It's been something like three years since Schmidt said that, and people are still quoting it out of context (facepalm). The comment was in reference to activities performed using Google's services, and was qualified with "the reality is that search engines including Google do retain this information for some time, and it's important, for example that we are all subject in the United States to the Patriot Act. It is possible that that information could be made available to the authorities."
People need to realize that spreading knee-jerk misconceptions like this is damaging to Internet activism. You aren't helping the privacy cause by building up straw men instead of attacking the actual problematic stuff. The members of congress who support this legislation and the corporations backing them must be loving that so many people are ignoring them to instead focus on telling everyone how bad Schmidt and Google are.