It's always safe to assume we are fucked even if it's going to be just partially :P It's not only our paranoia and attachment to privacy (reasonable or unreasonable as they might be), it's also the fact that the authorities are not too likely to relinquish that power that easily. Whatever the technology, I'm sure the government would do its best to stay in control of it for both self-serving and possibly legitimate reasons.
But despite my partially irrational attitude and knee-jerk reaction to this idea, I can in no way deny it's utility in achieving the goal you have proposed for it. Sure, it will have side-effects, but its potential effectiveness is out of the question, at least in my book.