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Doesn’t meaningfully change the answer. There are still tons of edge cases with catastrophic failure modes. The transponder won’t tell you about the alligator on the runway, a vehicle where it shouldn’t be, unexpected braking action, a mechanical problem, or a plane not doing what it was cleared to do. Tracking the planes is the easy part.

The reasons we haven't automated air traffic control are similar to the reasons why we still have pilots in the cockpit even though we technically don't need to some of the time.

The thing is... not everything you need to track, not even all airplanes, will have transponders.

Sometimes the transponders will be faulty, sometimes you have to direct a broken aircraft safely to the ground with no transponder available.

And sometimes you are doing ATC for a zone that does not, in fact, require transponders (those are required only for the strictest controlled zones, not in general)