That's not a data protection problem, however. No data protection law forbids digitization of government services. It's a common excuse, though.

The primary issue limiting digitization of government services is federalization. A lot of software is just incompatible, outdated, broken. There's no central agency that can enforce standards across the states or (gasp!) municipalities - every city essentially can use whatever and buy wherever. There are no economies of scale leveraged, no central standards, few qualified technical and management personnel on the buyers side. And the federal government has no mandate to enforce any of this. Contrast that with the UK, which created gov.uk as the central authority on digital citizen services.