That is a threat to the tech industry, as part of the ongoing campaign to paint tech companies as "selfish and unreasonable" or even "aiding terrorists" in the public eye. At no point is any kind of "Manhattan project" actually intended. That's just a clever talking point used to frame encryption for the general public.
The long-term message for tech companies is "stop challenging our power and authority". Encryption represents a power shift, which is something the people used to having that power cannot allow. Their traditional weapon is the power to control the framing of any topic.
The end game isn't breaking encryption. If the tech industry doesn't submit to the demands for a backdoor, the tech industry will be declared the enemy. If the economy related to the internet and encryption crashed (which can always be accomplished with punitive regulation), the power situation is improved form the perspective of traditional politicians.
If they want to survive in anything like their current form, internet corporations should be fighting this hard to counter the framing in the public eye. Spending a few hundred million (or even a few billion) spent on media campaigns to make people want encryption is preferable to being forced to implement backdoors and watching entire markets dry up.
Technology in general has moved a lot of power away from government to the big players in the tech industry. An easy example is the somewhat-recent articles[1] about the political power that Facebook has with their ability to influence people... and influence elections. Obviously, Google could do the same.
This shift in power is what scares people who's only goal is to be re-elected. Therefor, they see internet corporations like Facebook and Google - and by extension most of the tech industry to varying degrees - as the enemy.
[1] http://www.bloomberg.com/politics/articles/2014-11-04/how-fa...
Really? I think companies and governments seem to work together pretty well just looking at all of legislation that has passed recently and all the secret agreements made in secret courts in order to have access to data from companies like Facebook and Google, that the public has been made aware of that happen.
>This shift in power is what scares people who's only goal is to be re-elected.
Or people are trying to muster of some sense of fear in people order to gain support, they themselves aren't scared because as you say they are using it as a political tool to get elected…
I get it, but I think we have to wait until those future actions actually happen to get serious. Partly it's because I don't necessarily believe that your narrative is correct - I think there's a great deal of real, legitimate ignorance about this technology, and that this will dispel in time. (Don't forget that Clinton is an old woman, who's made her career in a distinctly non-technical area. Do you really expect your grandma to understand things like PKI? Alas that there are no scientists or engineers in the field.)
Then you don't get it. It's impossible to fight from behind a jail cell.
Make supporting encryption without a government backdoor illegal. That same government backdoor could be abused by third parties. But the ones pushing for that either don't care about that or don't understand that. The government has many stupid people in it, but I don't think the NSA director is one of them. [0] He knows that third parties could use the backdoor, he simply doesn't care.
Notice how this occurring in the USA and not some totalitarian country you refer to? People aren't afraid for absolutely no reason. They're afraid because a country founded on freedom is increasingly taking the game plans out of a totalitarian state play book. People are afraid if they don't fight back now they might not be able to fight back.
[0] http://www.theguardian.com/us-news/2015/feb/23/nsa-director-...
Simply having the mindset of desiring to ban or hamstring encryption (or build perpetual motion machines) is indicative of far greater issues (likely in that domain, which we as tech-citizens should be aware of and active against) than merely chasing dragons would imply.
E.g. You will use weak encyption in your product, or we will take your money, your company or even your freedom.