... he rightly criticizes the government propping up zombie industries but then goes on to suggest that the money could be better spent in other industries ...
Government is the ultimate manifestation of the Tragedy of the Commons. It's in everyone's economic interest to try to extract money from the government to fund their own pet project, to the economic detriment of everyone else.
Provide legal and monetary incentives to form cooperatives and associations instead of corporations
It doesn't even need the provision of legal and monetary incentives, just the removal of legal and monetary disincentives. Plus the removal of the corporation's ability to internalise profit while externalising risk.
A gradual closing down is much preferred
Historically, this has never happened. Any large organization devotes a large part of its resources to perpetuating itself regardless of its utility. Historically, meaningful change comes suddenly, when all the right forces are lined up and the population is ready to accept it.
"lefties" ... see the State as a way to attenuate disparities among the strong and the weak
There are some interesting figures that show a correlation between the increase in US government spending (as a percentage of the economy) and inequality between the top and bottom slices of society. I can't track down the URL at this time, but I have seen them referenced on one of the FreeDomainRadio videos.
Also, those who receive the most aid from state spending have (on average) lower educational outcomes, lower lifetime incomes, poorer health etc. There is some high-quality evidence for this, taken from cities that straddle US state boundaries and therefore have different educational and health "entitlements" on opposite sides of the same street.