Once the best of friends personally and politically, then divided by the bitter 2000 campaign, Phil Gramm and John McCain are back on the same side for 2008.

McCain is emerging as a top GOP presidential contender. Gramm is back both in his good graces and as an increasingly influential adviser on spending, entitlements and trade.

The former Texas senator says he’s happy with his new life as an international bank executive with the Swiss-based UBS AG Bank and doubts he’ll return to public life. But the former Texas A&M economics professor once touted as a possible treasury secretary or Federal Reserve chairman didn’t totally rule it out.

“I don’t know,” he said. “As of today, I don’t think so.”

The McCain-Gramm relationship has been one of the more interesting ones in Republican politics during the past two decades. They fought spending and the Clinton health plan in the Senate.

In 1996, McCain was national chairman of Gramm’s unsuccessful presidential bid.

But four years later, the Texas senator backed his home-state governor, George Bush, over his old friend.

Gramm said it’s “not true,” as was widely reported, that he announced for Bush without telling McCain. And he said their personal ties were always stronger than their political differences.

“McCain and I have always been good friends,” he said. “We spent massive amounts of time together over the years. We’ve disagreed on issues vehemently. But we’ve always had a good personal relationship.”

John Weaver, a 1996 Gramm adviser who is McCain’s top political operative, said the two speak regularly.

“He obviously gives us advice on economic issues, and he always was a very good political strategist,” Weaver said, noting they share especially close views on the budget.

Gramm gained renown in Congress as co-sponsor of the Gramm-Rudman-Hollings law that curbed federal spending in the mid-1980s. McCain has been highly critical of current spending practices.

“He has been the strongest advocate of fiscal restraint, certainly since I’ve been there,” Gramm said, adding he thinks McCain would act strongly to curb federal spending, something conservatives say Bush failed to do.

“Would he veto spending bills?” Gramm asked. “That’s like asking whether water will wet you, fire will burn you and a mad dog will bite you. There’s no question he will.”

He also said McCain would take on the burgeoning costs of entitlements. “We’re going to have to do a lot of unpopular things like raise the retirement age,” he said. “The question is who would actually do something about it.”

The former senator praised McCain for backing free trade at a time of growing protectionism.

“I work all over the world now, spend about 25 percent of my time in Asia,” he said. “A movement toward protection would be devastating by the U.S. McCain is right on that issue, and he’s been courageous on that issue.”

And he said McCain has “great credibility” on Iraq, “having been a warrior and a hero.”

He even cited as a positive McCain’s occasionally explosive temper.

“One of the things I like about McCain is that he has not lost the ability to be outraged,” Gramm said. “I think that is a good thing. Americans like passion.”

Besides giving policy advice, two former aides said Gramm, who once memorably described money as “the mother’s milk of politics,” has been helping the Arizona senator with fundraising.

A key figure in his 1996 fundraising operation, Carla Eudy, now works for McCain. And former Texas Rep. Tom Loeffler, a fundraiser for Gramm and Bush, is helping McCain.

When Gramm was in the Senate, opponents said the most dangerous place was between him and a camera. But since he retired in 2002, he has kept a low profile.

“I made a decision when I left that there’s nothing worse than a guy who leaves who won’t leave,” he said. “I’m doing something else now. Part of my happiness is closing the door.

“I’ve been in public life. I didn’t leave it feeling unfulfilled. And if I do something, I’m going to do it in a very low-profile way.”