When President Clinton took office in 1993, he immediately attempted to roll out an ambitious domestic policy agenda. The Democrats controlled Congress, promising to help him accomplish his goals. However, the 1994 midterms gave the Republicans a majority in both chambers of Congress, allowing them to stymie most of Clinton's plans. The Republicans in the House, under the leadership of Newt Gingrich, were particularly hostile to the Clinton administration's agenda.

One of Clinton's major projects from the start of his first term was a massive reformation of the country's health care system. It was hoped that the new health care plan could have been finalized and signed into before the midterms. However, competing plans and litigation stalled the process. After the Republicans won control of Congress, the issue became a non-starter and was not taken up by the legislature.

Clinton inherited a federal government that had run up a massive deficit. He hoped to fix this through new tax revenue and spending cuts. When he introduced this plan in February 1993, Congressional Republicans united in opposition to the tax increases. In order to get the budget to pass, Senate Democrats were forced to eliminate a new energy tax. The Republicans also worked in significant cuts to Medicare, which Clinton had to reluctantly accept.

By his second term, the federal deficit had been significantly reduced. Republicans reacted to this good news by proposing numerous tax cuts. Clinton was afraid that this would undo recent gains. In 1997, they compromised by cutting some taxes, such as those on capital gains. They agreed on a child tax credit of $500, but Republicans blocked an increase in the federal minimum wage.

Both Clinton and the Republicans wanted to reform the country's welfare system, particularly to the Aid to Families with Dependent Children (AFDC). Clinton wanted to replace it with job training programs. At first, some Republicans agreed with this idea. However, rifts developed when Republicans opposed federal funding of these proposed programs. They also wanted to remove access to welfare funds and programs to immigrants. Republicans twice attempted to pass legislation to eliminate the AFDC, which Clinton vetoed. Eventually, Clinton was forced to accept the Republican plan, the Temporary Assistance for Needy Families (TANF), which included work requirements for welfare recipients and lifetime caps.