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U.S. economy shrank at steep 2.9% rate in 1st quarter

By The Associated Press

This article was published June 25, 2014 at 8:02 a.m.

WASHINGTON — The U.S. economy shrank at a steep annual rate of 2.9 percent in the January-March quarter as a harsh winter contributed to the biggest contraction since the depths of the recession five years ago. But the setback is expected to be temporary, with growth rebounding solidly since spring.

The Commerce Department said the first-quarter contraction was even more severe than the 1 percent annual decline it estimated a month ago. Two-thirds of the downward revision reflected a decline in health care spending. Another major factor was a bigger trade deficit than initially estimated.

Despite the plunge in economic activity last quarter, many analysts think the economy is expanding at a strong rate approaching 4 percent growth in the current second quarter.

Read tomorrow's Arkansas Democrat-Gazette for full details.


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Displaying 1 - 7 of 7 total comments

strick9 says... June 25, 2014 at 10:49 a.m.

Obama was on vacation or playing golf and didn't find out about this until he read it in the paper yesterday. He's very upset about this and he vows to get to the bottom of the problem. He's going to put together a panel of experts to come up with a solution to this problem.

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carpenterretired says... June 25, 2014 at 1:22 p.m.

As the largest cause of the drop was a drop in health care spending as the A.C.A. began to kick in perhaps the A.C.A. will do to health care spending what Sam Walton did to the price of socks Sam dropped the price of socks so much that it would have cut the G,D,P..

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GCW says... June 25, 2014 at 1:58 p.m.

Gas price increases will suck up any economic gain. Without hurricanes, Iraq became the latest excuse to gouge us at the pump.

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Packman says... June 25, 2014 at 4:11 p.m.

Allow me to be the first to say, it's GW Bush's fault!
Hey carpenterretired - Would you mind providing the data that supports your claim that links a drop in health care spending to this drop in GDP? Otherwise, STFU!

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FreeSpiritMan says... June 25, 2014 at 6:40 p.m.

"The first quarter was disappointing, but rather than view that as an omen of a recession or the first of a down leg in the economy, I see the seeds of a big bounce back in spring,"

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FreeSpiritMan says... June 25, 2014 at 7:26 p.m.

I believe I was watching FOX when the CEO of Starbucks said they would provide a free college education for their employees online with Arizona State University. I thought, you know that is great, just wish more companies would do that. Then I did a little research:
Last week the company unveiled a program that included a scholarship it described as “an investment” between Starbucks and Arizona State University. The program is designed to allow Starbucks workers to earn an online degree at the school at a steeply discounted rate. But the “free tuition” is based on the federal government picking up most of the tab:

Initially, Starbucks said that workers would be able to offset the costs through an upfront scholarship it was providing with Arizona State, but declined to say exactly how much of the cost it was shouldering. The chain estimated that the scholarship would average about $6,500 over two years to cover tuition of about $20,000.

Following the announcement, however, Arizona State University president Michael Crow told The Chronicle of Higher Education that Starbucks is not contributing any money toward the scholarship. Instead, Arizona State will essentially charge workers less than the sticker price for online tuition. Much of the remainder would likely be covered by federal aid since most Starbucks workers don’t earn a lot of money.

Workers would pay whatever costs remained out of pocket for the first two years, and Starbucks would bear no costs.

Starbucks had previously declined to say how much it was contributing to the scholarship. But in a subsequent email Wednesday evening, Starbucks said that the scholarship is being “funded by ASU.”

The “free tuition” is based mostly on students getting federal aid in the form of Pell Grants and federal student loans. Starbucks may eventually pay some of the out-of-pocket expenses of the student (perhaps even up to $1,000 a year) but they aren’t directly paying for tuition.

Overall, it’s a great deal for both Starbucks and for ASU. The school gets federal money for students who would not normally be enticed by their online programs. And Starbucks gets to claim a “benefit” that cost them almost nothing. The primary people who will be paying are American taxpayers (though they would have likely foot the bill anyway), the taxpayers in Arizona, and students who attend ASU.

Students who don’t work for Starbucks will be paying the normal tuition rates in order to subsidize the education for out-of-state baristas. That “free tuition” Starbucks claims as a “benefit” is actually being paid for not by coffee profits but by the students in Phoenix who don’t get the benefit of working for a crony in Seattle.

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FreeSpiritMan says... June 25, 2014 at 7:31 p.m.

Oh, buy the way, the CEO said they would be raising the price of a cup of coffee anywhere from 5 cents to 20 cents, That good old free market system working just like it should for the middle class, screw them.

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