Some countries have (or had) laws or articles in their constitution that mandate that time is kept according to earth's orbit and rotation. We want everyone to use the same time, so UTC is the compromise to use atomic time but to regularly adjust it by whole seconds to keep it within one second of astronomical time.

I'd prefer to use TAI (international atomic time), but if that meant that some places use IAT and some use UT2, requiring us to keep track of time offsets of a couple thousand milliseconds that change daily, that would be much worse. UTC is a fine compromise

It generally isn't really, which is why the powers that be have decided to abolish the leap seconds (at the latest in 2035). There's a notice period to adapt the few systems that do care.