Economic Impact to Communities of AI, Robotic Replacement, and Immigrants

Recent announcements by Amazon and other major companies that they intended to layoff significant numbers of workers to be replaced by AI and robotics got me thinking of the economic impact to communities of these losses. The immediate impact is an increase in the stock price for the company, which makes the market happy, as the bottom line increases.  Beyond that, however, the salary and tax losses cause significant negative impacts on the communities where employees lived.

The surge in artificial intelligence adoption between 2024 and 2026 represents more than a technological milestone; it signals the definitive onset of what has been called the Fourth Industrial Revolution. Unlike previous industrial shifts that focused on physical mechanization, this era integrates "intelligence" directly into production via AI and blockchain, fundamentally threatening the labor-based tax models that have sustained modern social safety nets for nearly a century. "Nearly 3 in 10 companies said they’ve already replaced jobs with AI, and by the end of 2026, 37% expect to have replaced jobs with AI.(1). For example, Intel is replacing about 15,000 workers as they move to AI chip production and Amazon plans to reduce middle management and bureaucracy by using more AI. One source (2) reported that "leading U.S. corporations have announced significant layoffs in 2025 and early 2026, collectively affecting hundreds of thousands of employees. Many cuts have targeted corporate, technical, and administrative roles that companies believe can be streamlined through automation and AI tools. . . .Companies are widely investing in artificial intelligence to automate routine tasks and accelerate innovation. This has made certain jobs redundant — particularly in corporate services, customer support, and middle management. AI‑related cutbacks accounted for thousands of layoffs in 2025 alone, underscoring how technology adoption now directly influences employment decisions.

The transition to AI-driven organizational models creates impacts well beyond advantages to the corporation. When corporations replace taxable human payroll with automated systems, they capture "efficiency gains" that are currently untaxed at the source of labor. This creates an immediate deficit in federal and local social insurance programs and infrastructure spending, as the high-volume payroll taxes that fund the social contract are traded for corporate capital gains that lack equivalent redistributive mechanisms.

Federal benefits, such as Social Security and Medicare—operate on a "payroll tax dependency" model. These systems require a stable ratio of human taxpayers to beneficiaries to remain solvent. Approximately 50% of federal revenue is derived from income taxes, meaning the replacement of human workers with AI agents is an existential threat to the mathematical framework of these programs. Coupled with current administration policy to remove all immigrants regardless of status and a declining birth rate, the math becomes clear and inescapable.

The declining taxpayer-to-beneficiary ratio is reaching a critical breaking point. While the expansion of capital gains may benefit shareholders, it does not automatically replenish the Social Security Trust Funds, which are legally tethered to payroll contributions.

In 2024, AI created an estimated 119,000 direct jobs, such as AI engineering and data center construction, which technically exceeded explicit AI-related layoffs for that specific year. However, this equilibrium is a mirage.

The World Economic Forum (WEF) projects that 92 million jobs will become obsolete by 2030. The small volume of high-skill AI jobs cannot replace the lost tax revenue from millions of middle-management and operational roles.  Research indicates that for an automated economy to sustain the social safety net without human payroll, AI must be five to seven times more productive than current systems.

This productivity gap is the crux of the solvency crisis. New high-tech jobs are a temporary reprieve, not a solution. Unless AI productivity reaches that 5–7x threshold and policy levers are adjusted to capture that value, federal social insurance programs face an accelerated timeline to insolvency, as the tax base evaporates faster than the aging population exits the workforce. Coupled with an enormous decline in revenue lost from taxes paid by undocumented workers, (4) and the future becomes even bleaker.

Impact on local communities is substantial.  In 2026 the shift to AI systems in agriculture is having severe impacts on communities.The direct cost is the displacement of migrant and seasonal labor. A strawberry harvester can replace 15-30 workers. Most of those workers lack unemployment insurance, access to retraining, and mental health support.Indirect costs drain the resources of rural communities who host these workers about 4-8 months during the year. Seasonal workers spend a large percentage of their earnings on clothing, food, and supplies.  Without them local stores lose up to 40% of their annual income. Seasonal housing becomes vacant and falls intro disrepair. School enrollment falls leading to less assistance from the state. For every $1000 in wages lost, $1400 in economic activity is lost to the community. (5)

 A 2025 study from the Richmond Fed notes that for every high-wage job lost, there is a "downstream" decline in local service jobs. Displaced workers stop spending at local restaurants, gyms, and retail stores, causing a second wave of layoffs in the service sector. As property values potentially decline and income tax revenue drops, the local government’s ability to fund schools and infrastructure is weakened, which can lead to a "death spiral" for small manufacturing towns. (9)

Solutions are not obvious. The central tension for fiscal policy is capturing automation-driven value without stifling the innovation essential for competitiveness. The debate centers on the "Robot Tax" versus broader corporate reform. Andrew Yang, Bill Gates, and others have suggested taxing robots. (7) Others recommend a focus on taxing productivity gains as making more sense.

Defining a "robot" is technically complex. When we think robot we envision those magnificent, unstoppable machines in auto factories that do everything better and faster without asking for time off or bathroom breaks. But ISO 8373 defines industrial robots much more broadly, as "reprogrammable, multipurpose manipulators," this fails to account for software-based automation like Microsoft Word’s grammar check or accounting algorithms. Taxing physical machines creates a disproportionate burden on manufacturing while exempting the service sector’s digital automation. Taxing the machine is elusive.

Overall, robots have a mixed effect: replacing jobs that relatively high-wage manufacturing employees used to perform, while also making firms more efficient and more productive, an MIT article reported (8) Some areas are most affected by the mixed impact of robots. “In the U.S., especially in the industrial heartland, we find that the displacement effect is large,” he said. “When those jobs disappear, those workers go and take other jobs from lower wage workers. It has a negative effect, and demand goes down for some of the retail jobs and other service jobs.

Automation fundamentally shifts the infamous Laffer Curve.(6) In a human-only economy, tax revenue peaks at a certain rate; however, automation shifts this curve upward and rightward. Because machines do not require incentives to work and increase productivity margins, the state can responsibly increase corporate tax rates to achieve a higher peak of total tax collection than was possible in the pre-automation model, without losing the incentive for firms to automate. The superior alternative is to treat automation as a driver for higher corporate tax rates on efficiency gains, ensuring that the shift from labor to capital does not result in a net loss to the public treasury.

The systemic bias where capital investment in software/equipment is taxed at approximately 5%, while labor is taxed at over 25% needs to be addressed. Eliminating this disparity removes the artificial tax incentive for firms to automate solely for tax avoidance.

Companies received substantial tax benefits by agreeing to build in a community, often promising wildly optimistic predictions of the number of jobs that will be created. Communities should require that any tax benefit be reduced in proportion to any lessening of the number of jobs created. For example, if a company promises 1000 new jobs but only 500 result, the tax benefit would be reduced by 50%.

Policymakers must aggressively decouple social funding from human labor to prevent the collapse of the nation-state model and ensure that the wealth of the "machine economy" is reinvested into the human economy.

(1) https://www.hrdive.com/news/companies-will-replace-workers-with-ai-by-2026/760729/#:~:text=This%20audio%20is%20auto%2Dgenerated,September%20report and 

 https://www.resume.org/6-in-10-companies-plan-to-lay-off-employees-in-2026-amid-economic-uncertainty%20by%20Resume.org.

(2) https://economictimes.indiatimes.com/news/international/us/why-are-amazon-intel-microsoft-and-17-others-cutting-165000-jobs-now-a-massive-structural-shift-is-hitting-the-u-s-corporate-workforce-in-2026/articleshow/127160433.cms?from=mdr

(4)According to 2024 and 2025 reports from the Institute on Taxation and Economic Policy (ITEP) and the Tax Policy Center, undocumented immigrants contribute billions annually:

• Total Annual Contributions: Undocumented immigrants paid approximately $96.7 billion in federal, state, and local taxes in 2022.

• Federal Payroll Taxes: About 50% to 75% of undocumented workers have federal taxes withheld from their paychecks. This includes Social Security and Medicare taxes, even though these workers are generally ineligible to receive the benefits they fund.

• State and Local Taxes: Beyond income tax, undocumented residents pay sales taxes on purchases and property taxes (either directly as homeowners or indirectly through rent paid to landlords).

• Economic Impact: A 2025 study noted that in 40 U.S. states, undocumented immigrants actually pay a higher effective tax rate than the top 1% of households in those states.

 https://itep.org/undocumented-immigrants-taxes-2024/  

(5) https://cafarmtrust.org/the-economic-impact-of-cv-ag-a-case-study/#:~:text=UC%20Davis%20Ag%20Issues%20Center,other%20parts%20of%20the%20economy.  and https://laca.ucmerced.edu/#:~:text=Funded%20in%202021%20by%20the,to%20transform%20the%20workforce%20and

(6) See https://www.investopedia.com/terms/l/laffercurve.asp for an explanation of the Laffer Curve.

(7) "The case for taxing robots — or not  . Robots aren’t taxed on the paychecks they’re taking from human workers. Should companies be held responsible?" by Meredith Somers, Jun 14, 2019  https://mitsloan.mit.edu/ideas-made-to-matter/case-taxing-robots-or-not

(8) "A new study measures the actual impact of robots on jobs. It’s significant.   Industrial robots negatively affect jobs and wages. The impact varies by region and industry." by Sara Brown Jul 29, 2020  https://mitsloan.mit.edu/ideas-made-to-matter/a-new-study-measures-actual-impact-robots-jobs-its-significant#:~:text=%E2%80%9CIn%20the%20U.S.%2C%20especially%20in,jobs%20and%20other%20service%20jobs.%E2%80%9D

(9) "The uneven labor market impact of industrial robots   How are the effects of automation spread across the population?  " by Tyler Smith. https://www.aeaweb.org/research/automation-employment-gaps-us#:~:text=When%20robots%20displace%20manufacturing%20workers,hit%20minority%20workers%20particularly%20hard.

 

Review: Battle for the Marble Palace by David Bobelian

Conventional wisdom likes to pin the birth of today’s scorched-earth Supreme Court confirmation battles on the Democrats’ treatment of Robert Bork in 1987. But that story is too neat, and too late. The real turning point came nearly two decades earlier, and—like so many American political convulsions—it traces back to 1968. Mark Kurlansky famously called 1968 the year that changed everything, and judicial politics were no exception. As legal historian David Bobelian argues, the modern war on Supreme Court nominations begins not with Bork but with Strom Thurmond.

Furious at the Democratic Party’s embrace of civil rights, Thurmond bolted the party and vowed revenge. He blamed the Warren Court for what he saw as the dismantling of the Constitution—by which he largely meant the dismantling of Jim Crow. Brown v. Board of Education, the expansion of privacy rights, and rulings on school prayer were, to Thurmond, evidence of a runaway judiciary.

What made Thurmond different was his strategy. He openly urged conservatives to undermine the Court’s legitimacy and turn public opinion against it. Many of the Warren Court’s decisions were deeply unpopular, and Thurmond helped fuse a potent coalition—evangelicals, law-and-order voters, and segregationists—that would become the backbone of the modern Republican Party.

Into this volatile atmosphere stepped Lyndon Johnson. Eager to cement his legacy, Johnson persuaded Justice Arthur Goldberg to step down to elevate his close friend, Abe Fortas, to Chief Justice. This move proved a tactical disaster. Thurmond found an ally in James Eastland, the segregationist chair of the Senate Judiciary Committee, who wielded institutional power to stall the nomination.

The deeper grievance was not Fortas himself but the "one person, one vote" decision in Baker v. Carr, which threatened the gerrymandered districts of rural white power. When the Fortas nomination collapsed, it fundamentally changed the vetting process. As Nixon speechwriter Pat Buchanan wrote for a Nixon speech: “Now, because of the Fortas matter, I determined that the appointee should not be a personal friend.” This declaration wiped out the traditional pool of candidates—senators, governors, and cabinet officials—who were now deemed too vulnerable to charges of cronyism.

Nixon capitalized on this shift, using the "Southern Strategy" to reward his base. While his appointment of Warren Burger was smooth, his subsequent attempts to fill Fortas’s seat with Clement Haynsworth and G. Harrold Carswell met fierce resistance from labor and civil rights groups.

Nixon’s aggression went beyond filling seats; he sought to purge the bench of liberals like William O. Douglas. In a precursor to modern partisan tactics, Nixon had the FBI tap Douglas’s phone and the IRS audit him. Future Vice President Gerald Ford led the public charge for impeachment, famously arguing that an impeachable offense was "whatever a majority of the House of Representatives considers it to be at a given moment in history." Though these efforts to remove sitting justices failed, the "inter-species pathogen" of politicization had crossed over. Nixon had forged a template for using the executive branch to reshape the judiciary for partisan ends, fine-tuning the focus on a nominee’s race, gender, or religion as political currency.

When Robert Bork finally arrived at the Senate in 1987, the battlefield had long since been prepared. The greatest irony was the role reversal: Strom Thurmond, the man who had pioneered the filibuster and the character assault against Fortas, now took charge of defending Bork.

Thurmond railed against Bork's opponents for "deviating from traditions," conveniently ignoring his own history of conducting "adult film festivals" during hearings to shame nominees or his relentless delegitimization of the Warren Court. He had violated the norms twenty years prior; now, he invoked them as a shield.

The confluence of these forces—the quest for ideological purity, the focus on identity politics, and the rejection of "crony" candidates—has left us with a hyper-politicized Court. Today, advocates on both sides have concluded it is far easier to influence five justices to push a political agenda than to appeal to thousands of legislators or the broader public.

The Bork hearings were not the beginning of this war; they were its inheritance. The rules had been rewritten in 1968, in an era where resentment over civil rights and a deliberate campaign of delegitimization converged to change the "Marble Palace" forever.

 

Further Proof I Have Never had an Original Idea

I just finished a book, Battle for the Marble Palace, review to appear shortly.  In the epilogue, the author mentions that in 1974,  just before his death, Earl Warren gave a speech at Morehouse College, in which he argued against a plan that would have created a "National Court of Appeals" that either I channeled in my sleep or must have read about and then forgotten, because it bears startling resemblance to what I thought was an original idea on my part.  Clearly, it reinforces the certainty that I've never had an original idea. *

This plan, which emerged in the early 1970s, was designed to relieve the "burgeoning caseload" of the U.S. Supreme Court. It was officially recommended in 1972 by the Freund Committee (the Study Group on the Caseload of the Supreme Court) (1), chaired by Harvard Law professor Paul Freund and appointed by Warren’s successor, Chief Justice Burger.

The proposed appellate body would have acted as a "buffer" between the existing Federal Courts of Appeals and the Supreme Court. Its key functions would have included: 

    Initial Screening: The new court would have screened all petitions for certiorari (requests for the Supreme Court to hear a case) and forwarded only a fraction (about 400) of the most "review-worthy" cases to the Supreme Court.

    Finality of Denials: Crucially, if the National Court of Appeals denied a petition, that decision would be final—litigants would have no further path to the Supreme Court.

    Resolving Circuit Conflicts: It would have the power to decide cases where different federal appeals courts had issued conflicting rulings, provided the issues weren't "important" enough for the Supreme Court itself.

Warren believed it would diminish the Court's standing, and that it would take away the right of every citizen to petition the highest court in the land. He was also against other structural changes that were being contemplated following Watergate. 

Specifically Warren said, ""The proposal to create a National Court of Appeals to screen cases for the Supreme Court would not only result in a loss of the Court's control over its own docket but would inevitably lead to a loss of the public's confidence in the Court as the ultimate protector of their rights."  Of course, losing control of its docket was one of the more positive features of the plan, in my opinion, as it would prevent the court from setting a "legislative" agenda, which is happening under the Roberts/Alito/Thomas Court.

I could not find the complete Morehouse Commencement address but found another speech in which he goes after the proposal arguing in part:

"The Supreme Court of the United States has not been immune from the destructive cynicism of our age. No one has yet suggested that it .be abolished outright. But in far more subtle and sophisticated ways, often masquerading under the guise of
procedural reform, there are those in the land who would have the jurisdiction and effectiveness of the Supreme Court substantially weakened. 

After the. mid-winter meeting of the House of Delegates of the American Bar Association, a plan to do exactly this was overwhelmingly endorsed after. a most superficial debate, which omitted any delineation or discussion of the details of the plan. All that we know is that the House of Delegates approved the bare contours of a plan to strip the Supreme Court of some of its vital powers to decide certain types of cases and to transfer those powers to a new court, a Mini Supreme Court.

Vagueness and impreciseness appear to be the hallmarks of the proposal. Even as late as April 1, when one spokesman presented the proposal to the Commission on Revision of the Federal Court Appellate System, the plan was shifting, hauling and tacking in some of its critical details. But, while some of the details may be unclear, the message conveyed has both loudness and clarity. The message is that the Supreme Court should no longer be allowed to exercise all of its authority to adjudicate cases that fall within its jurisdiction. 

The very essence of both proposals is that a new ad hoc tribunal should be established by Congress, a tribunal composed of lower court judges temporarily assigned on a rotating basis.  (2)

I appreciate that Edwin Chemerinsky, to whom I had sent the idea, was kind enough in his reply to simply suggest we didn't need another layer of courts rather than suggest I was just another dummy rehashing the past!

Partially, in my defense, the Judiciary Act of 1925, according to the Report, which permitted the Court to decide itself which cases were to be heard (until then they had to accept all petitions) assumed that the justices would give individual attention to all business brought to the court and receive the individual attention of every justice. (pg v) That has not happened as that responsibility has devolved to the clerk pool, it would seem.

References:

*https://rarebits.blogspot.com/2020/10/fixing-supreme-court-conundrum.html

(1) Freund Committee Report:
https://www.fjc.gov/sites/default/files/materials/44/Report_Study_Group_Caseload_Supreme_Court.pdf

(2) Santa Clara Law Review, Address Delivered by Honorable Earl Warren, Chief Justice of the United States Supreme Court, Retired, at the
Commencement Exercises of the Law School, University of Santa Clara, Santa Clara, Calif. - May 11, 1974 Address, 14 Santa Clara
Lawyer 740 (1974).
Available at: http://digitalcommons.law.scu.edu/lawreview/vol14/iss4/2

Summary of the 1972 Report of the Study Group on the Caseload of the Supreme Court

By the early 1970s, the Supreme Court had a serious problem that everyone could see but no one had really fixed: it was drowning in paperwork. The Study Group’s 1972 report is basically the Court saying, “We can’t keep doing this and still do our job properly.”

The report starts from a simple idea: the Supreme Court isn’t supposed to be just another appeals court. Its job isn’t to fix routine mistakes. Its job is to resolve the biggest legal conflicts in the country, keep federal law uniform, interpret the Constitution, and referee disputes between branches and levels of government. Those things take time, reflection, and real discussion among the Justices. You can’t rush them.

But the numbers show that rushing was exactly what was happening. Over a few decades, the number of cases filed with the Court exploded—especially petitions from prisoners and criminal defendants who couldn’t afford lawyers. By 1971, more than half the Court’s docket consisted of these in forma pauperis filings. Most had no merit, but every single one still had to be read and considered by every Justice. Meanwhile, the number of cases the Court actually heard and decided stayed about the same as it had been years earlier.

The result? The Justices were spending more and more time screening junk and less and less time thinking deeply about the cases that actually mattered. Conflicts between federal appeals courts were piling up unresolved. Cases that earlier Courts would have decided on the merits were now quietly passed over. Even when cases were decided, the report worries that the quality of deliberation was being squeezed by sheer exhaustion.

The report also makes clear that throwing more people at the problem won’t work. Adding more Justices would just mean more people to convince and more opinions to reconcile, without really reducing the burden. Relying more heavily on law clerks helps, but only up to a point. The Justices can’t delegate their core responsibility, and the Court shouldn’t turn into nine little bureaucracies run by staff. The Justices are supposed to deliberate with each other, not just manage memos.

A particularly blunt section deals with prisoner petitions. The report says, in effect, that we’re kidding ourselves if we think prisoners really get meaningful Supreme Court review. What they actually get is a few minutes of attention from an overworked clerk or judge. The authors suggest that it might be more honest—and more humane—to create a specialized system to screen and investigate prisoner claims seriously, instead of pretending the Supreme Court can do it well.

So what’s the solution? The Study Group’s main recommendation is a new institution: a National Court of Appeals. This court would sit between the existing appeals courts and the Supreme Court. Most petitions that now go straight to the Supreme Court would go there first. The new court would throw out the vast majority of cases, send the truly important ones up to the Supreme Court, and decide many inter-circuit conflicts itself. The Supreme Court would still control its docket—but it wouldn’t be buried alive by it.

The authors admit this would mean the Supreme Court giving up some control. But they argue that this is unavoidable. If nothing changes, the Court will still lose control—just in worse ways, by becoming more dependent on staff and less able to do its constitutional job. The report closes with a warning drawn straight from history: the Court has faced crises like this before, and Congress acted in 1891 and 1925. The early 1970s, the authors say, are another one of those moments. If reform doesn’t come, the Court will change anyway—and not for the better.

 

Review: The Whale: In Search of the Giants of the Sea by Philip Hoare

 

Part Mark Kurlansky and John McPhee, -- authors I love -- Eric Dolan has written an absolutely fascinating book about whales and the history of the whaling industry. Much as those authors bring quotidian things and events to life.  It's also part literary criticism and biography.

 

The first whaling was done by settlers who copied the Indians dismantling of stranded pilot whales along the coast. This was succeeded by shore-based whaling as the value of whale oil became apparent leading to taxation and division of the spoils according to detailed rules.  What happened, for example, when a whale washed up on the beach attached to a harpoon?  Who "owned" the whale? This led to marking harpoons and lances, much as lobster fishermen do to buoys today, to help identify who might own a share.

 

Gradually, as the Indians, who had performed much of the labor connected to whaling, died off from diseases brought back by those same ships, and as the value of the product rose immensely, blacks were hired to work. The case of Prince Boston was to have profound implications nationally. He was an excellent boat steerer, and having returned from a voyage was due the princely sum of 28 pounds, a substantial amount.  His owner, Swain, claimed the money belonged to him and when Roach, the ship's owner, who despised slavery, insisted on paying Boston directly, Swain sued. He lost in all venues. In the Mass. Supreme Court, Boston was not only awarded the money but also given his freedom.

 

Whaling leveled racial animosity. Escaped slaves would often seek out berths on whaling vessels as a way to earn money (they got equal wages with their white counterparts) as well as escape the depredations of the slave catchers. Most Nantucket whaling captains wanted nothing to do with racial animosity and valued their black sailors.  There were exceptions. One Second Mate who became captain after the deaths of the Captain and his First Mate, decided he could make a lot of money by turning his ship into a slaver and sailed off to Africa where he obtained a load of slaves, a profitable voyage, indeed.  Whale ships were designed to have lots of room in the hold making them well-suited for such evil transactions.

 

The story behind Moby Dick is interesting.  Melville had signed on has a hand on a whale ship for a 1/175th share (the whole section on how they were paid and the pittance ordinary seamen earned is revealing.) During a GAM -- when two whale ships met in the ocean they would hang our for several days mingling crews and exchanging gossip -- Melville met a young man by the name of Chase who recounted his time on the Essex, a ship that was rammed by a large sperm whale and battered until it sank. The few crew members who survived did so by consuming their companions. (See my review of Nathaniel Philbrick's In the Heart of the Sea: The Tragedy of the Whaleship Essex  .) Melville was so taken by the story he used it for, well, you know...  

 

The heyday of whaling was the 1850's before the discovery of coal gas and kerosene as alternative lighting options. The predations of the confederate raiders Shenandoah and Alabama which preyed almost exclusively on the whaling fleet -- they couldn't shoot back so it was easy pickings, destroyed many ships, but the great ice-in of 1871 and 1876, when with typical white man hubris they had ignored the warning of the Eskimos in the Arctic, not only destroyed many ships, but badly hurt the insurance industry which had to take the brunt of the losses. (The story of of 100 whale boat trek to open water is quite a story in itself.) The ever-increasing availability of oil and its refinements spelled doom for the whaling industry, which diminished to nothing by the end of the 19th century.

 

BTW.  You do NOT want to know how ambergris is formed and where it comes from.

 

Wonderful read.