Also See: Frequently Asked Questions about Smart ID Cards

Introduction

The Sept. 11 hijackings illuminated many holes in our domestic defense. Four of the five hijackers who crashed into the Pentagon, for example, had fraudulent ID cards obtained in Virginia. But the flaws in our identification system were evident long before that. Fake ID cards are so common as to be almost a rite of passage for American teenagers. The industries that rely on the wildly unreliable identification system we have today have watched identity theft grow into a major industry. Worst of all, the ease with which criminals can obtain false identification documents in some states renders the entire system suspect, as possession of a valid driver's license is taken as unquestionable proof of identity for the distribution of other important identity documents -- passports, social security cards, employee ID cards, and many more. The Sept. 11 tragedy made vivid the risks inherent in our flawed identification system, but those risks have always been there and we pay for them every day -- in higher credit card interest rates to cover for identity fraud, in victimization by criminals who avoid arrest, in suffering and death caused by underage drinkers who get behind the wheel.

Though we have long known that our identification system is broken, we now have a key opportunity to obtain consensus on fixing it. If done properly, a new identification system can not only reduce the threat of terrorism as well as more common crimes, but also lead to significant economic benefits. Placing 21st-century technology on our driver's licenses and ID cards will jump-start the New Economy, making offline and online transactions more convenient and more secure than ever before.

To accomplish this, there is no need for the federal government to build a new infrastructure for issuing "national ID cards." Modernizing the current system, in which the primary form of identification is issued by the Department of Motor Vehicles in each state, will be sufficient, provided that Congress requires an appropriate amount of standardization both in the cards themselves and in the processes for issuing them.

To do that, action is needed in Congress and in state legislatures. PPI recommends that Congress:

• require states to issue "smart ID cards" containing a standardized hologram and digitally encoded biometric data specific to each holder;
• set standards for initial identity verification;
• accelerate the linking of state DMV databases;
• provide grants and loans for additional state smart card applications;
• upgrade the system for foreign visitors to incorporate a similar "smart visa" program; and
• create strict controls to protect privacy and prevent abuses.

States should:

• issue digital signatures with smart ID cards;
• develop and promote other government applications to take advantage of smart ID card capabilities;
• facilitate access to the chip on the card so that card holders could allow private organizations to place applications (e.g., digital cash) on the unused parts of the chip; and
• reduce or eliminate fees for first-time upgrades from old cards to smart cards.