That's fallacious generalizing, though. "All sorts of things have been allowed, so allowing this other thing can't hurt." Yes, yes it can.

I think we can agree that, say, putting a chip in everyone's heads that transmits their thoughts to the government would indeed, as you put it, cause the sky to fall. I'm not trying to suggest that outlawing encryption is the exact same thing, but I do believe it would cause much more injustice than it would prevent.