AI is coming! AI is coming! Ok, ok. Eakinomics gets it. AI is a potentially transformative set of tools, although as yesterday’s missive indicated, businesses see a modest impact in the near term. Nevertheless, there is a whole set of proposals premised on the notion that everything will be different.

The unemployment insurance system will be unable to handle the tsunami of layoffs. Work will be wiped out, necessitating a government program of universal basic income. Tax systems will have to be re-invented when paychecks disappear. The list could go on and on. And it is all bunk.

In April 2020, 20 million workers lost their jobs and the unemployment rate jumped by 10 percentage points. One month. That is a knockout punch that AI will not match. The U.S. unemployment systems survived. Unemployment insurance got expanded – the self-employed, for example, got covered – was made more generous, and lasted longer due to emergency legislation. There were lots of challenges, but the system certainly survived. It will survive AI as well. One can make the case for a whole variety of reforms, but that has nothing to do with the source of the newly unemployed.

When AI replaces a worker, the job still gets done (or more), the product or service is delivered to the market, and the income is generated. If it does not flow to the remaining workers, labor income will be lower. But it will accrue to the owners of the firm in the form of greater capital income. The individual and corporation income tax bases include labor and capital income. Sure, the mix might be different and the rates may need to be adjusted, but there is nothing about AI that means the U.S. tax system will somehow fail. Now, it may be the case that there is a shift to more capital income and this will make reliance on payroll taxes less desirable. But the system as a whole will not crumble.

Finally, the Unites States has an elaborate system of support for low-income individuals that includes Temporary Assistance for Needy Families, Medicaid, Supplemental Nutrition Assistance Program, and so forth. None of those depend on how the families came to be in need of support. If the cause is AI, why does the system need to be ripped up and replaced with a universal basic income? It doesn’t.

The notion that federal tax and income support programs need to be ripped out and replaced because of the arrival of AI is simply fuzzy thinking. Or, it is people using AI as a means to scare others into making changes they want anyway. In either case, any reforms should be on the merits of the design, and not on the source of new pressures.