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Sex Trumps Economics: Will Petraeus Scandal Scuttle a Fiscal Cliff Deal?

Aaron Task
Daily Ticker

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The resignation of David Petraeus has all the elements of a classic Washington scandal: it reached the highest levels of government, involved leaks of classified information and inter-agency intrigue, raised the "who knew what, and when did they know it?" questions and, of course, centered on sex.

As a result, the Petraeus scandal could potentially scuttle — or delay — a deal on the fiscal cliff, which is a hugely important economic issue but isn't nearly as sexy, literally and figuratively.

Related: Ralph Nader's Advice to Obama: "Stand Firm" on Fiscal Cliff Negotiations

The conventional wisdom today is that the Petraeus scandal and the fiscal cliff are separate issues and never the twain shall meet. But given the incredibly partisan nature of Washington, D.C., it's not so unthinkable that both parties could get bogged down in the Petraeus hearings to the detriment of the fiscal cliff negotiations.

First and foremost, U.S. Attorney General Eric Holder knew about the Petraeus affair "as far back as late summer" while House Majority Leader Eric Cantor learned of the FBI's investigation into Paula Broadwell in October, according to The WSJ.

That alone has the potential to mushroom into a couple of mini-scandals: If Holder knew, when did President Obama know? Why didn't Cantor try to use the scandal for political advantage ahead of the election? If Cantor knew, does the FBI have its own problem with leaks?

While it now appears that Petraeus was involved in a legitimate scandal, some Americans will likely feel his resignation had something to do with Benghazi and the administration's response to the Sept. 11 consulate attack. Prior to his sudden resignation, Petraeus was scheduled to testify on Benghazi this Thursday; his Deputy Mike Morell will now take his place but Sen. Lindsey Graham (R-S.C.) told CBS's "Face the Nation" this weekend: "I don't see how in the world you can find out what happened in Benghazi before, during and after the attack if General Petraeus doesn't testify."

Related: Fiscal Cliff: Congress Will Come to 'Reasonable Agreement' Before Year-End Says David Walker

On Fox News this weekend, Senator Dianne Feinstein (D-CA) described Petraeus' resignation and revelations about his affair as "like a lightning bolt."

Given all the dry tinder in Washington, don't be surprised if that lighting bolt doesn't ignite a broader brush fire, and one that could consume the fiscal cliff negotiations — even if just by providing a distraction from this most critical economic issue.

Aaron Task is the host of The Daily Ticker and Editor-in-Chief of Yahoo! Finance. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com

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