Business Stories of the Week: May 12

by May 12, 2017
Famed executive Warren Buffett warned other business leaders that health care costs, not corporate taxes, are slowing the U.S, economy. Photo courtesy of Pexels.

Warren Buffett warned other business leaders that health care costs, not corporate taxes, are slowing the U.S, economy, The New York Times reported. (“Physician” photo courtesy of Pexels).

Wall Street reacts to Comey case

On Wednesday, Bloomberg took a look at whether President Trump’s abrupt firing of FBI Director James Comey will impact the White House’s economic agenda. Investors are concerned the decision will slow or halt Trump’s pledges to bolster infrastructure spending, reform the tax code and repeal the Affordable Care Act. Experts told Bloomberg the decision “muddies the agenda” and that it’s “hard to see any political and policy upside in firing Comey….” At least one analyst said the move could have more impact for overseas investors.

Buffett warns about health care

Despite Donald  Trump’s repeated proclamation that corporate taxes are hindering the U.S. economy, Warren Buffett, the chief executive of Berkshire Hathaway, has a different take. At the company’s annual meeting this past weekend, Buffett told investors the tax system is not crippling the American economy. The New York Times reported Buffett said chief executives focused on lowering their tax bills should turn their attention to lowering health care spending, which is stymying U.S. corporate profits. Buffett said tax rates have fallen as a share of gross domestic product, while health care costs have soared from 5 percent of G.D.P. 50 years ago, to 17 percent today.

Seattle and Silicon Valley converge

On Thursday, The Economist took a look at how Seattle and Silicon Valley are becoming extensions of each other, despite the 800 miles that separate the two. They have similar roots: Both grew during gold rushes. While Silicon Valley emerged as a maker of small things (Apple phones) and Seattle focused on larger technologies (Boeing planes, Microsoft computers), the two are increasingly linked by cloud computing. Amazon is based in Seattle, and most startups run their business on the e-commerce giant’s cloud-computing platform. Many of Seattle’s burgeoning firms have California-based parent companies. As the two regions have converged, Rich Barton, the founder of Zillow and Expedia, told The Economist he’d like to see travel between them become more efficient through high-speed rail.

Retailers sober up

It hasn’t been smooth sailing for the retail industry, feared to be facing another recession. On Tuesday, the Associated Press reported more than twice as many stores have closed this year than at the same point last year. Bankruptcies also are far outpacing last year’s rate on top of the sharpest pace of job cuts in seven years. The AP reported the reasons behind the slump are different than the last time around: Shoppers’ habits have changed as they increasingly rely on online deals. That’s put pressure on department stores, including Macy’s, Kohl’s and J.C. Penney. And the bad news continues: The Limited closed all of its remaining 250 stores, Payless ShoeSource is closing 400 stores, and Ambercrombie & Fitch, BCBG and Wet Seal are also retreating.

Steel bets on spending

America’s steel industry is cheering President Donald Trump’s pledge to protect the country’s manufacturers against cheaper imports and invest as much as $1 trillion in infrastructure spending over the next decade. The New York Times on Thursday reported that American producers have long complained that China treats its subsidized steel industry as a “giant government jobs program,” putting American producers at a disadvantage as the Chinese unload steel at fire sale prices. Steel workers at Nucor, an American steel maker, make on average $80,000 a year—and these workers are betting on bigger paydays thanks to Trump’s focus on trade and manufacturing.

Tribune prepares to pack

Crain’s Chicago Business dug into the impact of the $3.9 billion sale of Tribune Media to Sinclair Broadcast Group. Since Sinclair already has a headquarters in Hunt Valley, Maryland, it’s likely the Trib’s Chicago headquarters will go. Tribune Media has its roots in Chicago, dating to the 1847 launch of the Chicago Tribune and the launch of WGN Radio in 1924. For Chicago, the merger marks the end of the group’s long history in the city as most corporate roles at the newly merged media conglomerate will be in Baltimore, rather than the midwest. In addition to the $3.9 million sale, Sinclair also will acquire $2.7 billion in Tribune Media debt, Sinclair said in a statement.

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