The collective cost, time and effort to migrate AM stations to an expanded FM band given the present state of broadcast radio in the US would be the biggest boondoggle of all time in the arena of broadcasting (exceeded only, perhaps, by the advent of HD!)...virtually all existing home and car radios would be incapable of picking up the new signals and stations would have to put in new towers and transmitters probably simulcasting on their current AM facilities and on and on and on---and for what? The general economics of the business for individual stations in small-to-medium markets are not favorable and the younger generation no longer listens to radio (not to mention reads books, magazines or newspapers or visits a library or watches TV for the news)...let's face it, the world has changed... AM was and that's life...
True, but it could be phased in over time. An expansion of the all-channel receiver act to require expanded FM coverage on receivers would have to be the first thing to be done. Many receivers in use in the US and Canada actually have the electronics in them to receive 66-108 MHz - only the reception is disabled by a jumper wire (this makes it easier for the receiver factories to use one design in all world markets). The law would be necessary because too many people in high places wouldn't want you to be able to buy an expanded band radio (much as many radios sold in the US circa 1990-2005 actually have AM stereo - again disabled by a jumper wire).
While 76-88 MHz has only 60 channels versus the AM band's 117, I believe it could actually house all the AM stations, due to FM's capture effect and the lack of skywave skip >99% of the time. Major markets would have to have 400 kHz spacing (of course, if expanded FM were to also go below 72, to 66, 60 or even 54 MHz, expansion would be possible).
Phasing the change over time could look something like this: For about three years, AM stations would build their VHF-low FMs while they continue to operate their AM facilities as they have been doing already. After then, the AM facilities would be packed into about half the current number of channels, usually using omnidirectional antennas, most operating like Class C stations at night. This change would be done in June to minimize immediate impact.
The cleared AM channels would house the first of a number of nationwide long-range franchises, each using 3 or 4 adjacent channels, 5 kHz audio cut, with the ability to install a network of simple daytime or and/or more complicated synchronous carrier directional fulltime transmitters for broad coverage (this would be ideal for Radio Disney or any Spanish language network in the US, or for Première Chaîne coverage of all Canada, for examples). It may be possible for such a new service to have 15 kHz audio range, using audio harmonic regeneration.
After another 2 or 3 years, the local AM transmitters, not as significant with all radios <6 years old having all-channel FM, would be daytime-only (at this point, a lot of stations would choose to shut them down anyway), clearing the whole AM band for long-range service. Two more years and the whole old band is available for long-range radio day and night, with mandatory shutdown of the few remaining local daytime transmissions.
Of course, this can't happen because the investors DON'T WANT the problem fixed, they do not want any new stations or revitalized existing stations to threaten the value of their investments. For the past 30 years, the government exists to serve the investor, not the public, so a huge political shift would be necessary for any improvement to be carried out.