If you really think that then you haven't been paying attention. For example, the Church committee, and later when the U.S. belatedly relaxed controls on computer cryptography, and then even put the NSA and NIST in charge of ensuring the public had great cryptography available to them to protect the public's and government's communications and data.
> "Terrorism" on the other hand does not scale
It doesn't have to scale. You could sit and prepare for years for a single massive attack and get maximal value out of it. As technology improves, so does the ability to for a single malicious agent to kill or maim more and more and more people at a single time, which only gets worse when you combine multiple such agents into a group.
And as you mention, the psychological impact is completely out of proportion to the resources expended. The government is following the public's lead on this. No one wants to be blown up, but even more importantly, no one wants those who try to attack the nation to be simply let off the hook or allowed to attack unopposed.
> Also, unlike increasing government powers, there is no evidence that terrorists acts on US soil are increasing.
Wow, it's almost like there's some unseen force interfering with Al Qaeda's previously-stated wishes to bring violence to American soil...