There are a lot of rumors floating around that Fred Thompson is going to drop out after the Iowa caucus and endorse John McCain. Incidentally, Nick Wapshott over at The New York Sun is calling McCain the new GOP frontrunner. There’s no confirmation yet on the Thompson rumor. And he’s still in a close race for third place in Iowa with McCain. Thompson has doubled his polling numbers to about 10 or 11 percent — roughly even with McCain.

But the key point is that if Thompson does move into the McCain orbit, it will definitely exert a strong conservative influence on the war hero from Arizona.

This is good.

Sen. McCain has been wobbly on tax cuts. Mitt Romney’s attack ads continue to point this out. My own view, after interviewing McCain several times over the past year, is that he’s more interested in spending and earmark restraint then he is in cutting taxes. And while he did vote for the Reagan supply-side program in the 1980s, he opposed the Bush tax cuts in recent years.

That said, I believe the real McCain value-added is his robust foreign- and military-policy experience. He was absolutely right on the Petraeus surge. And he was absolutely right on criticizing Don Rumsfeld for bungling the post-Saddam period in Iraq. There’s every reason to believe that a President McCain would be a very strong leader in the global war on terror.

Circling back to economic policy, I’ve got two key words for a potential President McCain: Phil Gramm. Look for a President McCain to hand the economic policy reins over to the former Texas senator. Gramm would either be Treasury secretary or chief of staff in a McCain White House. This is good.

Phil Gramm remains a strong, zealous, free-market advocate. He has been sorely missed in the U.S. Senate following his retirement a few years back. Gramm has been working as an investment banker on Wall Street for the global firm UBS.

Gramm is a staunch free trader, tax cutter, budget cutter, and entitlement reformer. Most important, he’s tough as nails on policy issues.

The conservative Mr. Gramm would steer a possible McCain presidency in the right direction.