The federal government has done a very bad thing by accessing the private data of so many individuals, and this is just more evidence that it's not to be trusted. However, the libertarian position of pure opposition to the federal government (or any government) does not provide the necessary protection of individual rights. Simply reducing the size or authority of government will not make us any more secure than we are now.
Let us assume that the libertarian position can be summarized as advocating for "the smallest government possible." If we define the private sector as anything not directly managed or financed by the government we can also read the libertarian argument as being in favor of the largest private sector possible. The more the power of government in society is reduced, the greater the power of the private sector. This exposes the problem with the libertarian position: If I do not trust the government with my personal information, why should I trust a private company?
The NSA did not develop a new technology to secretly access your data — they simply requisitioned it from a series of private companies. All the information the NSA had accessed was information about you that had already been collected. Private companies are collecting and analyzing vast quantities of personal information for their own benefit with the ultimate goal of manipulating our behavior for their own enrichment. The federal government was simply acquiring copies of this information. Now, don’t misunderstand me — I distrust the government as much as any libertarian, but I trust a privately owned, for-profit company even less. At least government is nominally acting in the interests of the people. For-profit firms act on no other motive than their own gain.
The free market response to this challenge is that if a company engages in unethical behaviour it will be punished in the marketplace with reduced sales as consumers look elsewhere for their product. However, if this is true the same logic must apply to government. If the government acts in an unethical manner it will be punished in the election with fewer votes as voters look elsewhere for leadership. Just as both the Republicans and the Democrats support the work of the NSA, so too did Apple, Microsoft, and Google hand over private information. Certainly, one day that small bedroom start-up might topple the industry leaders, just as one day the Green Party candidate might win the presidential election — but those are long odds. In the meantime, whether the government or the private sector has the most power, our emails will be read and there is nothing we can do about it.
Libertarianism does not provide a solution because it simply seeks to transfer power from the political elite to the corporate elite, neither of which is interested in the needs of the governed. At its heart, libertarianism is a conservative ideology. It seeks to protect and expand the power of the powerful.