Speaking as someone personally affected by all this, I can tell you that encryption most certainly would have helped if used in a system designed with modern se

Speaking as someone personally affected by all this, I can tell you that encryption most certainly would have helped if used in a system designed with modern security principles in mind. But (especially in government) there is no incentive to redesign a functioning system. There isn't any money available to fund the work, and there is no specific legal liability that poses a risk if you don't. It's not surprising that corporations and governments don't take steps to avoid these problems when an 18-month membership in some identity theft insurance program is considered equitable compensation for losing 10-years' worth of personal information.