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During the latest government shutdown, the District of Columbia will pay for public services out of a cash reserve.

If these shutdowns are becoming common enough to create actuarial tables, could state or federal agencies start purchasing "government shutdown insurance" to avoid eating into cash reserves?

Assuming that such insurance (or betting pools) were available and the premiums weren't sky high.

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    Only if the expenditures to pay for the insurance premiums would be authorized by legislative branch. – user4012 Oct 2 '13 at 0:52
  • Which Congress probably wouldn't do since it would straight up acknowledge their own ineptitude in managing a cash flow. Hmm. This might be an answer if nothing better comes along in the next few days. – LateralFractal Oct 2 '13 at 1:40
  • I'm not sure there are any current laws on the books about hypothetical insurance offerings. – user1530 Oct 2 '13 at 6:25
  • Or laws about whether an agency may shunt some of their operating budget into cash-flow insurance if such was hedging available? I wonder if Congress simply assumes that agencies squirrel reserve money in a mattress instead using of more sophisticated risk management practices. It would be in-line with Congress' own level of risk management (except their mattress is an airbed). – LateralFractal Oct 2 '13 at 6:57
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    it's a general principle that you can't buy insurance for an event you have control over. If such insurance were available, then all government departments could buy it, and then government could be run permanently using the payouts from the insurance company. Clearly something the insurance companies are not going to permit. – DJClayworth Oct 3 '13 at 15:41
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DJClayworth caught the crux of the issue.

In theory, purchase of such insurance is possible; however the insurance cannot actually exist for two reasons.

  1. Attempting to price the insurance is impossible due to the shape of the risk curve. There's no maximum payout, so integrating under the curve produces an infinite result, resulting in an infinite premium.

  2. As a general principle of insurance, you cannot purchase insurance for events you are in control over. This would apply to the United States as much as any other. While this is indeed written into the law, it exists independently of the law and no competent insurance company would offer such insurance anyway.

Now, someone else could purchase insurance against a government shutdown, but not the federal government or any of its departments.

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