Sons did a nice job with his answer, but there are other elements of Wilson’s domestic policy that had catastrophic effects on the American political system.
Wilson believed that the president was the “political leader of the nation,” and as such thought the president was more “prime minister” than president. Thus, he should be able to initiate legislation and ram through a domestic agenda, what he labeled the New Freedom. Wikipedia has a nice point by point discussion of the New Freedom. He favored vigorous anti-trust activity and supported the Clayton Antitrust Act, alone with the aforementioned FED. He also began the process of providing government subsidized loans to farmers. It is also important to note that the income tax amendment was ratified during the Taft administration, but Wilson gave it teeth by insisting on a graduated income tax. The 16th does not stipulate what kind of income tax the government will use, only that it is legal for it to use one. The Republicans of the 1860s gave the U.S. its first income tax, legislation that was later declared unconstitutional by the Supreme Court.
Wilson also favored a sedition law during World War I which resulted in over 100,000 people being arrested and deported during the War. The nationalization of the American economy during the war was the blueprint for FDR in WWII, and his interventionist foreign policy was evident not only with WWI but also in Latin America where U.S. troops had boots on the ground in several conflicts during his administration, most famously in Mexico after the communist revolution there resulted in American oil interests being expelled from the country.
If you want to know more about Wilson, read Edward M. House’s “Philip Dru: Administrator.” Glenn Beck was hot on that book a few years ago, but I have been teaching that since I started lecturing in the late 90s. House was one of Wilson’s most trusted advisers. He even lived in the White House for a time. This is the blueprint for the Wilson administration.
Of course, Wilson supported the splinter National Democratic Party in 1896 (the Gold Democrats), the last great conservative Democratic Party in the U.S. This was a blip on his political career, however, as his administration in no way reflected his support for that movement. I wrote a brief article on this here: http://www.lewrockwell.com/orig10/mcclanahan1.html I also have a chapter on E.L. Godkin, a NDP supporter in my forthcoming Forgotten Conservatives in American History with Clyde Wilson: http://www.amazon.com/Forgotten-Conservatives-American-History-McClanahan/dp/145561579X/ref=ntt_at_ep_dpt_3
I am also including Wilson in my “fraudulent five” section of my forthcoming “Politically Incorrect Guide to Real American Heroes” due out in November. http://www.amazon.com/Politically-Incorrect-Guide-American-Heroes/dp/1596983205/ref=ntt_at_ep_dpt_4
Hope that helps.