The papers are full of pieces deploring the debt the US government is accumulating under the Trump administration. However, we can know that these people are not serious because they never take into account the implicit debt created by the granting of patent and copyright monopolies.

The story here is a simple one. The government grants these monopolies as a way of paying for research and creative work. What is at issue here is a simple logical point that cannot be disputed by honest people.

Suppose the government were to spend another $400 billion this year on biomedical and other research and creative work. This means that the deficit and debt would be $400 billion larger because it paid out more money to corporations and individuals for this work. That’s very straightforward and all our deficit hawk friends are running around yelling and screaming over this additional debt burden.

Now suppose it grants patents and copyrights this year that will add an average of $50 billion a year over the next decade to the price of prescription drugs, software, and other protected items. Ignoring interest and discounting, how is that different from adding $500 billion to the debt?

In the case of the debt, we are obligating the government to make payments to the bondholders. In the case of patents and copyrights, we are requiring taxpayers to pay more money to drug companies and software makers. That is in effect a privately collected tax.

Perhaps people feel better about being taxed by Pfizer and Microsoft than by the government, but if we care about the impact on living standards as conventionally calculated, the two are the same. (To head off one excuse, no, the patent/copyright rents are not optional in any way, as taxes, in general, are not optional. After all, the government could have excise taxes on drugs and software. No one would say that changes the debt story at all.)

Anyhow, any deficit/debt monger who doesn’t talk about the cost of patent and copyright monopolies is just being a political hack. They are not making serious economic arguments.

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