By whom? This is veering dangerously close to a "democracy doesn't work" argument which makes me less sympathetic and likely to believe everything else you say.
> Also, what does "making encryption illegal" entail, exactly? Does that encompass HTTPS?
Something like "we have to be able to read one of the ends of the pipe". HTTPS satisfies that definition already.
> What does not scale exactly about using encryption at rest and point to point ?
The fact that everyone has to use it for it to work everywhere. If the government tells big businesses "You can't use it" most of their users are automatically left unprotected for most of their activity.