Firewalls are definitely a good measure to prevent identity theft. Of course, this is not fool proof. I doubt there will ever be a way to prevent identity theft completely, but this is a good measure to take, of course. I think it should be complimented by harsher laws too.
Current firewall software packages prevent identity theft adequately. Most firewalls have sufficient encryption to protect would be hackers from gaining access to a computer on the firewall. It is very difficult to hack into any computer that has a strong password on it for protection. Most Internet service providers come with firewalls which protect computers on their network from outside access.
While identity theft still does occur regardless of how strong the firewall protections are the vast majority of it has been eliminated with the current state of firewall technology, I think for the vast majority of Americans who practice safe computer browsing techniques and use proper firewalls the chance their identity gets stolen is very minimal.
No, the current firewall software packages do not prevent identity theft adequately, because that is not what they are meant to do. Firewall packages are meant to stop viruses and stop computers from getting infected. They are not supposed to prevent identity theft, and they are not very good at it.
There's an arms race going on between hackers and people trying to prevent identity theft, and it's fueled by constant innovation. We can never rest on our laurels and say, "Okay, current software is good enough," because hackers are always coming up with new malware and new ways to get it into our computers. It's just a sad fact of human nature that people will see it as a challenge to bypass the law, especially people as creative and socially on the fringe as hackers. The recent security breaches at Target and Nordstrom's show what happens when we get complacent. The fight continues.