* Are Dems really holding the line on Medicare benefits cuts? That’s the key dynamic to watch this week as the debt reduction talks hit crunch time. Yesterday Senate Dems declared that Medicare benefits cuts are off the table — a clear sign that Dems are determined to maintain their political advantage on the issue. Interestingly, David Rogers’s reporting from inside the talks appears to indicate that the White House is taking this marker seriously.

The question now is whether the current difference between both sides — over more than $1.1 trillion over ten years — can be bridged, given the GOP’s seemingly implacable opposition to any tax hikes.

* Why a deficit deal is likely: David Leonhardt has the optimist’s take on why both parties have a clear political incentive to reach a deal: Republicans want Dems to own some Medicare cuts (Dems may agree to non-benefits cuts) so they don’t continue sinking under Ryancare, while Dems want Republicans to agree to job-creation initiatives in hopes of turning the economy around before 2012.

* But will the deficit deal really work for Dems? I’m late to this, but don’t miss David Dayen’s take on why a deal that is really a good one for Dems long term is unlikely. Yes, Dems are winning on Medicare, but the economy will be the most important factor in 2012. By capitulating to the GOP’s austerity/cut-cut-cut frame, Dems have essentially ensured that no ambitious job-creating initiative will happen.

* But White House is pushing job creation: One other interesting dynamic inside the deficit talks: The White House is pushing harder than before for a payroll tax cut as part of the deal, seemingly signaling that a real (if modest) pivot to jobs is underway.

* Is the anti-tax cabal losing its grip on the GOP? Yesterday’s vote by 34 GOP Senators to end ethanol subsidies suggests that anti-tax crusader Grover Norquist could be losing his hold over the GOP, which could (in theory) clear the way for tax breaks to be a key part of the imminent bipartisan deal on deficit reduction.

* Reality check of the day: Of course, the fact that GOP flexibility on new revenues (as opposed to tax hikes) is viewed as such a major breakthrough is a clear sign of just how far to the right the debate over taxes has shifted.

* Are the neocons losing their grip on the GOP? Mitt Romney and the other 2012 GOP candidates, well aware of rising opposition to the Afghan war, begin tentatively flirting with the idea that it may be time to bring the troops home.

The key dynamic to watch here: What kind of blowback they suffer from neoconservatives and self-described “hawks,” who seem to believe there should be no limit on our ambitions for American power abroad, and how the candidates navigate that criticism.

* Romney gets hit with the ultimate insult: Relatedly, Romney’s heretical claim at the debate that we should perhaps not stay in Afghanistan forever has got Lindsey Graham comparing him to Jimmy Carter.

* What’s the legal basis for continuing war in Libya? With liberals and conservatives alike hammering the White House over the looming War Powers Resolution deadline, the administration insists it is preparing a detailed legal rationale justifying the operation that will be forthcoming, perhaps as early as today. This one is going to provoke an intense reaction on both sides.

* You underestimate Michele Bachmann at your peril: Good read: Bachmann’s breakout performance at the GOP debate seems to have solidified a consensus that she really can win the Iowa caucuses, where social conservatives dominate.

Key takeaway: She’s now so clearly a factor that the other candidates are recalibrating their strategies accordingly.

* Bachmann-esque comic relief of the day: I’m not sure which is funnier: That House GOPers are worried that her presidential bid will inflate expecations among the Tea Party base that they can work spending-cut miracles, or that they’re relieved that she’s now going to be out of their hair.

* The optimist’s take on yesterday’s Wisconsin Supreme Court decision: Dem state senator Chris Larson: “I guarantee you, some Republicans are breathing a sigh of relief about not having to take this up again. On the other hand, these justices just sent a reminder to voters of what has happened here.”

* And is it possible to get Republicans to deal with reality of climate change? Stephen Stromberg suggests it’s not completely out of the realm of possibilty, and proposes one way to make it happen.

What else is happening?