With the end of the Cold War, the United States concentrated its attention on the economy. The Clinton administration made economic revitalization the major focus of its first year. President Clinton's proposal to reduce the federal budget deficit through spending cuts and income tax increases was enacted by Congress in August, 1993. Congress also approved the North American Free Trade Agreement, which was designed to strengthen the American economy by forging a trade partnership with Mexico and Canada, in November, 1993. Two other significant trade agreements were signed in 1994—the General Agreement on Tariffs and Trade, dealing with world trade; and a preliminary agreement on free trade in the Western Hemisphere.

The economy had improved in 1993 and 1994, but voters indicated their displeasure with the general quality of life in the United States and with "politics as usual" in the November, 1994, elections. The Democratic party, which had held power in Congress during most of the period since World War II, lost control of both the House of Representatives and the Senate. Clinton became the first Democratic President to face a Republican Congress in nearly 50 years.

In 1995 the Republicans in Congress, led by Speaker of the House Newt Gingrich and Senate Majority Leader Robert Dole, attempted to bring about a major shift in the direction of the federal government. In keeping with their "Contract with America," the Republicans introduced legislation that would reduce the size of the federal government, eliminate many federal programs or turn them over to state governments, and bring about a balanced federal budget by 2002. Many of their proposals were opposed by the Clinton administration. In 1996, however, President Clinton signed some of the legislation into law, including the bill to balance the budget and a welfare reform bill. This bill increased the states' power to design welfare programs and limited the length of time for which persons could receive welfare benefits.

The United States continued its major role in world affairs. In 1995, the United States helped negotiate a peace treaty in the Bosnian civil war and deployed troops to Bosnia as part of a NATO peace-keeping force.

During the mid-1990's, a number of incidents occurred that heightened Americans' concern about terrorism. In 1993, the World Trade Center, in New York City, was bombed by Muslim fundamentalists, killing six persons and injuring about 1,000. In 1995, a federal government building in Oklahoma City was destroyed by a bomb, killing 168 persons and injuring more than 400. Two Americans, Timothy McVeigh and Terry Nichols, were convicted in the bombing.

The economy continued to improve in the mid-1990's, largely because of the growth of technology-based industries. President Clinton was reelected in 1996, but Republicans retained a majority in both houses of Congress. In December 1998, after four years of investigation of alleged misdeeds by Clinton by an independent counsel appointed by the Justice Department, the House of Representatives impeached Clinton on two counts, accusing him of lying before a grand jury and of obstructing justice in a civil suit. After a trial that lasted about a month, the Senate acquitted Clinton on both counts.

Social security and the cost of prescription drugs were key issues in the 2000 elections. The closely contested outcome of the presidential election took five weeks to determine, and it marked the first time that the nation's Supreme Court intervened in a Presidential election. Republican candidate George W. Bush lost the popular vote, but won the electoral college vote, defeating Democratic nominee Vice President Albert Gore, Jr.