The remarkable reduction in cold war tensions, combined with the promise of continued prosperity with no increase in taxes, carried Republicans George Bush and Dan Quayle to victory over Democratic candidates Michael Dukakis and Lloyd Bentsen in 1988. Lacking his predecessor's strong personal following and facing a Democratic-controlled Congress, Bush sought to govern in a more moderate, middle-of-the-road way than Reagan. The rapid demise of communism in Eastern Europe in 1989-90 and upheaval in the USSR in 1991 provided him with an opportunity to lessen international tensions and to reclaim the primacy of the United States in world affairs. Bush intervened militarily in Panama in 1989 to overthrow its president, Manuel Noriega. In mid-1990, responding to Iraq's invasion and annexation of Kuwait, he ordered more than 400,000 American troops to the Persian Gulf region to defend Saudi Arabia. When Iraqi troops refused to withdraw from Kuwait in January 1991, demanded by Bush in an ultimatum, he authorized a massive bombing, and then ground assault, on Iraq and its forces in Kuwait, and won a swift victory.

Decisive in acting abroad, Bush failed to evolve a domestic program that addressed a persistent recession starting in 1990. That year, despite the recession, he and congressional leaders agreed to a deficit-reduction package that raised federal taxes, thereby breaking his "no new taxes" 1988 campaign pledge. He also failed on his promise to be both "the environment president" and "the education president" and angered many women by naming Clarence Thomas to the Supreme Court and continuing to support him despite allegations of sexual harassment. Concerned about the economy and demanding change, many conservatives backed columnist Pat Buchanan's challenge to Bush's renomination while moderates rallied to the independent H. Ross Perot. Also focusing on the nation's economic woes and promising change, Bill Clinton, governor of Arkansas, beat several rivals in the Democratic primaries and chose as his running mate Tennessee senator Al Gore. Capitalizing on a slumping economy, the Clinton-Gore ticket won 43% of the highest voter turnout (55%) since 1976 and 370 electoral votes.