Law enforcement is far over reaching in my opinion. This data is still hackable because all data is hackable. the fact it is inconvenient is a good thing. This is like saying you should only be allowed to have car or house locks that law enforcement has keys to. They can still acquire the data but they will need to spend significant resources to do it. Invading your citizens privacy should be difficult!
You're not obligated to make the lock unlockable for them, though.
The government can probably break many consumer-grade encryption schemes if they so choose to as well, but much like having to break in to your house through your locks instead of merely unlocking them, it raises the cost of law-enforcement doing so, and incentivizes them to make more restrained choices (eg, not taking literally everything they can get their hands on).
They can ask. A court order to reveal your password is enough. If you don't comply you usually run into troubles. This Wikipedia page http://en.wikipedia.org/wiki/Key_disclosure_law explains how it works in some countries.
Or putting it another way, law enforcement will still be able to break into individual phones, but indiscriminate collection of data on a large scale will become that much more difficult. Which is a good thing.
