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RE: On the perceived omnipotence of the US Federal Government
No, that isn't the point at all. The point is that if you were homosexual, a foreign intelligence agency could discover that and blackmail you to reveal secrets. This doesn't apply so much if you are openly gay vs in the closet but I doubt they made those kinds of distinctions.
Yes--the reason they could blackmail you is because if it were revealed you were homosexual, you would lose your job.
So it is absolutely circular: The only reason you were vulnerable to blackmail was because you could lose your job--because you could be at risk of blackmail because you could lose your job, and so on. It is the very definition of circular reasoning.
You may not want that information revealed for a variety of reasons. Despite the gains in social acceptability of homosexuality, it used to be much worse not that long ago. Many people didn't want their families to know, didn't want it to be public knowledge because it could affect not only current employment but future employment, etc. When determining whether or not you can have a security clearance, they are very sensitive to potential blackmail and if this was something you had been keeping a secret for a long time (before applying for that security clearance) that means it is potential blackmail material. If you were openly gay it shouldn't make any difference because then there would be no blackmail potential but like I said, they likely didn't differentiate and it used to be very common to hide this sort of thing.