They won't stop using strong encryption. The big national security issue is not a break of government encryption; it's a break on civilian encryption.
Consider a foreign adversary with the ability to break encryption used by banks, credit card companies, large retail facilities, hospitals, etc.
There are a few things that seem tempting-- think "steal from the banks", but a lot of that is unlikely to work, anyway. Banks and wire transfer systems have auditing and verification measures in place that would make it difficult to pull this off successfully. Credit card companies and retailers would have a serious issue with reissuing cards, etc.
What would turn things upside-down is the LOSS OF FAITH in these systems and the economic, social, and practical effects. The Russians would be all to happy to exploit this.
Suppose somebody recovers the necessary keys to send out fake-but-authenticated buy/sell orders on the NYSE, NASDAQ, or even commodities exchanges, with the specific intent of causing havoc with algorithmic trading, and causes a crash.
Suppose somebody is able to break into JP Morgan Chase and reveal private records, transfer information, and the session keys used to decrypt them.
Suppose somebody is able to modify a single prescription in West Bumfuck, Georgia, cause their death, and show off that they can do it again.
In all of these cases, you would see an immediate collapse of trust in important institutions. If the attackers make clear that their ability to fuck things up is the result of backdoored crypto, there would likely be spillover from one institution to the others-- "I can't even trust my pharmacy; how the hell can I trust my bank?!"
That collapse of trust would result in severe, immediate, and possibly unrecoverable damage to entire industries. That would likely destroy a lot of wealth as stocks take a giant shit.
Could somebody DO that? With backdoored cryptio, I'd say it's likely, even inevitable. Backdoored crypto either has to have a mathematical weakness inserted somewhere into the algorithm itself (in which case I would expect adversarial equivalents of the NSA to hire fucktons of mathematicians and tell them find and exploit said backdoor), or you have to do some form of key escrow (in which case the master keys used to protect session keys will be SUPER high priority for attack, including technical attacks and the famous "give the right disgruntled IT worker a bunch of money" attack).
Strong, un-tampered-with encryption is SERIOUSLY vital for national security.
Yes, some companies already have issues with this due to shit security practice, but those can be treated as isolated incidents. If it becomes clear that EVERYBODY is fucked, I would expect to see the market crash worse than it has during the pandemic.
EARN-IT is NOT OKAY by a long shot, but as others have pointed out, this is an attempt to make EARN-IT look like a responsible, reasonable compromise. It isn't a reasonable compromise, but Congress is basically a giant bag of assholes, s we're probably screwed.