I don't think the government themselves are prepared for the amount of identity theft that is going to follow mass collection of government documents.
1. The current situation isn't that apocalyptic.
2. The alternative is so much more horrifying.
The first is a weaker argument because there is always a bottomless bag for the opponents to reach into and grab counterexamples. But none of these things are new. It's been 30 years since the average person could freely communicate with anyone in the world over the internet. 20 or so since the maturing of online scams. Probably at least 15 since nation-level actors started using the internet for propaganda purposes. The elephant in the room is AI, but I feel like AI use has diminishing returns, much like in any other fields. It offers a quick boost, but it's not infinitely scalable. The internet can't be completely taken over by scams and garbage in a way where everyone just keeps consuming it and goes crazy in their own ways. It's almost an ecosystem - pour too much garbage in, and you'll see people retreating into private communities and self-enforce trust, no universal carding necessary. Right now it's just tech people doing this on a large scale, but at a certain point of misinformation and incomprehensibility, treating the internet as untrustworthy by default would just become a mainstream view. It would likely fracture into massive social networks with strong identity verification and small communities that enforce trust in their own ways. As much as I don't like most private businesses, but your suggestion that they could take upon the role of the verifier is more palatable to me because that still leaves air in the room for small, private communities, and because businesses don't have perfect communication with each other or the government, preventing the universal tracking of everything.
The second argument is the real one. Technology would enable governments to track absolutely everything about everyone if we let them. Now this is a space where AI actually provides a novel use case - if before you had to have suspicion about a specific person and have someone look into them, AI will enable them to inspect everything and then form suspicion or document undesirable behaviors by default. It will be like having a personal private investigator that sees everything you do, being on the lookout for anything unusual 24/7. Online identity verification is nothing like having a SIN or a driver's license, because those two are used in specific contexts and don't enable tracking-by-default. The internet is used for ALL communications, so automated tracking of it is tracking of everything we do and say. Instead of showing your driver's license to the officer one time in a defined spot, the officer would come to you because your driver's license is etched into your skin for all to see at all times, and they're concerned about your recent movements that were automatically recorded and processed by a billion cameras. It would be a world without secrets, a world of perfect knowledge and ruthless enforcement. I don't want to live in it. I'm fine with the current world, thank you.
Does an entire society have to make the same choices of autonomy and record keeping that are common among members of the uniformed services? Mostly in the West, the answer was "No" but, here we go again.
The other side would make this exact same point about vaccine proponents. How can we differentiate one argument from the other?
Well, because the issue with vaccine doubt, is misinformation. It's disinformation, spread for either profit (followers on youtube), or foreign actors working to reduce the cohesion of the West's societies.
Russia? China? Iran? None of these countries, even together, stand a chance militarily against the West. But if you cannot beat them militarily, you must weaken them from within. So confusion. Distrust. Pour fuel on the fire of any differences between sectors of a society. If you can weaken your political enemy, they it ceases to become a threat. Even better if you can trick your enemy into fighting itself!
It's no secret that a lot of countries are engaged in disinformation campaigns against the West. If you can cause your competitor to have plagues, when they were preventable? Well, that ties up resources, reduces productivity, and so forth.
I honestly believe that much of ID verification on the Internet is about this. A healthy society can handle outliers, handle internally created disinformation. Not so, if 1 guy in a foreign country seems like 1000 youtube channels. And you can see this everywhere. A video with a TTS voice, which is now progressing to entirely crafted video from scratch. Now anyone from China can look like a US citizen, going on about the woes of vaccination.
But if you can identify every person, and they can be sued for slander, libel, or criminal acts? Then you're back to normal, internal, citizen protest. EG, your normal crazies. And it can't be stated enough, there are a lot of marginals. Those "on the fence". If they hear enough nutty stuff, they move into almond territory too.
In the end, China, Russia, Iran won't be truthful or play ball, or will undermine attempts with fake IDs willfully issued, so they'll just get cut of entirely. The West will likely sign treaties.
So. Identity verification, is actually an answer to the vaccine issue. After all, we didn't have this level of issue until crazy Internet posters caused it. Although, to be fair, Elvis Presley is who helped convince youth to get the original polio vaccinations.
One way to look at it, is like driver's licenses. Before them, there was no way to stop a person from legally driving on the road. Take it away, and now they could be fined, jailed, etc for driving "without a license". A few bad actors were just unrepentant, and suddenly everyone could be carded, ID required, just to get around. This is like that. A bad result, eg ID on the net, but the attempt is likely to solve 100 internet pains.
I think if we have any sense, we'll come up with a best-privacy-laden method to allow this to happen. Because I cannot see how it will go away. If we can steer it, make it palatable. make sure it cannot be used by industry to track us, etc., it would be at least a partial win.