trillion Dollar War: The True Cost of the Iraq Conflict.

3. Get Americans back to work. Stimulus and works programs are politically untenable right now but Stiglitz says spending on these programs will ultimately reduce the debt because if we put people to work and "our tax revenues will increase enormously"

4. Reform Medicare Part D - Under the current law, big pharma sets their own prices. Stiglitz says if that provision is eliminated and the government can negotiate drug prices it would save taxpayers $1 trillion over the next 10 years.