Finance

Brett Kavanaugh Is Your Very Real Chance To Be More Financially Successful Than A Supreme Court Justice

We'll simply point it out: Brett Kavanaugh really sucks with his money.

By Jonathan Wolf on September 12, 2018 10:03 am

(Photo by MANDEL NGAN/AFP/Getty Images)

Ed. note: Please welcome Jonathan Wolf to our pages here at Above the Law. He’ll be writing about issues related to the intersection of law and finance.

Surely our great American republic is unique. Where else can something like Congressional committee hearings simultaneously function as a popcorn spectacular and a proceeding of grave importance to the direction of the nation? Last week, the Brett Kavanaugh confirmation hearings covered a range of things both more entertaining and more likely to affect the lives of thousands of Americans than the guy’s credit history. Yet, this is a column about finance and the law, so I’ll leave the high amusement and existential questions to my better-informed colleagues, and simply point out that Brett Kavanaugh really sucks with his money.

But, you may protest, he owns a house worth $1.2 million! Surely that qualifies as wealthy? Well, yes, to a debt-laden first-year associate struggling to afford avocado toast, or to the vast majority of us economically anxious real American types out here in the dusty middle states, saving enough for a down payment on that type of home would be quite a financial accomplishment. But Brett Kavanaugh is a federal judge who has had a guaranteed six-figure income for decades. And it’s not like he owns his home outright; the bank owns most of it. According to his July financial disclosure form, Brett Kavanaugh’s personal residence is worth $1,225,000, but his mortgage balance sits at $815,912.

Thanks to 5 U.S.C. § APP. 4 § 102, we can learn a lot about Brett Kavanaugh’s underwhelming financial health. That is the statute describing the required contents of the financial reports which must be filed by certain federal officers and employees, including Kavanaugh. In a nutshell, he must report income from any source other than his federal employment, along with all assets and liabilities. For investment income, he only has to indicate what he received within certain incredibly vague ranges, but Kavanaugh avoided that vagueness problem entirely by just not having any investments.

Let me repeat that. A 53-year-old, besuited white guy with the baby-smooth cheeks of a man who definitely doesn’t have to replace his razor after dragging it across his face three times, and who is a Republican Supreme Court nominee, does not have any investments. He has $26,989 in cash, apparently sitting in a Bank of America account, and no non-retirement investment accounts. These are the types of guys investment income was made for! Two hundred years of old white guys went to the trouble of rigging the financial system in his favor and he’s not even taking advantage of it. Weird.

To be fair, Kavanaugh does have nearly half a million dollars in his federal thrift savings plans (the federal employee equivalent of civilian 401(k)s). For some reason he still has $2,154 in the Employee Retirement System of Texas Texa$aver program too that I guess he just never got around to rolling over (and I’m not making up that name, they really spell it with the dollar sign, because Texas wants the Kesha-before-she-matured type of retirement savings program). Half a million in retirement savings is not a pittance compared to the average American’s retirement accounts, and given that he is probably going to remain employed until the steely grip of death rips him from his cushy position within the federal government, perhaps saving is not as important for him as it is for most of us. As an Article III federal judge with a lifetime appointment, Kavanaugh already has what has been accurately described as the position with the best job security in the history of civilized society. Still, Kavanaugh seems to enjoy the finer things, as evidenced by his penchant for stupidly expensive baseball tickets and country club memberships. If he were less terrible at investing, maybe he wouldn’t have to finance his spending habit like he does, with crippling credit card debt and unwise loans against his retirement savings (his debts, other than his mortgage, were rapidly and mysteriously paid off before his latest round of financial disclosures, some of them purportedly by being “reimbursed” from unnamed third-party friends for the baseball tickets he had purchased). I guess even though Kavanaugh aspires to be an originalist, he forgot that Benjamin Franklin wrote, “So rather go to bed supperless than rise in debt.”

Let’s do a thought experiment. Kavanaugh has been on the D.C. Circuit for more than a decade. We’re going to ignore the extra income he made (including close to $30,000 a year for teaching at Harvard over the last few years), and pretend he had saved and wisely invested just five percent of his judicial salary during just his last 10 years at the Court of Appeals. We know exactly what he made in salary for each of the last 10 years thanks to the handy judicial compensation table from the U.S. government. And we’re going to be making a few assumptions and do some rounding to make the math easier. For instance, we’re going to look at a raw five percent rather than an after-tax five percent (he makes plenty to pay the taxes and still save the five percent), we’re going to compound returns annually and pretend he dumped the five percent into his fund at the beginning of each year (which isn’t exactly how it happens in real life but close enough for our purposes), and we’re not going to factor in the expense ratio of the investment fund (which currently stands at next to nothing, 0.04 percent, anyway). Finally, we’re going to use the Vanguard 500 Index Fund Admiral Shares fund, which tracks the S&P 500 Index, as a proxy for any reasonable, safe, and relatively boring passively managed mutual fund he could have chosen. The 10-year average annual returns on that fund at month-end as of the end of August was 10.85 percent.

By my caveman math, investing just five percent of his salary over the last 10 years in a very milquetoast mutual fund would have allowed Kavanaugh to report a non-retirement investment asset worth in the neighborhood of $180,314.91. After amassing such a sum, withdrawing his annual investment income on that fund alone would have been enough to get him into the fifth vague reporting tier under 5 U.S.C. § APP. 4 § 102(a)(1)(B) for his Supreme Court financial disclosures. Had he fully cashed out after 10 years, even after paying his capital gains tax, he could have easily covered his initiation fee for the Chevy Chase Club and his Washington Nationals tickets. Or, you know, he could have spent the money on something less dumb.

If confirmed, Kavanaugh will be the least financially successful member of the Supreme Court. Don’t be like Kavanaugh. You should be maxing out your tax-advantaged retirement savings accounts as soon as your salary allows you to, and he hasn’t done a horrible job on that. But unlike Kavanaugh, you don’t have a lifetime tenure, you aren’t virtually unfireable, and you don’t have rich friends poised to bail you out of your financial woes because they like the ideological influence you could have on the country. You need to be smart about your non-retirement investments, because a lot of things will happen between now and when you retire. You can afford to save and invest a measly five or 10 percent of your income in addition to retirement savings. It’s insulation against everything going on in the world, and everything going on at your firm, for that matter. You’ll feel more secure, because you will be.

Plus, if you’re anything like me, it will give you the chance to call your dad, who is a retired janitor, and say, “Hey dad, guess what? I have more non-retirement investment assets than some guy 20 years older than me who’s up for a position on the Supreme Court. And he took out credit card debt to buy baseball tickets for his friends. What a dumbass.” And you won’t be able to see it, but your old man’s going to do that gruff nod of approval on the other end, because he knows he didn’t raise no fool. Trust me, it’s going to feel good.

Jonathan Wolf is a litigation associate at a midsize, full-service Minnesota firm. He also teaches as an adjunct writing professor at Mitchell Hamline School of Law, has written for a wide variety of publications, and makes it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at [email protected].