* Dems call GOP’s bluff — again: The latest in the debt ceiling impasse: Late yesterday, talks fell apart again after Dem leaders rejected the GOP leadership’s offering of a short-term debt limit increase, arguing that they didn’t want to set the stage for another major debt ceiling battle in a few months. It’s yet another way Dems and Republicans have swapped roles in this battle: GOPers spent months insisting on a big, long-term debt deal, only for the White House to usurp the role of pushing for something substantial and far reaching.

Last night, Harry Reid released a statement saying Dems would release yet another framework today that contains a long term debt limit increase, spending cuts but no entitlements benefits cuts, and no revenue increases. Lori Montgomery previews how this offer would work, and it too seems designed to call the GOP’s bluff:

People familiar with the months-long search for a debt-reduction compromise said that hitting such a large target without raising taxes or cutting entitlement programs would probably require Reid to rely heavily on savings from ending the wars in Iraq and Afghanistan — a figure budget analysts said could easily amount to more than $1 trillion over the next decade.

Counting money not spent on wars that the nation is already planning to end is widely viewed as a budget gimmick, and House GOP leaders have been reluctant to include it as savings. But it has a political advantage because it was included in the budget blueprint House Republicans adopted this spring.

That Dems are now calling this latest offer a compromise — deep cuts and no tax increases in exchange for a debt ceiling increase that Republicans themselves previously agreed was inevitable — is another sign of just how far to the right this debate has shifted. It would constitute a substantial win for Republicans — if only they would take it.

* But GOP will press forward with its own two-track plan: John Boehner’s office has not commented on Reid’s latest offer, but all signs are that the GOP leadership will hold a vote this week on a two-tier strategy beginning with a short-term increase.

Friendly reminder: My handy Plum Line calendar tells me that the August 2nd debt limit deadline is a week away.

* Why does GOP even want to relitigate debt fight? With Republicans pushing for the debt limit fight to unfold in stages, Taegan Goddard asks: “nearly all of the major public opinion polls show Obama and Democrats to be consistently winning in the public relations battle on this issue. Why do Republicans want to keep it alive?”

* White House sees even odds that crisis will be resolved: A senior White House official says the odds are 50-50 that a resolution will come together at the last second. Not exactly reassuring — we now have even odds that the economy could crater.

* Dear Dems: Please don’t give away your Medicare edge: Outside allies put Obama on notice: If you agree to deep Medicare cuts, you will squander the huge political advantage that comes with the argument that Dems are the ones who will protect entitlements at all costs.

* But Obama’s advisers want a grand deficit bargain: Also important in the above link:

Obama’s political advisers have long believed that securing such an agreement would provide an enormous boost to his 2012 campaign, according to people familiar with White House thinking. In particular, they want to preserve and improve the president’s standing among political independents, who abandoned Democrats in the 2010 midterm elections and who say reining in the nation’s debt is a high priority.

* Would “grand bargain” really be good politics? Paul Krugman points out that any Medicare cuts would be seized on by Republicans, just as they did last cycle:

The G.O.P.’s most potent political weapon last year — the weapon that caused a large swing in the votes of older Americans — was the claim that Mr. Obama was cutting Medicare. Why give Republicans a chance to do it all over again?

The idea here appears to be that Dems would be foolish to imagine Republicans would refrain from attacking Obama over Medicare cuts that they themselves agreed to as part of the grand bargain.

* Will debt limit battle even matter in 2012? E.J. Dionne hits on one of my pet points: For all the drama and noise surrounding the debt ceiling battle, once it’s settled the bad economy could relegate it to the status of minor sideshow, and jobs will re-emerge as Obama’s primary obstacle to reelection.

* Yes, one party is more to blame than the other: Dan Balz says what must never be said in polite company:

it’s clear that House Republicans are the principal obstacle to any grand bargain that includes substantial new revenue. Their rigid opposition runs contrary to public opinion, which shows that a majority of the country believes that a deficit-reduction package should include both spending cuts and new taxes.

* Newsflash: Business groups will never like Obama, no matter what he does: In the no-brainer of the day, business groups say the Obama administration’s “charm offensive” to win them over has not succeeded in its objective.

Sob, sob, sob — pass the hanky. As if there’s anything the President could do that would stop them from painting him as anti-business.

* Elizabeth Warren for Senate? Massachusetts Dems wonder whether she can make it on the stump, though Dems are also confident they can deflect the inevitable GOP attacks on Warren as a Harvard elitist by pointing to her father’s job as a maintenance man.

* Obama allies tout his pro-Israel record: Dem Rep Steve Rothman, who’s widely regarded as a reliable ally of Israel in Congress, pushes back on conservative falsehoods by arguing that under Obama, “U.S.-Israel military and political cooperation has never been stronger.”

Key takeaway: Rothman’s emphasis on military cooperation reflects a sense among Obama allies that this part of his record on Israel has been under-sold and should be front and center in the story the President’s reelection team tells to prevent defections among Jewish Americans.

* And American anti-Muslim bloggers influenced accused Norway killer: Must-read from Scott Shane on how anti-Islam American bloggers and writers apparently had a profound influence on the man accused of the Norway killing spree.

What else is going on?