Politics and economic reality are often at odds — a truth that President-elect Barack Obama is encountering as he shapes his response to the global financial turmoil.

Throughout the presidential campaign, Obama repeatedly pledged to raise taxes on higher-income earners in order to "restore fairness" to the tax system. (Never mind that the top 5 percent of tax filers already pay more than 60 percent of all individual income taxes.) He also promised to repeal right away the across-the-board tax cuts enacted under President George W. Bush in 2001.

Yet, just three weeks after the election, as Obama assembles his senior economic advisers and begins to grapple with the financial crisis, he appears to be backing away — sensibly — from his promised tax increases. His aides have suggested, for instance, that he may not seek to repeal the Bush tax cuts but rather leave them in place for two more years until they expire under existing law.

Considering the badly faltering economy, Obama would be prudent to defer any and all levy increases. The nonpartisan Tax Policy Center estimates his proposed tax hikes would total a whopping $43 billion in 2009. The timing of such huge tax increases could not be worse. If adopted, they almost certainly would be a heavy drag on the hoped-for economic recovery.

On Monday, Obama announced the backbone of his economic team — Timothy Geithner as Treasury secretary; Lawrence Summers as director of the National Economic Council; and Christina Romer as head of the White House Council of Economic Advisers. All three are experienced, highly respected economists who can inject beneficial doses of reality into the president-elect's thinking at this critical moment. The immediate test for Obama is whether he will be pragmatic enough to shift toward a more centrist course and jettison his campaign rhetoric calling for a government-imposed redistribution of wealth.

It also is encouraging that the president-elect has softened, at least a bit, his plan for a massive taxpayer bailout of the Big Three automakers. Although Obama is still apparently set on a massive infusion of government dollars for General Motors Corp., Chrysler and Ford Motor Co., he also has praised Congress for not giving Detroit "a blank check." A better course would be to abandon a bailout completely and allow the automakers to reorganize on their own, under bankruptcy protection if necessary, in order to regain profitability in the marketplace.

Under the waning months of the Bush administration, Washington has injected itself into the credit markets to a historically unprecedented degree — necessarily so — while piling up mountains of new debt. This hard fact must temper Obama's ambitious tax and spending plans as he and his economic team adjust to the new realities at hand.

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