One of the problems with widespread monitoring is the huge incidence of "false positives". This example from the University of Massachusetts is instructive and a bit chilling to those who have commented upon it.
A senior at UMass Dartmouth was doing a research paper on communism in a class on fascism and totalitarianism. As part of his research, he requested a copy of Chairman Mao's Little Red Book using the interlibrary loans system. (Why a major univeristy library does not have its own copy of the book raises completely different questions.) Instead of the book, he received a visit from officials from the Department of Homeland Security. The agents told the students that the book is on a "watch list". Actually, the agents brought the book with them, but did not leave it with him.
Privacy advocates aren't generally pleased with any watching of what people read, but the chilling effect of this is significant. The professor who teaches the class has decided against teaching a planned class on terrorism because he does not want to put his students at risk of this sort of surveillance and profiling.
Read the coverage here: Agents' visit chills UMass Dartmouth senior: 12/ 17/ 2005, Student Gets Surprise From Mao's Book. Some comment here: Gardistan in Vision: Political censorship in Bush's USA, The Dark Wraith Forums: Special Report: Feds Question Student for Requesting Book of Mao Tse-Tung Quotations, Villa Beausoleil: Fascism comes to New Bedford, David Farrar: Book Monitoring.
UPDATE: There is speculation at Boing Boing that this story is a hoax. Boing Boing: DHS agents visit student over Little Red Book - HOAX DEBATE. As I hear more, I'll post here.