This argument is one degree of separation away from a "nothing to hide" fallacy. And as you accurately pointed out, it's founded on a very unrealistic assurance of an entirely virtuous power.
Free speech is important. This fact can not be overstated. Surveillance backed by the threat of persecution chills not just "bad speech", but any speech deemed undesirable by groups or individuals in power. This is a fundamental concept to understand when forming theories and opinions that also directly relate to subjects like democracy and authoritarianism. To miss this crucial fact is to formulate a skewed premise that favors the primary mechanism by which free speech, and by extension the many rights and liberties which require free speech, are historically suppressed.
The notion that democratic systems and values are compatible with a surveillance state is flawed. The two systems operate in directly contradictory ways. Surveillance states historically always tend toward forms of authoritarianism. 1984 was a work of fiction, but it was a warning driven and informed by very real demonstrated dangers inherent in the enabling and acceptance of a surveillance state. The validity of its message is shown clearly and repeatedly in real world examples of population surveillance in practice.
Trading liberties, including and especially privacy, for some concept of order, is a dangerous approach which ignores and contradicts historical evidence. To ignore this is to embark on the path to Oceania.