When the economy is in a recession or operating below its potential, well-designed deficit spending can act as a stimulant. This was the basic lesson taught by John Maynard Keynes. Deficit spending on productive public investments can increase incomes while cultivating long-term growth.

Obsessing over the deficit while the economy is in or near a recession would be disastrous (as Argentina, Brazil, Indonesia, South Korea, and Thailand have learned). It would be dangerous for the next administration to blindly follow the Wall Street-pleasing Clinton recipe in hopes of replicating the ’90s boom. That decade was an anomaly.

When Clinton took office, banks were sitting on large quantities of long-term government bonds, partly the result of a misguided quirk in regulations and some subtle flaws in accounting standards. Regulators treated these long-term bonds as if they were safe, although their value was vulnerable to rising interest rates. And because these bonds were treated as safe, banks didn’t need as much capital—a particular concern because reckless lending in earlier years had eroded their capital base. Moreover, they could book the difference between the long- and short-term interest rate as profit, without setting aside reserves for a potential decrease in the value of the bonds—even though the discrepancy between those rates arose because markets were worried about precisely such a decline in value.

Tackling the deficit seemed to lead to reductions in long-term interest rates partly because it brought down inflationary expectations. And large reductions in long-term interest rates fed increases in bond prices, which helped to recapitalize America’s banking system after another of its episodes of bad lending practices.

The situation is totally different now. Long-term rates are already low, and banks are piled high with subprime mortgages and complex instruments.

Deficit reduction may have had less to do with the 1993 recovery than is widely believed. In fact, that belief may be a case of post hoc, ergo propter hoc—the fallacy of assuming that when one thing occurs after another, the first event caused the second one. America was lucky. Excess global capacity in Asia led to falling prices for many imported consumer goods, reducing inflationary pressures. And this, far more than deficit reduction, led to lower interest rates. Today, the weak dollar and inflationary pressures in Asia mean that long-term interest rates are unlikely to fall, with or without deficit reduction.