One theory is that in Europe in the 1980s, workers became so much more empowered that the private sector lost the will to invest. Start with https://delong.typepad.com/kalecki43.pdf for the basic concept here, but there are many more examples.
A VAT-funded balanced budget welfare state is a purely redistributional mechanism which, while great, is not sufficient to undo this sort of thing.
Direct government spending like the military sort is a way around this. Maybe the workers are militant, but will the democracy just allow itself to decline military because you don't feel like dealing with that?
Workers vote too, so I don't think so.
I think the US is a very weird state - it's probably the most consistently old-school liberal state in the world, it has negligible worker activism, colossal natural resources, and its position as world hegemon gives it all sorts of non-imitable economic advantages. I don't think you can copy the US if you're not the US - the closest in terms of economic policy is the UK, and the UK economy is kind of like a corpse in a bin bag.
If you go back to the decades in which the US became the world hegemon (post-war era) the difference is way more stark. It's not that the EU resigned - it's that the US muscled them out!