During Emperor Wu's reign and Huo Guang's regency, the dominant political faction was the Modernist Party. This party favored greater government intervention in the private economy with government monopolies over salt and iron, higher taxes exacted on private business, and price controls which were used to fund an aggressive foreign policy of territorial expansion; they also followed the Qin Dynasty approach to discipline by meting out more punishments for faults and less rewards for service. After Huo Guang's regency, the Reformist Party gained more leverage over state affairs and policy decisions. This party favored the abolishment of government monopolies, limited government intervention in the private economy, a moderate foreign policy, limited colonization efforts, frugal budget reform, and a return to the Zhou Dynasty ideal of granting more rewards for service to display the dynasty's magnanimity. This party's influence can be seen in the abolition of the central government's salt and iron monopolies in 44 BCE, yet these were reinstated in 41 BCE, only to be abolished again during the 1st century CE and transferred to local administrations and private entrepreneurship. By 66 BCE the Reformists had many of the lavish spectacles, games, and entertainments installed by Emperor Wu to impress foreign dignitaries cancelled on the grounds that they were excessive and ostentatious.

Spurred by alleged signs from Heaven warning the ruler of his incompetence, a total of eighteen general amnesties were granted during the combined reigns of Emperor Yuan and Emperor Cheng of Han. Emperor Yuan reduced the severity of punishment for several crimes, while Cheng reduced the length of judicial procedures in 34 BCE since they were disrupting the lives of commoners. While the Modernists had accepted sums of cash from criminals to have their sentences commuted or even dropped, the Reformists reversed this policy since it favored the wealthy over the poor and was not an effective deterrent against crime.

Emperor Cheng made major reforms to state-sponsored religion. The Qin Dynasty had worshipped four main legendary deities, with another added by Emperor Gaozu in 205 BCE; these were the Five Powers, or Wudi. In 31 BCE Emperor Cheng, in an effort to gain Heaven's favor and bless him with a male heir, halted all ceremonies dedicated to the Five Powers and replaced them with ceremonies for the supreme god Shangdi, who the kings of Zhou had worshipped.