Who is it who relentlessly spread "false conspiracy theories" of Saddam-engineered anthrax attacks and Iraq-created mushroom clouds and a Ba'athist/Al-Qaeda alliance -- the most destructive conspiracy theories of the last generation? And who is it who demonized as "conspiracy-mongers" people who warned that the U.S. Government was illegally spying on its citizens, systematically torturing people, attempting to establish permanent bases in the Middle East, or engineering massive bailout plans to transfer extreme wealth to the industries which own the Government? The most chronic and dangerous purveyors of "conspiracy theory" games are the very people Sunstein thinks should be empowered to control our political debates through deceit and government resources: namely, the Government itself
It is this history of government deceit and wrongdoing that renders Sunstein's desire to use covert propaganda to "undermine" anti-government speech so repugnant. The reason conspiracy theories resonate so much is precisely that people have learned -- rationally -- to distrust government actions and statements. Sunstein's proposed covert propaganda scheme is a perfect illustration of why that is. In other words, people don't trust the Government and "conspiracy theories" are so pervasive precisely because government is typically filled with people like Cass Sunstein, who think that systematic deceit and government-sponsored manipulation are justified by their own Goodness and Superior Wisdom.
UPDATE III: Just to get a sense for what an extremist Cass Sunstein is (which itself is ironic, given that his paper calls for "cognitive infiltration of extremist groups," as the Abstract puts it), marvel at this paragraph:
So Sunstein isn't calling right now for proposals (1) and (2) -- having Government "ban conspiracy theorizing" or "impose some kind of tax on those who" do it -- but he says "each will have a place under imaginable conditions." I'd love to know the "conditions" under which the government-enforced banning of conspiracy theories or the imposition of taxes on those who advocate them will "have a place." That would require, at a bare minumum, a repeal of the First Amendment. Anyone who believes this should, for that reason alone, be barred from any meaningful government position.