If that is the government's position then the government is a ass. This argument cuts against a fundamental requirement of the exercise of administrative discretion - that it be "reasonable," e.g. that it be based upon a valid stated reason. That a representation be "material" is an important filter in any decision-making.
There’s a fair argument on the other side for a “bright line” rule; ie: that no falsehood should be tolerated in granting the extraordinary privilege of citizenship. Otherwise, we become embroiled in endless shaded arguments about what lies “matter” and we inherently accept that some lying is OK. Not a good posture.
Another argument can be made that someone willing to tell any lie to gain American citizenship has demonstrated a fundamental disregard for the rule of law and for the integrity of the legal process in becoming a citizen.