Under that authority, you could lock up editors and publishers (that was, northern editors and publishers) for writing unfavorable articles, prevent newspapers from having mailing privileges, and even seize the property (slaves) of southerners (The Emancipation Proclamation) to cause hardship and economic suffering to the enemy. You can punish as seditious libel that which would otherwise be free speech (the Alien and Sedition Acts passed under President John Adams), and lock up tens of thousands of US citizens based upon nothing more than their ethnicity (the Japanese detention cases during World War II.) Historically, the Courts have been reluctant to look beyond the declarations of the executive branch during time of war concerning the necessity of some acts to protect the American people. Indeed, only when President Truman attempted to use the Korean War (a conflict?) as justification for seizing the steel mills did the courts deny his assertion of Presidential war power.
This Means War!
In addition to the general war powers, the President and the Attorney General have relied on an act of Congress - the Authorization for Use of Military Force (AUMF) passed on 18 September, 2001 - indeed, while the embers of the Pentagon and World Trade Centers were still burning. This is important because the wiretapping laws make it a crime to engage in warrantless wiretaps unless otherwise authorized by statute. The administration is reading the AUMF as the "statute" that authorizes the wiretapping, even while Members of Congress are emphasizing that they intended no such thing.
The AUMF empowered the President to "use all necessary and appropriate force" against "nations, organizations, or persons" that he determines "planned, authorized, committed, or aided" in the 11 September, 2001, al Qaeda terrorist attacks. The President's war powers, even during this "war on terrorism" or "war on Islamic fundamentalism" or "Global War on Terror," have traditionally trumped limiting statutes. It was pursuant to this authority, for example, that the President ordered the detention of Yaser Esam Hamdi, a US citizen, and the Supreme Court affirmed his authority to do so, citing in part the AUMF resolution. Similarly, the United States Court of Appeals for the 4th Circuit affirmed the authority of the government to seize US citizen Jose Padilla also under the AUMF resolution, although they later rejected the government's efforts to remove him to Florida as a potential pretext to moot a US Supreme Court review. Both courts held that the AUMF, although silent on the issue, authorized the President to detain US citizens on US soil if he designated them as combatants.
The Law of Wiretaps
Let's start with a little reality check here. Much of what the NSA and the intelligence community does is in violation of some law somewhere. Indeed, much of what the military does is as well. When the NSA intercepts a communication from France to Afghanistan, it probably violates the privacy and electronic surveillance laws in both countries. When it installs alligator clips on a phone in Turkmenistan, it probably violates some local burglary or trespass law. Espionage - the staple of the CIA - is a felony in almost every nation, and a capitol offense in the US. In fact, it is part of the intelligence community's job to try to get people to commit treason. So we are hardly shocked or offended that our government or any government is violating the law. What the so-called NSA domestic spying scandal addresses is whether the process violates US law.