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WHY ARE THESE MEN SMILING?

ALBANY – In a bizarre scene, Gov. Paterson and legislative leaders laughed their way out of Albany yesterday after failing to take any action to address the ballooning budget deficit.

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The collapse of the Legislature’s special session was capped with a hearty hug among Paterson, Senate Majority Leader Dean Skelos and Assembly Speaker Sheldon Silver that came after a freewheeling public meeting in which the governor made a desperate, 11th-hour attempt to get reluctant lawmakers to accept $2 billion in budget cuts.

Paterson suspended his call for spending cuts until January, when the Democrats are slated to take over the Senate. By then, this year’s budget gap is expected to mushroom to $2 billion.

Without action, next year’s deficit is projected to reach $15 billion.

“I think it is clear that this special session on Nov. 18 will not yield the result that we want today,” Paterson said.

The declaration came after a raucous 90-minute public meeting, unusual even by Albany’s standards for its swings from partisan finger-pointing to gestures of camaraderie.

The Republicans chided Silver (D-Manhattan) and Senate Minority Leader Malcolm Smith (D-Queens) for refusing to support their own governor’s proposals.

The Democrats slammed a threat by Skelos (R-LI) to force the vote, which Smith dubbed a “charade.”

At one point, Paterson held up a blank sheet of paper that he said represented the alternative spending cuts offered by Skelos.

“You brought us nothing,” Paterson said. “You don’t have anything on paper to show. Mr. Leader, with all due respect, I’m still waiting for what your solutions are.”

Assembly GOP leader James Tedisco (R-Schenectady) held up another sheet, which he said represented Silver’s budget proposals.

“It’s blank also,” he said.

In the end, Paterson suggested the candid exchange had actually brought the leaders closer to a future agreement.

“This is the closest I’ve ever seen to an actual leaders’ meeting,” the governor said. “This is how government works. This is how democracy works.”

Then, strangely, Paterson grabbed Skelos and Silver and smiled for photographers.

Lobbyists and lawmakers filed from the Capitol shaking their heads.

Republicans said the failed budget-cutting session cost taxpayers at least $70,000.

“There are going to have to be a lot of hard decisions that everybody is going to have to make here,” said Russell Sciandra, director of the Center for a Tobacco Free New York.

“I don’t expect it to be all hunky-dory and hugs after Jan. 1.”

brendan.scott@nypost.com