I'm not quite sure where the sudden outrage? concern? is coming from. The government has been asking for, getting, compiling and using this information for more than 70 years. There has been a long form for the census since 1940 and about 1 in 6 households got it. Here
is the one from 2000. Only in 2010 did the census bureau go to an all short form format with the American Community Survey collecting the same info that used to be generated by the long form.
I don't know if response to the American Community Survey is mandated by law, but response to the long census form was. It's pretty much one of those laws without teeth, though.