The silver lining is that by the time this project goes through study after study, development, testing, and finally deployment 5-10 years will have passed and the Internet will fundamentally change in ways that either makes this instantly irrelevant or impossible to enforce.
We need a publicly-controlled identity infrastructure that's compatible with the Internet. The problem isn't that internet ID is somehow evil, but rather the government.
No one group of people should ever be allowed this much power.