While Peter and Brian take a walk around the neighborhood, Cleveland shows off his new trampoline, which he bought with his tax refund. Jealous of his friends, Peter plans to build a backyard swimming pool with a tax refund, but is dismayed to discover that he is instead being audited by theInternal Revenue Service. Peter still attempts to build his pool, but once he comes across an underground power cable, he splits it with his shovel, knocking out electricity across Quahog. As a result, he attempts to acquire a zoning variance from City Hall. However, as he and his brother in-law Mayor West examine the map of Quahog to see if they can give him his pool, they discover that the Griffin's property is actually not incorporated into Quahog, and thus nor the entire United States.
In response to this discovery, Peter declares his house to be the new independent micronation of "Petoria" which he claims is an oligarchy. He builds a fence around his house and draws a flag; his self-portrait with "Petoria" written underneath it. Peter spends the night on a "goodwill mission" in Quahog (drinking at the Drunken Clam). Peter flaunts his diplomatic immunity by refusing to pay his bar tab and engaging in public drunkenness before breaking into a parody of MC Hammer's song "U Can't Touch This" (entitled "Can't Touch Me"), during which he proceeds to engage in several more crimes, such as stepping on illegal grasses, littering, jaywalking, public urination and sexual harassment. The new country gets in the newspaper and President Bill Clinton takes notice of it.
While representing Petoria at the United Nations meeting headquarters, Peter and his country are humiliated by the Secretary General and other representatives because of his country's smaller size. During lunch, he is approached by another ambassador, who informs him that his country faced similar ridicule by the same leaders until it invaded Kuwait. His advice is "If ya want something...just take it." Following his advice, Peter decides to perform an action for Petoria to prove himself to the larger leaders: he "invades" Joe's swimming pool next door by dividing the pool from Joe's USA incorporated house and stealing it into Petorian property. When Joe gets upset by the robbery he calls the police and Peter names the stolen property as "Joe-hio (based on the US state of Ohio)."
In response to this illegal action, American President Bill Clinton agrees to impose sanctions upon Petoria. Days later, the United States Army surrounds Petoria and Joehio; wanting to incorporate it into the USA nation and Mayor West searches records and discovers that the technicality on the map with his brother-in-law's house was a mistake and that the entire time the house was incorporated by the USA; Peter refuses to obey USA laws for Petoria still leading to conflict with his family. As a result, the Griffins are forced to endure life without utilities such as heat and electricity, while Lois homeschools Meg and Chris causing her to miss the USA policies and life. They try to solve problems by using miner lighted hats to see in the dark, saving food, and using the pool to bathe themselves. Despite the difficulties Peter flatly refuses to return Joehio, and proceeds to invite the leaders of several countries hostile to the United States (including Slobodan Milošević, Saddam Hussein, Muammar Gaddafi, Osama Bin Laden, Kim Jong-il, Fidel Castro and Ali Khamenei) over for a pool party and barbecue using his stolen pool from Joe.
In reply to this and the fact that Stewie wants to make friends with Fidel Castro; Lois angrily informs Peter that she and their children are abandoning him to immigrate back to the United States and calls Petoria "A filthy mess you call a country." Peter tries to arrest her for high treason but is forced back inside by soldiers and after the family pledges their loyalty to the USA Peter has Brian arm both of them with the USA enemy leaders. Peter is finally forced to call a parley when the USA army warns him of "Operation Bomb The Crap Out Of Your House", and faces an American tank barrel at point blank range.
At the negotiating table with Mayor West, Peter agrees to return Joehio to Joe but demands denied requests such as getting access to the pool on weekends, keeping his independent nation, or being given a copy of a valuable pen that authorities like mayors use for contracts. Saddened by how he gets nothing from the unconditional surrender, Peter reluctantly reincorporates Petoria back to the USA, defuncts his nation, dissolves Joehio back to Joe, and feels better when Lois offers to comfort him every night.
It is then revealed that the events of the episode were part of a film being shown to social studies students 200 years into the future, explaining the brief history of Petoria. The teacher asks her students if they have any questions concerning the video, to which a pupil asks if the Griffin family can actually understand Stewie or not, before the episode abruptly ends.
Rating From IGN: