You're overestimating the competence of government.
Incidentally, I love the mentality that says that the USG is using optical splitters to record all the traffic on the Internet, built a data center sufficient to archive it, built the database technology sufficient to enable the entire NSA and FBI realtime access to that data, compromised SSL CAs, but is too dumb not to tell strangers about their secret programs on random visits.
It's like in the movies, when the evil mastermind has the hero tied to a chair suspended over the laser shark tank, but monologues long enough for the hero to find a way to escape.
The group of people that are doing this random visits are not imbued in the same culture of secrecy as the NSA. Furthermore, the larger a program, the more and more casual a group of people are going to be about protecting it. It's the fault of our social programming -- if nearly everyone I deal with on a daily basis is in on a secret, I am far more likely to share that secret. This is probably the reason that nobody talks about their own secret projects at the NSA.
Your line of reasoning was what I used to assume about the type of NSA style data collection: "Gathering and using data information about every American would be an immense task, requiring lots of people -- if such a program existed, we probably would have found out about it now."
It turns out -- we are finding out about it for precisely that reason.
http://www.huffingtonpost.com/2013/05/07/tim-clemente-fbi_n_...
http://www.fbi.gov/news/testimony/going-dark-lawful-electron...
http://www.huffingtonpost.com/2013/03/28/fbi-surveillance_n_...
Edit: Note that this was well before the PRISM leaks.
Which makes me wonder, how do county police get access to a reporter's search history?
This is how spying works in general--find one of the inevitably many people in a secret organization who will, in the right compromised situation (alcohol, a romantic affair, etc.), brag about their knowledge of state secrets.
Or look at Bradley Manning, who among other things exposed the fact that low level operatives have access to far more secret data than one would have imagined. His motivation (which led him to release all the data) differed from the organization's overall motivation in an extreme way.
That's not a mentality, that's being aware the USG consists of millions of people, exactly the opposite of
It's like in the movies, when the evil mastermind has the hero tied to a chair
So yeah, this part of the story is entirely plausible to me.
Government is neither competent nor incompetent. It is a vast collection of organizations composed of humans that vary from grossly negligent paycheck collectors to shockingly effective strategic geniuses. Bureaucracy is the friction inherent in the system; different people clog and lubricate its workings to different aims, which range from the purest altruism to the most cynical abuse.