Negotiations to raise the U.S. federal debt ceiling met fresh snags after the White House presented congressional Republican leaders with a list of proposals to reduce the deficit by closing tax loopholes on Monday, which were universally rejected by the GOP. President Joe Biden will meet with key congressional representatives Tuesday to discuss the debt ceiling, after he told Reuters on Sunday he was optimistic about a deal before the deadline.
According to unnamed sources consulted by the Washington Post, senior White House officials pitched a dozen tax schemes to decrease the deficit, as part of a wider agreement with House Republicans last week, including one aimed at crypto transactions and another for major real estate investors.
The Republican rejection of the White House plans indicates that congressional Republicans are focused on spending cuts over tax hikes in order to reduce the U.S. deficit. Rep. Dusty Johnson (R-SD) has previously stated that any tax increase would be a "red line" not to cross in debt ceiling talks.
The deadline for raising the nation's spending ceiling comes in early June, and lawmakers have only a few weeks to do so.
Read also: Peter Schiff Predicts Dire Consequences: Debt Default Or Massive Inflation Inevitable
Investors Are Getting Jittery Over Debt-Ceiling Talks
So far, the discussion of the debt ceiling has only marginally weighed on the stock market, while some detrimental effects are starting to become increasingly evident in the Treasury market.
The yield on the one-month Treasury note, a measure of market anxiety over the debt ceiling deal, increased by a full percentage point to 5.6% in May, hitting the highest level since data began in 2002.
On Monday, the bond market's proxy for raising the debt ceiling declined by 8 basis points, indicating a minor improvement in market sentiment following Biden's remarks.
The SPDR Bloomberg 1-3 Month T-Bill ETF BIL is the most popular exchange-traded fund (ETF) that invests in U.S. Treasury bills with maturities of one to three months.
Chart: One-Month Treasury Bill Yield Spiked In May On Debt-Ceiling Frenzy
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