True, but in order for that to happen you would need to have a really big goverment-funded infrastructure, with lots of cabinet positions, public owned companies, public sector unions, tons of useless regulating bodies that are redundant, a ton of observatories that don't actually do nothing, a ton of state owned television network,state owned phones lines, state-owned energy sectors, subsidized crops,etc. And most of this is unprofitable (I'm speaking of Portugal's case, of course).
You need a lot of revenue (ie sales tax, corporate tax, VAT, Social Security, IRS and other local taxes) to keep this whole thing afloat and even then it still might not be enough.
You see, the labor regulation in Portugal also doesn't help, because it is impossible to fire anyone. Well, not impossible, but the necessary paperwork to do so, takes almost 4 months to fill out, since the State dictates the terms between employee and employer, and still not get anywhere.
Also, the minimum wage for a full-time job is way above the market price, so many people either have part-time jobs (like me) or resort to become freelancers doing several odd jobs.
In order to keep many of the public sector jobs still going, of course, taxes are going to indeed keep getting higher.
Of course, there's always a catch, you see the newly elected Portuguese administration has pledged to cut spending, but taxes are going to increase to fill the treasury(VAT going to 25%) to make up for the loss. On the plus side, there's going to be some major changes in the labour market which will at least ease the pain.
The US already has some things right from the start: a very flexible market and a solid tax system(tax rates varies from state to state, though).