NSA tech spying hurts economy, senator says

PALO ALTO -- A leading Senate critic of online surveillance wants the government to stop widespread spying on phone calls, texts and emails, saying the "digital dragnet" doesn't make the country safer, and only hurts the U.S. economy.

"When the actions of a foreign government threaten red-white-and-blue jobs, Washington gets up at arms. But, even today, almost no one in Washington is talking about how overly broad surveillance is hurting the U.S. economy," said Sen. Ron Wyden, D-Ore., in remarks prepared for a Senate Finance Committee event in Palo Alto, California on Wednesday.

Wyden convened the roundtable, which also includes Google Executive Chairman Eric Schmidt and top corporate attorneys from Facebook and Microsoft, to discuss the economic fallout from the surveillance programs revealed last year by former National Security Agency contractor Edward Snowden.

Tech executives and industry experts warned those revelations would hurt Silicon Valley companies by making consumers and business customers fearful that U.S. companies can't protect sensitive data from government prying. Some analysts estimated last year that U.S. tech companies could lose tens of billions of dollars in sales, particularly after European firms began marketing themselves as being more secure than U.S. competitors -- or less vulnerable to legal demands from the U.S. government.

"We're going to end up breaking the Internet," Google's Schmidt said in his opening remarks, complaining that U.S. programs have prompted some foreign governments to talk about requiring Internet data and services to be housed within their own countries. He said Germany and other nations have lost trust in America, "and it's affecting our industry very strongly."

Most of the reported impact, to date, has been anecdotal. A few companies, including Cisco and Qualcomm, have said they believe they lost some deals in China and other emerging markets because of concerns about U.S. spying. Tech startups and telecommunications companies in France and Switzerland have claimed an increase in sales to customers who are wary of U.S. providers.

It's difficult to quantify the losses because "companies don't always know about the deals that they weren't invited to be a part of," said Daniel Castro, a senior analyst at the nonprofit Information Technology and Innovation Foundation. Castro estimated last year that losses to U.S. tech companies could amount to $35 billion by 2016. He said this week he believes his estimate is still valid.

Wyden has called for strict controls on the NSA and has complained that a pending reform bill, authored by Sen. Patrick Leahy, D-Vt., doesn't go far enough to restrict so-called "back-door" or warrantless searches of emails and online communications by Americans. The Obama administration has endorsed the Leahy bill, while defending government surveillance programs as narrowly defined and necessary for tracking foreign terrorist suspects. Wyden is backing a separate bill that would increase the authority of the government's new Privacy and Civil Liberties Oversight Board.

A coalition of leading online companies including Google, Facebook, Apple and Microsoft are urging Congress to pass reform. The companies say they've also taken steps to beef up their own security measures, through encryption and other methods intended to rebuff snooping by individual hackers or government agencies.

That's put Silicon Valley at odds with federal authorities. Attorney General Eric Holder, who announced last month that he is leaving the Justice Department, has complained that recent encryption moves by Apple and Google could hinder vital law enforcement investigations.

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NSA tech spying hurts economy, senator says