One wonders if the Earth government intentionally panders to xenophobia knowing that external threats are the only thing keeping the human colonies in the Alliance…

Sounds plausible to me. Especially since given the relatively recent Earth/Minbari war (during which laws like the Rush Act were installed), during which humanity rallied behind one goverment, is fresh in everyone's memories, so trying to recreate an ongoing sense of threat in order to recreate unity was probably an easy strategy to think of. We've always been at war with Eurasia, etc, to quote good old Orwell.