12.2 The Clinton Years: NAFTA, Welfare Reform, and Impeachment

Hold three Clinton stories on the same timeline: a New Democrat bargain with global markets and a smaller cash-welfare state, a Republican Congress after 1994 that changed what a Democratic president could pass, and a constitutional crisis that tested impeachment without repeating Nixon's resignation. The exam will ask you to connect NAFTA, PRWORA, the late-1990s surplus, Bosnia and Kosovo, Don't Ask, Don't Tell, and the 1998–99 impeachment. Keep the 2003 Iraq War and the 2008 financial crisis out of this section; they are later chapters.

"It's the Economy" and the 1993 Deficit Package

Clinton's war-room line "It's the economy, stupid" was a strategy, not a statute. It told staff to keep the 1990–91 slump, the deficit, and jobs ahead of Desert Storm nostalgia. In office he offered a New Democrat mix: accept much of the post-Reagan market consensus, raise some taxes on upper incomes, and claim credit for fiscal discipline. The Omnibus Budget Reconciliation Act of 1993 passed with no Republican votes; Vice President Al Gore broke a Senate tie. The package raised the top individual rate, expanded the earned-income tax credit, and aimed at multi-year deficit reduction. Critics called it a job-killer; supporters later argued it set up the surplus years. A trap item will date that 1993 bill as the 1990 Bush deal or as the 1996 welfare law. They are three different statutes.

Health-care reform led by Hillary Rodham Clinton failed in 1994, a political wound that fed the midterm backlash. That failure matters as context for why Clinton later signed Republican-leaning welfare legislation rather than a new federal entitlement.

1994, the Contract with America, and a Divided Government

In September 1994 House Republicans led by Newt Gingrich released the Contract with America, a campaign document promising votes on a balanced-budget amendment, tax cuts, welfare overhaul, term limits, and tougher crime measures. In the November 1994 midterms Republicans captured the House for the first time since 1954 and also took the Senate. Gingrich became Speaker in January 1995. The result was not a parliamentary overthrow of the presidency; it was divided government that forced Clinton to triangulate—borrow Republican themes on crime, welfare, and the deficit while vetoing measures he called extreme.

Budget fights produced two government shutdowns in 1995–96. Public blame fell heavily on Gingrich and congressional Republicans, which helped Clinton recover politically before 1996. He won re-election against Bob Dole and a weaker Perot bid. For party realignment, 1994 is the earthquake in Congress; 1996 showed that a Democrat could still hold the White House in a growing economy. Do not treat the Contract as a constitutional amendment that passed in full. Much of it stalled in the Senate or died on Clinton's desk; the political fact is the House majority and the agenda shift.

NAFTA: Signed in 1992, Fought in 1993, Effective 1994

The North American Free Trade Agreement among the United States, Canada, and Mexico was signed by Bush on December 17, 1992, in the presidential lame-duck window. Clinton inherited it, added side accords on labor and the environment to peel off some Democratic votes, and spent scarce capital to pass the NAFTA Implementation Act. He signed that statute on December 8, 1993 (Public Law 103-182). The agreement entered into force on January 1, 1994. House passage in November 1993 depended on a coalition of Republicans and pro-trade Democrats against a labor-and-Ross-Perot opposition that warned of manufacturing flight.

NAFTA phased out most tariffs and limited many non-tariff barriers across the three economies. It did not create a European-style common market with free movement of labor. Exam answers should say regional free trade, not "open borders for workers" and not "a treaty that immediately equalized Mexican and U.S. wages." Perot's giant sucking sound is the opposition sound bite; Clinton's claim was that export markets and investment rules would raise growth on all three sides. Empirical debate over job losses in specific industries is real; the tested political fact is that a Democratic president completed a Republican-negotiated liberalization over his own party's labor base.

Welfare Reform: PRWORA, 1996

On August 22, 1996, Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) after vetoing earlier drafts. The law replaced Aid to Families with Dependent Children (AFDC)—a federal matching entitlement dating to the New Deal—with Temporary Assistance for Needy Families (TANF), a block grant to states. Hallmarks were time limits (a five-year lifetime federal cap in the statute's core design), work requirements, and greater state discretion over eligibility and programs. Clinton announced that the era of "welfare as we know it" was over—language he had used since 1992.

This is a federal-role item. Progressive critics said the law punished poor children and immigrants; conservative supporters said it ended a culture of dependency and returned authority to states. Caseloads fell in the late-1990s boom, which both sides cited. Do not confuse PRWORA with the failed 1970s Nixon Family Assistance Plan or with Social Security privatization, which did not occur. Pair it with 1994: a Democratic president signed a Republican Congress's central social-policy demand.

Surplus Politics and the Late-1990s Expansion

The unified federal budget recorded a surplus in fiscal year 1998—about $69 billion, the first since 1969—then larger surpluses in 1999 (about $126 billion in later OMB rounding) and 2000 (about $236 billion). Causes were plural: the 1990 and 1993 deficit laws, a long expansion, a capital-gains boom as equities soared, and restrained discretionary spending after the Cold War. Clinton's 1998 State of the Union line "Save Social Security first" tried to fence the surplus against large tax cuts. The surplus is not proof that NAFTA alone balanced the books, and it is not the 2008 crash. A chart in this section uses rounded unified-budget totals so you can see the swing from the $290 billion 1992 deficit to the 2000 surplus.

Bosnia, Kosovo, and the Limits of Unipolar Force

Clinton's early foreign policy looked hesitant after the October 1993 Mogadishu firefight in Somalia, which cooled appetite for humanitarian interventions. In Bosnia, ethnic war and the July 1995 Srebrenica massacre of Bosniak men and boys shamed Western inaction. After NATO's Operation Deliberate Force, U.S. diplomat Richard Holbrooke brokered the Dayton Accords, initialed on November 21, 1995, at Wright-Patterson Air Force Base and formally signed in Paris in December. NATO's IFOR (later SFOR) deployed to police the settlement, including U.S. troops. In 1999, NATO conducted an air war (Operation Allied Force, March 24–June 10) against Slobodan Milošević's Serbia over Kosovo, without a U.N. Security Council green light because Russia and China would have blocked one. That contrast with 1991—U.N. blessing versus NATO-only air power—is a clean diplomacy comparison.

Don't Ask, Don't Tell

Clinton had campaigned to end the ban on gay and lesbian service members. Facing the Joint Chiefs and congressional resistance, he accepted Don't Ask, Don't Tell in 1993: the military would not interrogate recruits about sexual orientation, and service members were not to disclose a homosexual identity. The compromise satisfied almost no one—liberals wanted an open ban repeal; many commanders wanted the old exclusion. Statute and Defense Department rules implemented the policy in 1993–94. It is a culture-war and civil-rights item, not a claim that the armed forces became fully open in the 1990s. Full repeal waited until 2010–11, outside this chapter's close.

Lewinsky, Impeachment, and Acquittal

Independent Counsel Kenneth Starr's investigation, which had begun with the Whitewater land deals, expanded after Monica Lewinsky, a White House intern, became the subject of a January 1998 denial by Clinton in a civil deposition connected to Paula Jones's lawsuit. Clinton's public line—that he had not had "sexual relations with that woman"—collapsed as evidence accumulated. The Starr Report (September 1998) alleged perjury and obstruction. On December 19, 1998, the House approved two articles: perjury before a grand jury and obstruction of justice. Two other proposed articles failed. The Senate trial ran in January–February 1999. On February 12, 1999, the Senate acquitted on both counts: 45 guilty / 55 not guilty on perjury and 50–50 on obstruction, far short of the two-thirds (67) required to remove a president. Clinton remained in office and finished his term.

Compare this carefully with 1974. Nixon resigned when Republican senators told him conviction was likely; Clinton's own party held together, the economy was strong, and the charges were framed by Democrats as lying about a private affair rather than a burglary cover-up. The 1998 midterms, unusually, saw the president's party gain House seats, a warning to Republicans that voters were not demanding removal. Impeachment is a political-constitutional process, not a criminal conviction. An option that says the Supreme Court removed Clinton, or that he resigned like Nixon, is wrong.