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Fiscal cliff uncertainty puts more guesswork into state financial forecast

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A state economic forecast due next week will provide a foundation for the budget that Governor Dayton will propose to the Legislature in the new year. But the forecast will involve more guessing than usual, thanks to uncertainties about how federal policymakers will resolve their own budget and deficit questions.

State Economist Tom Stinson tells the Pioneer Press that if Congress dives off the fiscal cliff -- by allowing dramatic spending cuts and tax increases to take effect -- another recession is certain. Many analysts expect an agreement to avoid that scenario. But the ingredients of such a deal are an open question. Stinson says next week's forecast will assume that Congress will put off the hard questions and 'kick the can' down the road another six months or so.

The looming cliff has lots of folks on edge. A group called The Action plans a 30-hour vigil outside the offices of three Minnesota Republicans to mark the 30 days remaining until the deadline.

One of those Republicans is U.S. Rep. Erik Paulsen. Like many in his party, he's on record as opposing higher taxes. But Paulsen told WCCO last weekend he could be open to boosting tax revenue by eliminating deductions and loopholes, as long as tax rates stay the same.

The leader of the Taxpayers League of Minnesota writes in an opinion piece that all the attention focused on Washington is obscuring the prospect of the new Legislature raising taxes here in Minnesota.

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