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Making it hard to for others to enter the US is a just a nuisance. Making it hard for US citizens to leave the US is one of the most terrifying things I can think of.
You lack imagination.
I'm having no trouble imagining all of the wonderful reasons the government might have for preventing Americans and their money from escaping it's borders. And all of the things that come after that. I suppose I can think of worse, but I'm afraid because we already know what happens when countries slam the door on their citizens and allow only the annointed to travel. It's never ever anything but reactor-grade awful.
If the government does things you don't like and you are allowed to leave then you can do so and it ends up being not that bad. I would say that not being allowed to leave is practically a prerequisite for having something to fear from your government.

Or did you mean the scarier things are like the Yellowstone Caldera erupting or Godzilla attacking?

I can't understand why people would actually want a US passport.
That would be because they are already in the US and they'd like to go somewhere besides the US. The importance of the freedom to actually leave a county when you so desire can't be overestated.
> when the applicant submits citizenship or identity evidence that is insufficient or of questionable authenticity

So the vast majority can stick with driver's license and birth certificate. I think this is overblown.

Glad I got mine recently. I was freaked out by the fact that when I handed them my birth certificate, they didn't hand it back. "It will be returned to you by mail" they said; I'm not sure why they needed to keep the birth certificate, but it did in fact come back to me. (I was more freaked out over the fact that I had paid 50 dollars for the birth certificate and didn't want to lose it (plus dropping another 220 to get the passport rushed))
While I believe Obama was born in the US, it's interesting that you can become President of the US without having to show a birth certificate, but you can't leave the country without producing one. Doubly interesting because the Constitution specifically requires the President to be US-born, but says nothing about passports.
Well, you can walk right out the door to Mexico, if one were so inclined.
It looks to be a typically outrageous limitation introduced without much thought or reason.
I'm a US citizen, with a US birth certificate, but to apply for a social security number I had to provide proof of address for every year of my life. The process took a year.

It's in the nature of bureaucracies to accumulate information, the larger and more inefficient, the more paperwork they demand to fulfill their 'process'.