Cap-and-Trade Faces First Major Political Test

Prices at the pump are widely expected to go up early next year.

California’s cap-and-trade system expands next year. And while the program has already discreetly impacted energy prices, consumers will likely get their first direct glimpse at cap and trade’s effect on markets when it’s applied to transportation fuels.

That fact has many politicians nervous, including a group of Democrats who are urging Governor Jerry Brown to hit the breaks on cap and trade.

‘What The Hell Is Going On?’

There’s no day-to-day cost that smacks you right in the face quite like gasoline. You fill your car up, and you stare straight at the price as it climbs higher and higher. So it’s no surprise that when a recent poll asked whether Californians would keep supporting the state’s cap-and-trade system, even if its new phase leads to higher gas prices, support suddenly tanked by nearly 40 points.

Democratic political consultant Garry South doubts many people really understand what the program does. “I think it’s just so far out of the typical person’s viewfinder that the impact of this is not going to be known until gasoline prices actually start occurring,” he said, “and people say, ‘Hey what the hell’s going on here?’”

What’s going on is, in fact, a kind of stock market for pollution. Companies buy and sell the right to emit carbon dioxide and other greenhouse gasses. Right now, the system covers industrial sources like power plants. And the direct consumer impact has been blunted a bit by rebates and other breaks for power utilities.

Next year, cap-and-trade expands to cover transportation fuels. Oil companies will be charged that assessment up front, and then pass the cost along to consumers. State officials say that could lead to a price spike of as much as 30 cents a gallon, though most experts think it will actually be around 10 cents. “The actual price increase will depend on a wide variety of economic, technological and regulatory factors that are difficult to predict,” the Legislative Analyst’s Office noted this week.

Either way, Republicans and business groups have latched on to the potential price increase, which they’re calling a “hidden gas tax.”

Democratic Pushback

But even some cap-and-trade supporters are having doubts. “I represent a district in southern Fresno County that is very poor,” explained Assemblyman Henry Perea, a Democrat. “My constituents are going to be hurt a lot more than constituents in other parts of the state where the economy’s stronger, and people are making a lot more money.”

Perea is leading the effort to delay cap-and-trade’s expansion to transportation fuels. Fifteen other Democrats are supporting a slow-down. Perea said the push is about the economy, not the environment. He’s framing the debate as Valley Vs. Coast, Rich Vs. Poor, pointing out the geographic divide between the lawmakers supporting a slowdown, and those pushing to stay the course.

A three-year delay, he said, would allow policymakers to ask some questions. “How do we meet the goals of AB 32, how do we reduce greenhouse gasses and how do we do that in a meaningful way through fuels, and not have a large economic impact on everyday people who are struggling to make ends meet?”

‘Higher Prices Discourage Demand’

That may be hard to do, though, since the entire point of cap-and-trade is to make carbon emissions more expensive. That’s not the sort of thing politicians say in front of crowds. But Senate President Pro Tem Darrell Steinberg did just that during an unusually blunt speech earlier this year. “It may not be popular to say, but that’s necessary. Higher prices discourage demand,” he told the Sacramento Press Club. “If carbon pricing doesn’t sting, at least a little bit, we won’t change our habits.”

Not exactly a populist argument. But the push to delay the cap-and-trade expansion may still come up short. That’s due mostly to a lack of political muscle.

First, there’s the simple fact that gas prices won’t be affected until January, long after the state’s election.

The second factor is more powerful: cap-and-trade’s biggest cheerleader is the popular, well-funded Governor Jerry Brown. “This is a path that must be pursued today, the next decade, the next hundred years,” Brown said at a climate change conference in May.

Brown hasn’t directly weighed in on the push to delay cap-and-trade’s expansion to transportation fuels. But the chair of California’s Air Resources Board, appointed by Brown, has warned the delay would be “a major set-back” to the program, pointing out transportation fuels are responsible for “almost 40 percent” of California’s greenhouse gas emissions.

Still, political consultant Garry South argued Brown may have a tough time convincing Democrats to keep backing a program that’s costing voters money. “I equate this to Obamacare,” he said. “This is another fairly massive change in government policy to affect a real problem that people are concerned about, but that is going to have some impact on people’s daily lives. And that always has the potential for a revolt taking place.”

Brown has acknowledged cap-and-trade and other climate change efforts can be a tough sell. “This is really a complex set of pressures that are not easy to talk about in a sound bite, a bumper sticker, or a one-liner,” he said in May. “It is something that is yet to fully capture the public imagination,”

But like it or not, politicians live in the world of one-liners and bumper stickers. Hearing voters say, “Your program costs me money” is a powerful motivator for politicians. And Brown may have to spend a lot of political capital keeping jittery Democrats in line, if predictions about the price at the pump come true.


After complaints about Obama CA fundraising, White House says president to discuss Obamacare in CA

Just 24 hours after some California Democrats complained that President Obama’s fundraising here is giving short shrift to key issues key issueslike the Affordable Care Act, the White House says the president will now discuss about the benefits of the Obamacare during his trip on Thursday.
From White House press secretary Jay Carney’s press briefing today: “Before departing for Los Angeles, “President Obama will deliver a statement in San Jose on Friday morning about the benefits of the Affordable Care Act for working Californians and all Americans.”

“He’ll highlight the promising news that, despite dire predictions, early data on insurance competition and premiums in the state shows the ACA is creating quality, affordable choices for Californians who plan to buy insurance this fall.”

“California is the largest state with the biggest insurance market in the country and with nearly 6 million uninsured, the state is also a critical part of the effort to sign up Americans for insurance.”

The President plans a fundraising trip to Northern California Thursday, where he will appear at two events in Silicon Valley to benefit the Democratic Senatorial Campaign Committee, with tickets ranging from $2,500 to $34,200 per person. This marks the president’s 13th official trip to the region, all of them including fundraising stops.

The Chronicle on Monday reported that California Democrats like veteran strategist Garry Southcomplained that the president — while returning here repeatedly to gather campaign checks — has failed to hold public events that highlight key issues like the implementation of Obamacare in California.

“We probably are further ahead in implementing Obamacare than any other state. … We’re setting up the exchanges that many other states have resisted,” he said. “And we have a Democratic governor and Democratic majorities in both legislative houses fully on board.”

South noted that even as Obama arrives this week to pick up checks from donors, Covered California, the new marketplace and state exchange for health care services, is working to educate the public on the legislation’s impact.

“A president of the United States, in a public forum, can say a few words – and that’s worth a lot more a than a few public service ads that no one will see,” South said. “He could play a very useful role here in helping the state with more registered voters than there are people living in 46 of the other 49 states.”

The White House said more details on Obama’s statement will be released as they become available.

We’ll continue to update.


Fans resent lack of public Obama events

By Carla Marinucci

It’s a scenario that’s all too familiar: President Obama will visit Silicon Valley this week – but the only Californians who will see or hear from him will pay at least $2,500 for the privilege.

As the president begins his 20th trip to California since entering office, the seemingly endless capacity of the White House to vacuum up California campaign checks – without scheduling any public events – is becoming a cause for concern, even among loyal Democrats.

“It’s a missed opportunity,” said Democratic strategist Garry South, who gave the maximum donations allowed to Obama’s two presidential campaigns.

“It’s usually a mistake to just be making fundraising forays into a state like California without combining those political events with some sort of public activity,” he said, noting public events offer alternatives to photos of Obama “hustled into the back of a ballroom.”

Obama’s latest Silicon Valley fundraising swing, to benefit the Democratic Senatorial Campaign Committee, begins on June 6 and includes an evening reception at the Palo Alto home of Flipboard CEO Michael McCue and his wife Marci, where tickets start at $2,500 per person.

That’s followed by an “intimate” $32,400 per person dinner at the Portola Valley residence of star venture capitalist Vinod Khosla, one of the founders of Sun Microsystems, and his wife Neeru.

No free events since ’08

The California trip will include one official event: a meeting Friday and Saturday with Chinese President Xi Jinping at the Sunnylands Estate in Rancho Mirage (Riverside County).

Records show that in every one of his 13 trips to Northern California since taking office, Obama has never missed an opportunity for fundraising in the reliable Mother Lode for Democratic causes.

His rare non-fundraising forays here have all been invitation-only – a May 2010 visit to the now-defunct Solyndra plant, and two 2011 private town halls at the Palo Alto headquarters of Facebook and Mountain View-based LinkedIn.

Obama hasn’t starred at a free event open to the public in the Bay Area since before the 2008 election, when – as a candidate – he held rallies and addressed thousands of voters in Oakland and Marin County.

Even first lady Michelle Obama’s last public events in the region were in 2009, when she made a visit to Bret Harte Elementary School in San Francisco and spoke to graduates at UC Merced.

Democratic pollster Ben Tulchin said Obama’s current troubles in Washington – the Benghazi attack, the IRS scandal and the outcry over secret gathering of Associated Press reporters’ phone records – suggest the White House needs to adopt a war room strategy that takes advantage of every opportunity to tell his story to voters instead of “just chugging along.”

“I’m really worried about 2014,” Tulchin said. “The GOP is fired up … and there isn’t a compelling narrative for the Democrats.”

Republican strategist Bill Whalen, a Hoover Institution research fellow, said the problem isn’t helped by Obama’s frequent visits to California to focus on fundraising – not issues.

“On trips like this, he raises a lot of money in Palo Alto,” said Whalen, while just miles away, “in East Palo Alto, they have a state of emergency.”

Contrasted with Clinton

Law officers enforced a curfew in East Palo Alto last week and put more officers on the streets to deal with a spike in gun-related violence since January – an issue Whalen said Obama could address.

The president’s failure to schedule public events contrasts sharply with that of Democratic President Bill Clinton, who mixed fundraising and public advocacy events in dozens of trips to the Bay Area during his two terms.

In 1996, for example, Clinton dramatized his “Bridge to the 21st Century” agenda by marking NetDay at Ygnacio Valley High School in Concord – where he personally laid wiring and installed computers with then-Vice President Al Gore.

In San Francisco, Clinton also invited reporters along when he made stops in neighborhoods like Chinatown – on one occasion, he shopped for gifts on Grant Avenue, to the delight of the residents and business owners.

“Bill Clinton treated California like he was a county supervisor,” said South, who served as senior strategist to then-California Gov. Gray Davis. “He knew everything going on here. He knew every bridge project … and he just treated it like a personal domain. He was a kibitzer.

“Obama has never had that relationship with California, and I’m not sure he has that relationship with his home state,” said South. “He’s more of a (view from) 39,000-feet guy.”

South insists that Obama – who won California twice by double digits – still can seize the opportunity to use his visits as a stage to dramatize the importance of key items on his policy agenda.

Those include immigration reform, high-speed rail and the Affordable Care Act, also known as Obamacare, which he called “a slam dunk” for the president to address while he is in California.

The nation’s most populous state has become “a model and a showcase” for implementing the president’s signature legislation, South said.

State a model for health care

“We probably are further ahead in implementing Obamacare than any other state. … We’re setting up the exchanges that many other states have resisted,” he said. “And we have a Democratic governor and Democratic majorities in both legislative houses fully on board.”

South noted that even as Obama arrives this week to pick up checks from donors, Covered California, the new marketplace and state exchange for health care services, is working to educate the public on the legislation’s impact.

“A president of the United States, in a public forum, can say a few words – and that’s worth a lot more a than a few public service ads that no one will see,” South said. “He could play a very useful role here in helping the state with more registered voters than there are people living in 46 of the other 49 states.”

Carla Marinucci is The San Francisco Chronicle’s senior political writer. E-mail: Twitter: @cmarinucci

California Republicans invite Democrat to assess state of GOP

In a bit of cognitive behavioral therapy — or masochism — leaders of the California Republican Party have invited a Democratic strategist to a retreat this weekend to tell them, more or less, how bad they are.

The strategist, Garry South, has been highly critical of the Republican Party’s inability to adapt to California’s changing demographics, among other failures. Republicans hold no statewide office, and party registration has fallen below 30 percent statewide.

“It’s a pretty depressing presentation if you’re a Republican,” South said. “So I may have a doctor on hand to issue Prozac prescriptions.”

South and former Senate Republican leader Jim Brulte, the new chairman of the state Republican Party, are colleagues at the government affairs firm California Strategies, and for several years they have made joint presentations to various groups about politics in California.

“For years, I’ve read and listened to Garry South’s diatribes against Republicans, sometimes when he was sitting at my elbow on panels,” Brulte said in an emailed statement. “I thought I would put him to the test and see if he would be willing to say the same things in a room full of Republicans, to their faces. To my surprise, he agreed.

“South said his presentation to CRP board members in Ontario on Saturday will include no advice about a potential recovery, only an account of how low the state Republican Party has fallen.”I don’t think it’s helping them,” South said. “It’s the same presentation I’ve given to everybody from the dentists to the insurance agents.

“South chuckled, said he’s looking forward to it and added, “I’m wearing my bulletproof vest.”


The Jim Brulte/Garry South Show: Whither California Politics

By , Editor of Fox & Hounds and President of the Small Business Action Committee

Former Republican state senator Jim Brutle, likely soon to be chairman of the California Republican Party, and Democratic political consultant, Garry South, now both partners at California Strategies, often appear around the state together discussing the California political scene. They brought their road show to Malibu last week at a salon dedicated to public affairs sponsored by businessman and philanthropist, B. Wayne Hughes, Jr.

There was little disagreement between the two political veterans that California Republicans have a problem with the changing demographics of the state’s voters and seemingly are losing any sense of balance in the eternal battle between business and labor.

For Brulte’s part, he said he was a “little more upbeat” that the current situation could be turned around.

The traditional perspective that business supports the Republican agenda while labor is in the corner of Democrats is not holding sway in California. While Brulte noted that 98% of labor resources go to Democrats, business splits its contributions between Republicans and Democrats giving Democrats an overall edge.

Recognizing the political reality of the overwhelming Democratic control of the state, Brulte said, too many businesses concede the game.

South said business’s problem is that business thinks it can buy its way out of political troubles, hoping that large contributions will carry their candidates to victory. Business, unlike labor, doesn’t put people into campaigns. Unless business can figure out a way to put boots on the ground, they will be outgunned by labor, South said. Candidates remember who is going door to door for them.

Business does have an opportunity to reach out to the minority communities that are changing California politics. South said that one fast growing group is Hispanic women creating small businesses.

But he said, Republicans often read minorities incorrectly. While acknowledging that Latinos are culturally conservative, Republicans make the mistake that they are also fiscally conservative, which they are not, South argued.

South insisted that Republicans were going about their approach to Latinos all wrong. “You can’t convince Latinos to vote Republican by having a mariachi band at a Lincoln Day dinner.”

South said that Republicans have a math problem when it comes to the changing electorate.

In 1994, when Pete Wilson was elected governor 82% of the vote was white, 8% was Latino. In 2010, when Meg Whitman ran for governor, 62% of the vote was white, 22% was Latino.

Whitman received the largest percentage of the White vote in the state’s history but lost the election by 13%. South rattled off numbers showing the growing vote for Democrats from minority voters over the years, Asian as well as Latino.

However, Brulte argued there would be opportunities for the Republicans to reach all voters with common sense stands. One likely place to find that opportunity will be the Democrats desire for more revenue.

You might call it: the Leopard-doesn’t-change-its-spots scenario.

Brulte noted that when Governor Wilson left office in 1998 his budget was $58 billion with a surplus of $12.3 billion. Yet, Democrats, such as then Assembly Speaker Antonio Villaraigosa, thought that was not enough revenue and called for a sales tax increase. After Proposition 30 passed raising taxes, Brulte pointed out, Senator Ted Lieu wanted to triple the car tax.

Democrats have a problem with fiscal restraint that Republicans will exploit.

Brulte said the road back for Republicans will be long and hard but insisted the journey must take place. Unchecked one party rule is not healthy for the state, he said.


Capitol Weekly Top 100: The final cut

There are black lists, grocery lists, sh..t lists and graduation lists. Then there’s Capitol Weekly’s 100 List, which is a little bit of all of them, and more.

We’re the first ones to complain about lists – Forbes immediately comes to mind – but we make a shameless exception for ours, which at least gives a partial snapshot of the Capitol’s political players.

There are lots of people who aren’t on this list, and should be, and there may be some who are here and don’t belong. But in the end, we’re pretty happy with our little lineup and we hope you are, too. 

There are a couple people in the list who are there just because we like them; see if you can spot them. We don’t apologize, though: We need friends, too.

This week, we offer 1 through 50, and the difference from last year is dramatic. The Brownies, exiled from the Capitol for so many years, are back – in spades.  

See you next year….

50. Garry South
In any election cycle when the conversation turns to Democratic political consultants, Garry South’s name invariably pops up. He’s handled major campaigns over the years, including the classic 2002 race for governor when his intervention in the GOP primary paved the way for the improbable victory of Gray Davis. When he’s not handling candidates, his advice is sought by state and national campaigns, and he reportedly is helping Obama’s 2012 effort in California. He had a misfire last year when he got in a public dispute with former client Gavin Newsom, but we doubt it will slow him down in the long run.

Time and time again, the state Capitol is the place for unresolved local conflicts. The fiercest local fights, that often have big money attached, find their way to Sacramento where they escalate. We saw it last year when Majestic Realty came to Sacramento to help leverage the City of Walnut. And we see it again in a struggle between the City of Hope and physicians in Southern California. And as is so often the case with these types of conflicts, by the time they get to Sacramento, big name consultants and lots of cash is involved. The City of Hope has reached out to Garry South and Jim Brulte to kill a bill by Sen. Dean Florez that would prevent City of Hope from controlling the medical group. The doctors, meanwhile, have turned to Richie Ross, Florez’s political consultant, to help steer the bill through the building. Ross has registered as a lobbyist for the fight. South and Brulte have not. The bill marks the latest chapter in a nasty blood feud between South and Ross that goes back more than a decade. Ross was the consultant who talked Cruz Bustamante into running for governor in the 2003 recall – a move that South still believes helped sink Gray Davis. And Florez was the head of the Joint Legislative Audit Committee that held hearings over the Oracle debacle that embarrassed the Davis administration and Cabinet Secretary Susan Kennedy. South and Ross also tangled over a 2004 ballot measure, Proposition 67,  that would have taxed phones to pay for emergency rooms – a fight lead by Ross that was defeated with an assist from South. The bill is scheduled to be heard June 29 in the Assembly Health Committee.

Capitol Weekly’s Top 100 List

Capitol Weekly spent weeks talking to top California political professionals to get a consensus on the top influence peddlers, power brokers and political players in California. The list is varied – there are Democrats and Republicans; labor leaders and captains of industry; people who are little known outside of Sacramento circles, and international superstars.

One thing you will not find on this list is elected officials. We debated whether to include politicians on our list, but ultimately decided that would be too easy. We were looking for people whose political skill and influence transcends the position they hold.

81. Garry South, political consultant
South earned a reputation as a master strategist after the election of Gray Davis. He has become a national voice on California politics, and is now a senior adviser to San Francisco Mayor Gavin Newsom. In a world of button-down suits who take themselves too seriously, South is an eccentric, larger-than-life figure and is not afraid to go for the political jugular.

Distinguished Alumni Award 2008: Garry South ’76, Bachelor of Arts History and Political Science

“Other than my parents and my faith, my time at the University of Montana was the most important formative influence in my entire life. If my federally insured student-loan eligibility hadn’t expired, I would probably still be there! For a kid from Miles City and an uneducated family, the University was an excellent launching pad into the larger world. I left with increased personal confidence, a keen intellectual curiosity and an eagerness to excel and succeed. One couldn’t ask for more than that from a college education.”

Named “one of the top political strategists in the Democratic Party,” Garry is a frequent guest commentator on NPR and a regular contributor of opinion pieces to the Politico, Los Angeles Times, Los Angeles Daily News, San Francisco Chronicle, Sacramento Bee, Asian Week, Capitol Weekly and the California Majority Report blog. For the past 36 years Garry has managed or played leading roles in campaigns for President, U.S. Senate, Congress, Governor, Lieutenant Governor, State Legislature, County Executive, County Supervisor, Mayor and City Council. In 1998, he was unanimously named “Campaign Manager of the Year” by the American Association of Political Consultants for directing the come-from-behind victory of California Gov. Gray Davis. During his years at UM Garry served as president of ASUM, as a student member of the Blue-Ribbon Commission on Post-Secondary Education, as a member of Silent Sentinel and Phi Alpha Theta and as Feature Editor and Guest Columnist for the Kaimin.

Garry lives in Santa Monica, California, with his wife, Christine Wei-li Lee, and their 2-year-old son, James Ru-Shiao Lee-South.

Gavin on Working Honeymoon… with Garry South?

Is Democratic San Francisco Mayor Gavin Newsom already putting together his team for that 2010 gubernatorial run?

The newlywed mayor and his wife, Jennifer Siebel Newsom, were spotted in Malibu Saturday, honeymooning deep in lengthy conservation over frappucinos — with Democratic uber-political consultant Garry South.

UPDATE! Here’s the new video link.

Little problem for the environmentally-hip SF mayor at the usually star-laden Starbucks, the blogger reports.

”His Yukon was parked in the fire lane,” Zuma Dogg says of Newsom. ”I told him if you’re running for governor, you’re off to a bad start.”

The GMC Yukon — uh, that’s 12 mpg city/18 highway — was moved immediately, he said.

But Zuma Dogg was also impressed with the New Mrs. Mayor, saying she was not just a pretty face at the table.

”’She’s very vocal, very much part of the conversation — not sitting there quiet,” he said.

So why would the three be hanging together in the Southland? Maybe because South, the take-no-prisoners former senior consultant to Democratic Gov. Gray Davis, has some deep experience with running winning statewide campaigns in California.

He engineered Davis’ run to the top slot despite being out-gunned and out-financed by competitors like millionaires Al Checchi and Rep. Jane Harman, and then the unpopular governor’s re-election against GOP millionaire Bill Simon in 2002.

Since it’s looking increasingly like a crowded slugfest on the Democratic side, with a lineup of GOP billionaires already checking out a run, ”the Mouth from the South” and his tough brass-knuckled approach to state politics could come in handy, indeed.

We heard the whole story from blogger Zuma Dogg, who caught the scene on video and on camera, and posted it on his own LA Daily blog link at his website,

Comings & Goings

Garry South and Christine Wei-li Lee welcomed the birth of James Ru-Shiao Lee-South on May 26, 2006, in Santa Monica, Calif. Parents and child are doing well, though Christine broke an ankle in the final weeks of her pregnancy. South runs a political consulting and media firm in California and was the state coordinator in Montana in 1976. Both South and Lee are continued supporters of The Carter Center.

South on Lieberman

The upside to Steve Westly’s loss in the Democratic gubernatorial primary for political strategist Garry South is that he’s been able to spend more time with his 2-month-old son.

But South hasn’t checked out completely. Besides skewering Angelides’ campaign on blogs, he’s been dishing out free advice to U.S. Sen. Joe Lieberman, D-Conn.

South was Lieberman’s political adviser during his unsuccessful 2004 presidential bid. Now Lieberman faces a tough challenge from Ned Lamont in Connecticut’s Tuesday primary.

Lamont has won support from Democrats who oppose Lieberman’s backing of the war in Iraq.

“(Lieberman) and I e-mail back and forth quite a bit,” South said. “He’s got a fair shot in the primary. If not the primary, then he probably wins in the fall as an independent.”

Lamont led by 13 points in a Quinnipiac University poll released Thursday. If Lieberman runs as an independent, would South work for him in the fall?

“I doubt it,” South said. “I’m not really in the campaign business at the moment. I’m in the daddy business.”

Lunch with a political insider: Irresistible

Which is worth more, lunch with political consultant Garry South or a weeklong stay in Puerto Vallarta? According to bidders at the Stonewall Democratic Club of Greater Sacramento annual auction, it’s South.

The former political adviser to Gov. Gray Davis ultimately attracted a $1,300 bid, while the Mexico lodging went for a mere $900, said Stonewall Club Vice President Ron Spingarn. Even a weeklong stay in a one-bedroom Hawaii condominium went south of South, at $1,100.

“I just hope whoever the highest bidder is hasn’t heard all my political war stories and jokes,” South said. “Otherwise, I won’t really know how to give them $1,300 of value.”

That bidder turned out to be former Assemblyman Dennis Mangers, now president of the California Cable and Telecommunications Association.

The Stonewall Club, which backs gay and lesbian causes, raised $20,000 through its live and silent auctions with more than 100 items, Spingarn said.

A different Hawaii stay, in a two-bedroom condo owned by former state Sen. John Vasconcellos, went for $1,600.

It does not include Vasconcellos for a week.

Besides the lunch with South, the live auction featured one with Assembly Speaker Fabian Nunez – an interesting offering since the two clashed last year and Nunez challenged South’s Democratic credentials. Nunez went for $550 less than South.

“There’s no logical explanation for it, although Garry (is known to) give a year’s worth of advice in an hour,” said Nunez spokesman Steve Maviglio.

Christmas Cheer

Quite a party the other night down at the L.A. home of Ameriquest Corp. honcho Roland Arnall — with the ghosts of political Christmas past and present mixing freely.

And well they should, considering the number of times Arnall has played Santa to their various campaigns.

Guests — who were greeted by carolers clad in Dickens-era attire — included Gov. Arnold Schwarzenegger and wife Maria Shriver, former Gov. Gray Davis and wife Sharon, Assembly GOP leader Kevin McCarthy, GOP state Chair Duft Sundheim and new state Senate President Pro Tem Don Perata.

As usual with holiday gatherings, there was a bit of coal in the mix — such as when ex-Davis campaign manager Garry South wished former state Senate President Pro Tem John Burton a happy holiday.

“Yeah, and same to you,” Burton replied, then added, “Too bad about Prop. 62” — a reference to the defeat of the open primary measure that South and the governor worked for and Burton opposed.

South took the dig with a smile and later joked about it in the smoking tent with Arnold.

“You know,” Arnold chuckled, “he said the same thing to me two days after the election. And I said right back to him, ‘Too bad about Prop. 72′”- the Burton-backed health insurance measure that went down to defeat.

So much for “ho, ho, ho.”

In our nominee for strange political bedfellows, we have a new entry – George Gorton and the card clubs vs. Arnold Schwarzenegger, Garry South and the Indian tribes. In the wake of the new compact deals signed by the governor and five tribes last week, Schwarzenegger has vowed to oppose a measure sponsored by card clubs and race tracks that would cut them in on the slot machine action, standing instead with the tribes he demonized during the recall campaigns.

The card clubs had hoped the governor might support their initiative if Schwarzenegger’s talks with tribal leaders broke down. But now that a compact deal has been reached, the governor has endorsed a slot machine monopoly for tribes, and vowed to raise millions to defeat the card clubs’ proposal.

Gorton, one of Schwarzenegger’s top political aides, says he will stay on as a paid consultant for the card club initiative. Sources close to the governor say Schwarzenegger will begin lobbying supporters of the initiative to withhold contributions to the campaign. That could prove a true test of the governor’s charm and political skill, since the card clubs have spent millions on the campaign already.

Gorton downplayed the Schwarzenegger angle, saying it was not uncommon for political consultants and clients to be on the opposite side of an issue. But it’s hard to imagine, say, Garry South running a campaign for an initiative opposed by Gray Davis.

South will, however, be standing with Schwarzenegger against Gorton. South has been hired by a coalition of Indian tribes to run the campaign against the club card measure.

Californication: Fun Is Good

Garry South, Gray Davis’s longtime guru, is at a table in the Four Seasons in Beverly Hills, trying to explain his guy. More than a few people have described South as Gray’s closest friend. “Well… I wouldn’t put it in ‘friendship’ terms,” he says. “I mean, it’s not unusual for politicians not to have friends. These people are not normal. I don’t say that pejoratively. You know the old saying, No man is a hero to his valet?”

South has worked for Davis for the past ten years. He knows and respects him. He swears there’s an emotional side to Gray Davis. He hardly ever shows it, but it’s there.

“At his inaugural lunch in 1999, he broke down and cried,” says South. “He couldn’t finish his speech. He was talking about how important his mother had been in his whole development and life, and how without her he would not be standing here today. And he broke down and cried. Sobbed. Hey, should I introduce myself to Larry Flynt?”

The porn king, who often lunches here, is rolling through the dining room in his golden wheelchair. Garry runs over and stops him midroll.

“Hi, I’m Garry South.”

No recognition.

“The governor’s campaign manager?”

Larry seems to be at a loss for words.

“I hear you’re running for governor.”

“Welllll,” says Flynt. “I’m havin a little fun.”

“Fun is good,” South barks. “You’ll have a little competition, 300 or so people, but fun is good.”

More campaign trail humor

The best joke at the weekend GOP convention, meanwhile, was probably the luncheon version of an old standard as told by U.S. Rep. Mary Bono. It rang true for Republican activists who have watching Democratic political consultant Garry South demolish their candidates over the years:

“Arnold is out on a boat with the pope,” she said. “And the boat’s moving along, and the pope’s hat flies off and lands in the water, 50 feet back. So Arnold says to the pope: ‘I’ll get it.’ The pope watches Arnold climb over the railing and walk across water 50 feet to pick up the pope’s hat.

“The pope was amazed,” she said. “Arnold walked on water. But the next day Garry South puts out a press release saying, ‘Arnold Can’t Swim.'”

Taking a Closer Look: Celeste Spokesman offers friendly advice to peer

Garry South, the communications director for former Gov. Richard F. Celeste, left a two-paragraph letter of advice for Curt Steiner, who assumed a similar position when Gov. George V. Voinovich took office last week.

“Good luck and best wishes as Gov. Voinovich’s communications director,” South wrote.

“You’ll be overworked, underpaid, overextended, understaffed, under informed and — paradoxically — over relied upon while also underappreciated. Other than that, it’s a hell of a job!

“And hey, go easy on us, huh? Remember what savvy old English philosopher Sir Francis Bacon said: ‘Use the memory of thy predecessor fairy and tenderly; for if thou dost not, it is a debt will surely be repaid when thou art gone.'”