Terrorists need to communicate with each other to plan attacks. Governments need to gain intelligence on terrorist activity to thwart attacks. Much of that intelligence reportedly comes from electronic surveillance of communication. If terrorist groups were to start using strong encryption well, it would presumably make it significantly harder to gain information on their activities and thwart their attacks.

A lot of this necessarily happens in the dark, so we may not know for sure exactly what's happening until decades after the fact. You don't exactly want to advertise to the enemy that you can or cannot intercept their communications - that would tell them how to be more effective in attacking you.

Many national governments do indeed use strong encryption to protect their communications, and the outcome of many battles, and arguably of some entire wars, has hinged on the ability to crack that encryption, or lack thereof, and the ability to keep the fact that you have done so secret from the enemy.

It's convenient that they can justify the risk to democracy with information we aren't allowed to see. I guess we'll just have to take it on faith

The government can barely thwart attacks that are communicated in plain text. So I don't see how using encryption will actually change anything.