How does our country begin to fix this? Seems step #1 is paranoia

It's not paranoia if it's really happening -- go back, say, 20 years and tell me we have the same protection against government surveillance and intrusion as we did in 1993.

The reality check is that 4th Amendment guarantees have been steadily eroded in favor of a more surveillance-oriented state "for our protection." Add to that Corporations having the same rights as human beings, money being free speech, the Executive having the power to detain foreign nationals and execute American citizens without due process (we're at war with Oceania Terrorists, after all!), and a Congress apparently run by eight-year-olds ... at this point a little healthy paranoia is probably a good thing ;-)

How the country fixes all of these is first to recognize what's been happening -- which is already taking place, albeit with attendant over- and under-reactions from various points of view. Then we can have that conversation Barry was talking about and hopefully establish what kind of society we want to remain/become in the face of advancing technology and capability ...