Clinton's biggest crisis in his first term came from a strong challenge to national leadership offered by the Republican House Minority Whip¹ Newt Gingrich (only a few years older than Clinton, but a "Silent" in disposition rather than a Boomer). Gingrich had rebuilt the Republican Party around a new political vision, outlined in the book he co authorized, Contract with America.  It advocated welfare reform, a diminishing of the size of the Washington government, a balancing of the Federal budget, and the infusion of national politics with new blood (from young and rising Republican candidates to Congress).

In the 1994 congressional elections the Republicans greatly outpaced the Democrats, resulting in a new, huge Republican majority in both houses of Congress, and ending the long 40-year run of Democratic dominance in the House of Representatives.  The new House of Representatives immediately began to legislate many of the Contract's policies (the Senate sometimes failing to follow the House's lead however), some of which President Clinton vetoed, but many of which Clinton decided himself to embrace.  Most notable were the balanced budget, a reduction in the federal income tax rate, and welfare reform (getting able bodied individuals off the welfare rolls).  The welfare reform legislation Clinton vetoed twice before finally agreeing to a compromise, much to the chagrin of the Democrats who felt that he had abandoned Democratic Party standards in agreeing to the legislation.

For a while it appeared almost that Gingrich, not Clinton, was running the nation's politics (Time magazine named Gingrich the "Person of the Year" in 1995).  What effectively broke the Gingrich ascendancy was the huge battle going on between Gingrich Republicans in Congress seeking to reduce the size of the federal government and President Clinton (backed up by most of the nation's press) who continually vetoed their legislation.  Not possessing enough votes to override the veto, and with neither the White House nor the Republican Congress willing to back down in the standoff, the Gingrich House simply did not pass a government budget in September of 1995 and also would not raise the statutory limit on the federal deficit, forcing the government to go to a "continuing resolution," which ended on November 13.  November 14th came and neither President nor the House was willing to back down, which effectively shut down sections of the federal government.

The way the American press told the story, the shutting down was entirely Gingrich's fault, a result of his intransigence (actually Clinton was just as intransigent and just as much to blame for the shutdown).  Then an offhanded comment by Gingrich connecting this bold action to a presidential snub he experienced on a 25-hour airplane ride gave the press the opportunity to depict Gingrich in a meme as a mean-spirited bawling baby.  The press tore into Gingrich (the press would bring out the meme again in 2012 when Gingrich was running for the U.S. presidency).

¹The "Whip":  second-in-command party leader in the House of Representatives or Senate.

Clinton's early failure to make good on either the promise of health care reform or the promise to allow open homosexuality in the military was reminiscent of his first failed term as Arkansas governor.  To stage a political comeback in Arkansas after being voted out of office, he had moved to the political center in his policies to get himself re-elected as governor.  So thus too in the White House he had moved to the political center after the 1994 political rebuke.

Even before the 1994 vote, he had begun the journey to the center. In his first year in office he supported the ratification of the new North American Free Trade Agreement (NAFTA) with Canada and Mexico, which opened up American economic borders considerably to both neighboring countries.  Actually, the Agreement had been the work of his predecessor, Bush, who signed the Agreement just before leaving office in December of 1992.  But Clinton must be given credit for coming up against strong opposition from his own Democratic Party in his pushing for Congress's ratification of the NAFTA treaty.  The Democrats were very sensitive to the intense opposition of the American labor unions, always major supporters of the Democratic Party, which claimed (along with Ross Perot) that this would undercut both American labor and the American economy. As time would soon reveal, things economically turned out to be quite the opposite!

Clinton moved to deregulate the banking industry (pleasing Republicans) at the same time supporting the expansion of low-income mortgages through Fannie Mae (FNMA or Federal National Mortgage Association) and Freddie Mac (FHLMC or Federal Home Loan Mortgage Corporation) government-subsidized lending (pleasing Democrats).

Another area that moved Clinton to the political center was welfare reform.  This was a big piece of Gingrich's Contract with America program, and after the Republican sweep of Congress in 1994 Gingrich's Republicans put forward one, then another, measure to cut back on the lifetime recipients of government welfare, both efforts vetoed by Clinton.  What was being proposed by Gingrich was the idea of "workfare" rather than welfare, that is, finding paths and encouraging welfare-dependent mothers (who vastly dominated the welfare category) to train and take jobs that would provide better funding than just the flow of cash support coming from federally-backed local welfare agencies.  And it would free them from this welfare trap of perpetual dependency on government support.

Gingrich, frustrated with Clinton's vetoes, finally sat down with Clinton to negotiate a bill that both could live with (and both could take credit for),² which led finally to the passing of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.  This gave states (which had been compelled by Federal Court decisions to follow "non-discriminatory" criteria in their welfare programming) more flexibility in their use of federal welfare funding, such as Wisconsin's workfare program exemplified, by setting job training and employment requirements in accompaniment to receiving public welfare.  Under the new law, federal subsidies would require that at least 50 percent of that funding went to the workfare principle rather than the former straight-welfare programming, and in any case have a limit (five year maximum) on the amount of time a person could continue to receive welfare funding.

Whereas the vast majority of Americans lauded this measure, there were critics who complained that this would simply clear the welfare rolls, and leave former welfare recipients destitute.  Actually, some welfare recipients seemed beyond help and found themselves pinched by the new program.  But others took the opportunity to use welfare funding to gain job training and employment, which broke them free from the welfare trap. Statistics justified both sides of the argument as to whether this act helped or hurt the poor.³

²A national election was coming up and Clinton knew that a third veto would greatly work against him and his Democratic Party.  What is interesting is how, after passage of the law in August (1996), Clinton then went on to take as much personal credit as possible for this new "breakthrough" in welfare programming!

³Ultimately in 2012, Obama offered the states a waiver, granting them the option of no longer having to follow the 50 percent workfare requirements of the 1996 law, allowing them to be able to return to straight welfare support, that is, without having to impose any job-training or employment requirements.

The period from the end of the brief recession at the beginning of the 1990s (which helped bounce Bush, Sr. out of office) to the end of the 1990s was one of robust economic growth, the longest run of growth (116 months) in U.S. history. Whereas the normal growth rate of the national economy had typically been a little under 3 percent (actually 2.8 percent), the nineties registered a full 4 percent growth rate, or an improvement of over 40 percent above the normal rate of growth.  And Americans could sense the difference.

Of course Clinton claimed responsibility, as did the Republicans – and rightly so on both counts.  Certainly tax reform and balancing the budget helped. When the government spends within its income it means that it does not have to go up against the private sector to compete for financing, which leaves the private sector more income to invest in industrial growth.  But likewise, allowing the private sector easier access to developmental capital means greater profits, which in turn means more taxable income for the government, and thus a greater likelihood of being able to balance the budget, which leaves income for private investment, etc., etc., etc.  Growth produces its own tendencies toward more growth (but sadly the reverse is also true).  Also NAFTA must be given some of the credit for this growth. So, who finally gets the credit?  Government or industry?  Clinton or the Republicans?  The answer is obviously "both" in each case.

But also much of this growth had to do with the fact that in the 1990s, America once again took the lead in opening up a whole new industrial sector, one that would change drastically the way we live on this planet.  The communications industry simply exploded with the development of the personal computer (actually part of the 1980s boom, but continuing strongly into the 1990s) as well as communications satellites and the Internet, developed by the American government and a consortium of American universities – not Vice President Al Gore (as he himself claimed!), though he certainly helped in its development.  Soon computer hardware and software companies (the "dot.coms") abounded in Silicon Valley in central California to meet the explosive demand for all sorts of imaginative uses of the personal computer.  Then too there was the dramatic development of the cell phone and the world of wireless telecommunications.

And the stock market took off on a huge speculative climb as people bought into the American dot.com companies, fearful that they might miss out on the huge profits to be made from investing in this new industrial sector.  Something of the same optimistic mood as the late 1920s seemed to be growing in America, along with the same dangers.

By the end of the first year of the next decade (2000), Clinton's last year in office, the dot.com party would suddenly come to an end abruptly.  But the steep drop in the dot.com stocks (and the slower but steady decline in the stock market over the next couple of years) would be laid at the feet of Clinton's successor, Bush Jr., not Clinton himself.⁴

⁴Presidents normally get blamed for downturns of the economy – as well as praised for the economy's upturn, though they seldom have much to do with either.  But such is human nature, with people always looking for easy symbols to make sense of their world.  And America's presidents are the most obvious national symbols on which to affix cause and effect!