Government drastically cuts spending. Because government is no longer borrowing over a trillion dollars a year from the private sector, those funds are now freed up for investment and consumption. Thus, economic activity shifts away from government toward the private sector.
If we are to assume an open economy, which we have, the reduction in government deficits will also decrease our trade deficit, by decreasing our capital surplus which drives the current account deficits. So one other area where economic activity will shift is away from government and toward export-oriented industries.